Crude Oil Breaks Below $115

Friday, August 08, 2008 | 02:52 PM

Crude Oil is down to $115 (continuous cash futures contract). We also have some Backwardation -- meaning futures (September contract) versus cash or spot contract.

That’s bad mojo -- Markets are reading this as a positive, but I am less convinced. This looks to me like demand destruction brought on by a global slowdown is what has led Oil prices lower. That is not a good long term sign.

Efficient Markets? Well, if you think Whoopee! Global Recession! then sure. To everyone else, not so much.

>
September Futures Contract
Sept_crude_oil
via BarCharts.com

>

For the more technically minded traders out there, consider these Fibonacci retracements: A pullback to $110 is very likely . . .

>

Continuous Cash Contract, with Fibonacci lines
Crude_oil_fib

Source: FusionIQ, Bloomberg

Friday, August 08, 2008 | 02:52 PM | Permalink | Comments (43) | TrackBack (0)
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I wonder if its a combination of demand destruction and the commodity regulators finally cracking down. Looks like they started getting serious right around when oil started to come back down.

http://www.nytimes.com/2008/07/25/business/25cftc.html?_r=1&hp&oref=slogin

As far as demand destruction, its real. I don't go meet my friends at the movies anymore, its $8 round trip up from $3 when Bush started office.

Once the price of oil comes down to reasonable levels you'll slowly see people start spending more, but its going to take a long time for people to spend freely again. Everyone I know questions whether they really need something now.

Posted by: Martin | Aug 8, 2008 3:01:55 PM

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