[ Crude Falls on Skepticism That Production Cuts Justify Price Rally ]
Skepticism of the "sustainability'' of crude prices ...get used to that ugly word. It's not mine - it's the Street's. Per this article from Doomberg:
********************************************************************************
{{ New York, April 23 (Bloomberg) -- Crude oil fell 2 percent,
retreating from a 16-month high, amid skepticism that production
has dropped enough to justify a 50-percent rally this year.
While oil producers say they will reduce output by 2.7
percent, independent verification of the cuts won't be available
until May. The evidence available now, U.S. inventory levels,
shows that stockpiles are little changed from a year ago and
2 percent higher than they were two months ago.
''We haven't seen any effects from the OPEC cuts yet,'' said
Tom Bentz, senior vice president-energy at Cresvale International
LLC in New York.
Crude oil for June delivery fell as much as 36 cents, or 2
percent, to $17.82 a barrel on the New York Mercantile Exchange,
the biggest one-day drop in two weeks.
In London, June Brent crude oil fell as much as 33 cents, or
2.1 percent, to $15.80 a barrel on the International Petroleum
Exchange.
U.S. crude inventories have risen since the rally began,
according to the American Petroleum Institute. Inventories last
week were at 340.63 million barrels last week, up 8 million
barrels over oil in storage in the week ended Feb. 19, the week
the rally began.
Saudi Arabia led the Organization of Petroleum Exporting
Countries and such independent producers as Russia and Mexico in
pledging to pump less oil to reduce a worldwide glut. The
agreement, made in March, took effect this month. OPEC's record
in adhering to output reductions promised last year was spotty.
OPEC members met 78 percent of those cuts in March, according to
Bloomberg estimates.
Because exploration for oil has gotten cheaper, and demand
is lagging, many countries have excess capacity. High prices may
therefore not be SUSTAINABLE, some analysts said.''The present high price of oil seems like a passing phenomena,'' said Sheikh Zaki Yamani, former oil minister of Saudi Arabia at a conference in London.}}
********************************************************************************
We still have quite a few earnings reports to unfold. Should we continue to see comments like VRC's and NE's CEO's - we have little positive nearterm catalysts to offset the vacumn of good news untill OPEC reports May 10th. Never has a retracement been so well ''set up'' imho. Much damage can be done in 2 weeks.
We just had the quickest spike in prices in 30 years. We still have numerous hedge funds and short sellers ready, willing and able to turn on a dime on any weakness here and lay heavy on the short side. We just took a pound of their flesh & trust me; they be wanting 2 lbs back...
A lot can happen in the next 2 weeks, unfortunately - most of what can happen is bad... The other factor is that if we retrace in the next 2 weeks here - we are also setting ourselves up for the Street Selling into the expected good news strength of what most expect will be positive OPEC compliance news.
There is going to be some tough calls & decisions to be made in the next 2 weeks. While no one sees a return to the old bottoms; giving up any significant portion of a 50% move is not going to be met with complacency by the Street that just bought here in heavy volume in the dramatic shift to cyclicals last week. The profit taking-selling to protect these gains, if combined with short sellers jumping in on weakness; could artificially magnify a retracement here - as everyone will be trying to beat the next guy to the door to protect huge gains.
A different ''type'' of selling (protecting profits) - but, none the less, just as destructive...
Time to be developing a plan here folks. Pick your indicators, set your stops (and be prepared to have them ''gunned'') and either take some chips off the table, or place your bets - lots of ''action'' in the coming weeks ... welcome to the deadzone.
Remember; on each and every trade - you have an opponent. Someone wins and someone loses. Someone is betting the stock is going up and someone is betting its going down. On every trade - someone on the ''darkside'' wants your money...
The ''Darkside'' will be using this window of opportunity to be ''betting'' large imho - be prepared for the darkside... and remember, you may need more than the ''force'' to be with you when the Darkside meets the Deadzone...(VBG).
...2 weeks - it may seem like an eternity for the unprepared. This weekend will have lots of fund managers looking at those gains real long and real hard - don't expect anyone to be slow on the trigger come monday fwiw... |
