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Monday Energy Report
May 12, 2008 - Â From one of Slope's own readers, The Energy Analyst, here's the latest.... It was...
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From one of Slope's own readers, The Energy Analyst, here's the latest.... It was tough for Slope to call a “top” in crude last Friday morning, but this morning (Monday May 12) looks better with crude trading down between $1-$2 per barrel in pre-market. Ostensibly, the catalysts are USD strength versus Yen with USD now up 1% and overnight data from China on lower April crude imports. However, the real driver is more likely that oil was up for six straight days thru the end of last week, rising over 8% during that period. Profit-taking in crude is clearly overdue. Interestingly, Yen was up (dollar down) for six straight days prior to this morning. So, that trade was due for a reversal, as well. Energy stocks likely to open weaker with DUG now up 2%. OIH looks weaker driven by slippage in SLB in Europe. In sum, DUG looks okay as a near-term trade on a slight negative shift in sentiment on energy and may have potential back to the recent mid-30’s range. insert.a.chart.MA The real issue is whether oil can stay down. The first “fib” line is at $111, which also happens to be the 50-day MA. The 100-day MA is at $102. Note that oil has not traded below the 50, or 100 day moving averages since early February. These are key levels to watch, but may just be ‘a bridge too far’ right now. Overall, news flow still supports crude with reports that ENI may have to delay the world’s largest oil project (Kashagan) by another two years out until 2013. Initial volumes here are targeted at 370,000 barrels per day (b/d). Also, Chinese oil imports may have been down y/y in April, but are still up 10% year-to-date. (Note that monthly data is not that meaningful for discerning real trends, in my view). The collateral damage from higher oil still has not been fully discounted and is actually just beginning – note FedEx this AM. The S&P may be relieved short-term if oil “drops” to $110, but the economic impact will still be a real negative at such levels on a longer-term basis. Discuss this article in the forum. ...thanks
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