Monday, July 23, 2007

Buy The Dips

Crude Oil Falls on Expectations of Rising U.S. Gasoline Stocks

Crude oil fell a second day in New York on signs U.S. fuel stockpiles may increase as refiners increase output.

Crude Oil Falls After Report of OPEC Concern Over High Prices

Crude oil fell after Reuters reported the Organization of Petroleum Exporting Countries was concerned about high oil prices and their impact on the world economy.
The group may pump more oil to increase supplies, though it's unclear whether extra production will be needed this year, OPEC President Mohamed al-Hamli said, according to Reuters.

There is little evidence so far that high energy costs have affected economic growth, al-Hamli, who is also the United Arab Emirates' oil minister, told Reuters in an interview yesterday. Adjusted for inflation and a weaker dollar, crude is no higher than it was three decades ago, al-Hamli said.

$100 Oil Price May Be Months Away, Say CIBC, Goldman

``We're only a headline of significance away from $100 oil,'' said John Kilduff, an analyst in the New York office of futures broker Man Financial Inc. ``The unrelenting pressure of increased demand has left the market a coiled spring.''

The failure of near-record fuel prices to restrain global oil demand growth is what concerns Rubin, chief strategist at the brokerage unit of Canadian Imperial Bank of Commerce in Toronto.

``Prices have doubled, and demand is alive and well and accelerating,'' Rubin said in a July 18 interview. ``The argument that rising prices would choke demand and bring increased output is falling to the wayside.''

Gasoline pump prices averaging more than $3 a gallon across the U.S., the consumer of 25 percent of the world's oil, haven't dented sales. Deliveries of gasoline were a record 9.23 million barrels a day in the first half of this year, according to a July 18 report from the American Petroleum Institute in Washington.

The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $79.67 in today's dollars.

How many times has the price of Oil dropped on "expectations" of rising US gasoline stocks? How many times have these "expectations" not even materialized into higher stocks? LOL, just last week refining capacity rose and gasoline stocks fell. Oil is down on profit taking, pure and simple, and the mouthpieces of the market place are trying to talk it down further. Good luck!

Oil is clearly overbought. Oil will most likely react back to it's 50 day moving average before continuing on it's trek to $80. The reaction, which if given time, should coincide with a 38% retracement [70.50] of Oil's current leg up from it's May low around 61. The path of least resistance for Oil going forward is up.

Gold and Silver, butting up against downtrend lines at last weeks close, slipped a tad today as most commodities fell with Oil. Interestingly enough dem Rat Bastids on the Comex raided both right out of the box at the open today. The US Dollar was again pitiful today, and was up a couple pips on the back of weakness in Oil and nothing else. Though a tiny rally in the Dollar should be expected considering it's technicals...the blip it will put on the chart should prove to be insignificant.

Gold should be protected to the downside at 677 and 674. And Silver should find support beginning at 13.18. Silver will be hard pressed until it can dispense with the shorts at 13.35. With the powerful rally in Precious Metals stocks, we are now in "buy the dip" mode in Gold and Silver. BE PATIENT! Gold historically establishes a bottom at the end of July. That is not to say we are going back to the June lows, just that with a dip here and a higher low we will have "established a bottom".

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