OIl slick to reverse?


BP and the other oil majors were all downgraded yesterday because of the oil prices having reached their spike and companies valuations at historical highs.
So says JP Morgan.
But they discovered yesterday in the US that oil inventories are rapidly evaporating and oil by the close has now risen to a new 12 year high.
The price is going up and wont stop untill the market gets peace signals or a certain gulf state has had western boots all over it..
Well surprisingly the oil majors are finding difficulty in generating enough new reserves to replace those consumed..

The biggest source is Iraq.

Hmm but we know the war is nothing to do with oil..
Oil Prices

Crude Market

Strategy 3-3-2003 to 3-7-2003

The interesting thing here is that open interest declined last week into the new high weekly close. This is a chink in the armor of oil and is the type of thing that happens before a market turns direction. The OSX put call ratio dropped to .35. The oil market traded as low as 33.80 last week.

Oil April 36.70 3/11/2003 37.00 3/11/2003 +300.00
Oil April 37.48 3/12/200 37.32 3/12/2003 -160.00
Oil April 37.80 3/12/2003 37.62 3/12/2003 -180.00
Oil April 34.35 3/14/2003 37.55 3/13/2003 + 3,200.00

These were the oil trades in the trading room there were only four that were put on and the results were pretty good. As you can see the risk was very low and we let our winners run. I’m flat oil over the weekend.

Strategy 3-17-2003 to 3-24-2003

The crude market did just what it should if a major top has been put into that market. The pattern of crude was the spike to a high 2 weeks ago which turns out to be the top. After the top was made there was a counter trend bounce up to a .618 retrenchment and then a breakdown. I believe April crude will have a very hard time trading mush higher than 36 dollars. I want to continue to sell strength when it shows up in the crude market. The bullish consensus was 79% bulls last we so in my opinion, “everyone wants them!” That is when you want to be a seller in any market.

682,350 36.75 3-Mar-03
649,225 37.78 10-Mar-03
622,203 35.38 17-Mar-03

As you can see the open interest declined into the price high in crude which was the first sign of a top. With open interest not expanding into the price shows a lack of buyer thus the house of cards was built. Then the market fell and took out the previous weeks lows which cause long liquidation. Long liquidation is a flight out of the market which is also a bearish event.


  • 3-17-03 weekend edition vol.2 no.11.doc
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