Oil had a fantastic day, picking up nearly $3 in today's session. Could we finally be heading back into a bullish oil market? Cold weather and rumored OPEC cuts are definitely painting just such a picture.It has definitely been a long time since we have seen such a strong one-day move for the precious crude as we did today with oil prices climbing $2.77 to $56.78. We even briefly saw prices crest over $57 for a short period this afternoon.
Two main factors were at play today. The first being cold weather across America, and the second being more production cut rumors coming from OPEC.
This winter has definitely been a warm one. Cold winter weather took its sweet time arriving and didn't really start to impact most of America until about a week ago. The long-awaited arrival of winter has had the effect of boosting prices and it definitely showed up just in the nick of time. Last week we were wondering if oil was going to be able to use the psychological $50 barrier as support, and now it looks like we could be testing resistance up at $60. What a difference a week makes.
But weather is not the only factor. As always, U.S. oil traders love to believe anything we hear out of OPEC. Even though we know deep in our hearts that we have to take production-cut rumors as skeptical at best, any such rumors drive the market into a buying frenzy. That is what we saw today with more rumors coming out of OPEC-giant Saudi Arabia. According to a report out of the Wall Street Journal, the Saudis have been telling their customers to expect to see another 158,000-barrel-a-day cut in the nation's production starting next month.
As we all are aware OPEC has not exactly been 100% credible in the past with following through on production cuts during times of high oil prices, so whether or not we should believe today's report remains to be seen. One thing is for sure... as always, we really want to believe, and that has helped give oil a nice lift.
I doubt that we are going to be looking at prices stabilizing over $60 in the immediate near future, but should the cold weather linger and we do start to see some solid evidence of production cuts that is exactly where we are headed. Either way, i think that prices will be staying at least above $55, and if you are looking to pick up some bargain priced oil stocks the window may be closing fast.
Let's check out a current chart on oil for a better picture of what we are talking about:
On the day, we saw some pretty nice gains for most of the energy sector:
- Sunoco, Inc. (NYSE:SUN): +2.7% to $63.02 up $1.67
- Valero Energy Corp. (NYSE:VLO): +2.4% to $53.85 up $1.24
- ExxonMobil Corporation (NYSE:XOM): +1.6% to $74.39 up $1.19
- Chevron Corporation (NYSE:CVX): +2.2% to $73.07 up $1.54
- BP p.l.s. ADR (NYSE:BP): +1.2% to $63.60 up $0.77
- Oil Service Holders Trust (NYSE:OIH): +2.8% to $135.39 up $3.68
For a quick-read on the U.S. economy, check the price of gasoline
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Reader Comments (Page 1 of 1)
1-30-2007 @ 7:55PM
willy Vankal said...
Growth in 3rd world countries is only beginning. Last I knew 500 million chinese had never made a telephone call, let alone drive a car. When these people in India and China awake, 1.5 billion people will need to burn a little more oil. Oil will be $100 to $150 in 10/15 years.
2-06-2007 @ 7:02AM
samir said...
please send me the stock tips of indian stock market.