Oil is picking up right where it left off yesterday, charging to new highs again as concerns over a Turkish invasion of Iraq have stoked supply fears again today. After hitting a new intra day high of $87.97 prices have cooled off a bit, and are currently sitting at $87.56.As we discussed yesterday, the current run up in prices can be traced to concerns that we may see some escalation in activity between Turkey and the Kurds in northern Iraq. Activity in the area is nothing new, but yesterday the Turkish government took things to the next level by requesting permission from parliament to enter into northern Iraq and hunt down the Kurds that have been attacking its country.
As one of our readers, Michael Schneider from Barrelomoney, pointed out yesterday, CNBC is estimating that we could see a loss of about a million barrels of oil a day from the area. There are also other analysts that state that increased conflicts in the area would result in no supply impact since insurgents have been successful in disrupting most of the flow already, so there really does appear to be some confusion on the matter, and that is why I think the rally will continue. It is the uncertainty that leads to fear. Fear leads to panic, and panic leads to $90 oil prices before you know what hit you.
Right now we are looking at several bullish factors in the oil market. A falling dollar, low US inventories, and increased buying activities from large funds are also coming into play to push prices higher. In fact, the only thing that is looking bearish at this time is that fact that most people think oil is currently overpriced. Psychology is a big factor in commodity prices, but for now they are being outweighed by the fundamentals and I have to think that oil prices are going to continue to head higher.
Are we going to see $90 oil? That is the question. Today, no I do not think we are going to see prices move that high. But tomorrow it will be a strong possibility that prices will be able to move up to the psychological $90 mark. Wednesday's are always big movers for oil for one simple reason, Wednesday is when we get our weekly inventory report from the Department of Energy. If we are to see U.S. inventories lower than expected you can be sure the price is going to head higher, and right now $90 is the next psychological mark that it will be approaching.
Analysts are expecting to see tomorrow's inventory report to show an increase of around 1.4 million barrels of oil and 700,000 barrels of gasoline. A lot will depend on those results. We will definitely be eagerly awaiting tomorrow's report and will keep you updated on just how good the U.S. inventories are holding up.
What are your thoughts? Will we see $90 oil this week? This month? I think we are going to see it tomorrow, but I have been wrong before. Let us know what you think.
[Photo: octal]
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer
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Reader Comments (Page 1 of 1)
10-16-2007 @ 1:40PM
Jim Connor said...
Tell me just how the hell production of oil in war torn Iraq can have any bearing on world oil market. If there is that much oil being produced in Iraq the good old United States should be paying them fair price for all their production and eliminate any shortage here. Maybe not even paying fair price but deduct for our military expense.
10-16-2007 @ 1:39PM
Jim Connor said...
Tell me just how the hell production of oil in war torn Iraq can have any bearing on world oil market. If there is that much oil being produced in Iraq the good old United States should be paying them fair price for all their production and eliminate any shortage here. Maybe not even paying fair price but deduct for our military expense.
10-16-2007 @ 2:37PM
dom said...
whats the big deal. if you bid 200. or 20 cents . if there is no shipment what matters if you bid for it. its not cominig to us .