Oil prices have once again set a new record today, with prices moving as high as $97 a barrel earlier in the session, and are currently trading up $2.73 to $96.63.Today's move comes as traders are becoming increasingly worried about supply concerns as winter weather has finally started moving across the Northern Hemisphere. So far this year, mother nature has spared us from onslaught of wintry weather, but now that is changing, and the market is reacting. The past two weeks we have seen greater than expected declines in crude inventories in America, and analysts are expecting even more drops to be announced tomorrow when the Department of Energy releases its weekly inventory report.
Analysts are expecting to see a drop of 1.6 million barrels, and if we get reports of anything greater than that I would not be surprised at all to be sitting here writing about oil at $100 before the week is out. Consider this, before last week's report, prices were trading down to around $90.50, so a move from current prices to the psychological $100 barrier is not by no means out of the question.
Supply concerns are not the only influencing factor to today's upward move. Once again, the falling U.S. dollar has to be taken into account as traders have continued to push the almighty dollar even lower. As we all know, the dollar and oil trade inversely proportionate to one another, and the dollar has once again set a new record low against the euro in today's market.
As BloggingStocks writer Joseph Lazzaro wrote this morning, the dollar is just not getting any respect these days. Earlier today, the dollar traded down as low as $1.4556 before moving a bit higher on rumors that the Federal Reserve may decide to lower interest rates further at its next meeting.
While I am sure that you have been hearing a lot about the falling dollar lately, I realize that some of you may not have actually taken a glance at a chart for the dollar, so you may not fully understand exactly what is going on here. So, let's take a second to look at a chart to get a better idea of just how hard the American greenback has been hit lately:
As you can see in the above chart, times are definitely tough for the dollar. Since oil and the dollar typically trade inversely proportionate to one another, if the dollar's chart looks like a downhill ski slope, then the oil's chart must look as impressive to the upside. That is exactly the case as you can see in the following chart for oil:
Oil is definitely in a very strong upward pattern and it looks ready to test the $100 level in the next few days of trading. Late last month, when oil was trading around $92 a barrel, I wrote that we would be seeing $100 oil by the middle of this month, and possibly even sooner if we were to see a couple more bullish inventory reports. Well, we have had two bullish reports in a row, and if we get a third one tomorrow, $100 oil could be here by the end of this week.
The weekly inventory report will be coming out tomorrow around noon so be sure to check back then for a review of American oil supplies and market reaction to the latest data.
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)
11-06-2007 @ 2:06PM
ira said...
$97-100.00 per barrel, will certainly mean $4.00/gallon at the pump real soon. If GM and Ford can start selling Hybrid cars that can help them and us in a big way!
11-06-2007 @ 2:38PM
robert said...
Hey, It's a given that the world has to work together now. Problem is, all the world wants to be in control. How to fixit? Dagone if I know. Few things maybe..politicians, always in it for the money. Goverement, no control..in it for the money. Listening at myself while I post this. Why not just eliminate rule and let things happen naturally. Worked well before all the "LeaderShip". Oil, not a proplem..Just reduce the amount you use. 20 minutes a day can make a difference.
Bob