Crude oil looks cheap, doesn't it?

Crude oil looks cheap, doesn't it?

Just because something looks inexpensive doesn't mean that it's necessarily a buy. It's very possible for crude oil (NYMEX_CL) to rally up into the low 70s, but you have to remember that it would still be in a bear market. We have seen very few counter trend rallies in this market since it began its amazing fall from grace. The liquidation of the hedge funds and speculators from this market pushed crude down so much that OPEC had to have an emergency meeting. During that meeting, they agreed to cut production by a total of 1.5 million barrels a day. I don't believe for a second that they are going to follow through with that plan. I don't think its every going to happen.

OPEC is now between a rock and a hard place, and is being forced to continue pumping oil because of other financial commitments. Most if not all of the OPEC countries have recently put economic programs in place, all of which require further funding. These economic programs are now having to be financed from a lower income stream. I doubt seriously, giving the players in OPEC, that they will live up to their word to cut output levels. They need the money much like a drug addict needs a fix.

I expect certain countries (Venezuela and Russia) to continue pumping as much crude as they can, so that their socioeconomic infrastructure does not come to a screeching halt. As I have said before, trading this market with a technical program and a game plan far exceeds just looking at the fundamentals. The fundamentals always come in late and after the fact. Market action, and market action alone, determines the trend for not only crude oil, but also for all of the other markets.

Remember, when you are trading against the major trend you should always use positions smaller than if you are trading with the major trend. I believe that the conservative play would be to allow crude oil to rally, and then sell the rally when you have a technical signal to do so.

Every success,

Adam Hewison
Co-creator, MarketClub

8 thoughts on “Crude oil looks cheap, doesn't it?

  1. Why isn't everyone getting behind thorium nuclear?

    Thorium could safely provide all of our domestic electrical energy requirements for several centuries.

    This summarized Washington press release proves that someone is listening:

    Sen. Orrin G. Hatch (R-Utah) and Harry Reid (D-NV.) recently introduced legislation that would pave the way for thorium nuclear-fuel reactors in the United States. The Thorium Energy Independence and Security Act of 2008 would establish offices at the Nuclear Regulatory Commission and the Department of Energy to regulate domestic thorium nuclear power generation and oversee possible demonstrations of thorium nuclear fuel assemblies. Using thorium for nuclear power has a number of potential benefits over conventional uranium. As a resource, thorium is abundant in the U.S. and throughout the world.

    A thorium fuel rod would remain in the reactor about three times as long as conventional nuclear fuel, cutting the volume of spent nuclear fuel by as much as two-thirds. Also, thorium nuclear fuel would significantly reduce the possibility that weapons-grade material would result from the process. Finally, a thorium fuel cycle could be used to dispose of existing plutonium stockpiles, which is the national security goal.

    “Our nation has focused mostly on mixed oxide nuclear fuel cycles, and our regulatory structure reflects that,” Hatch said. “With the growing interest in thorium nuclear power in the world and in the U.S., it’s time we made sure our government has a regulatory infrastructure in place to accommodate this new generation of nuclear power.” Speaking about the bill, Bruce Blair, president of the World Security Institute said, “This legislation reflects an enlightened grasp of the importance of supporting nuclear power while suppressing nuclear proliferation.

    “This bill is a giant step for the United States toward the development of a safe, secure and independent energy future,” said Jack Lifton, business development and corporate communications Director of Thorium Energy Inc. ( Thorium Energy is a resource company that owns property in Lemhi Pass, Idaho, where it is generally believed that the largest veins of thorium-rich minerals in the world are located. Analysis of the deposits shows them to be either the highest grade or in the top tier of the highest grade known anywhere on Earth.

  2. The cost of production on oil is different for each producer, depending how deep they have to drill.

    Saudi oil is so close to the surface they can suck it up with a straw. That's why they are the lowest cost producer.

  3. Once price goes under production cost, supply will drop. No need for demand to increase. What is production cost on oil?

  4. As a techician; one should beleive what the chart is telling us. I'm myself trying hard not to listen to the news. It pays.

    thanks a lot coz sharing a very valueable experience to others like me.

    thanks again.

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