Friday, July 18, 2008

Oil Tumbled US $ 16 from the top

Just an entry of recording a first 10% off from the top for future reference. Oil tumbled after Ben Bernanke commented on the US economy prospect. Investors and speculators took profit fear of demand destructions caused by recessions.

Of late, the Iranian has been sending mixed messages about its nuclear program and direct confrontations with the US. One day they said it is not possible to have direct confrontations with the US and Israel, the next day they tested their missiles, kind of flip flop thinking. The WSJ reported that sanctions did not hurt its oil and gas sector.

Revenue has been on the upward trend benefited from high crude oil prices while production output has been stagnant, telling us no new investment made in the capacity. It's a catch 22 situation, if the prices were continue to fall, the Iranian will have a lot pressures of losing revenue. They may soften their stance on nuclear program, giving less reasons to argue on the supply disruptions.

Traders have been struggling to find reasons of price should move higher -- supply disruptions in Nigeria, strike in Brazil, etc. These arguments have not been strong enough to send price to move up higher.

Stripping all the noises of news flow, the real fundamental of demand and supply will surface soon. Demand destruction argument wins for now, let's see how weak is the demand turn out to be(next 30 - 100 days will be critical).

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