Despite an $8 per barrel drop in early August, the crude oil market is still in an uptrend, says Thomas N. Hartmann, analyst for Altavest Worldwide Trading. “We’ve got relatively stable demand and that pressure is not abating despite higher prices,” he says, adding that this market has one more leg up as we head into hurricane season. September is the most active month for storms, August is the second most active, followed by October. “We are just getting into the thick of things,” Hartmann says. With heavy weather, he expects a high of $80, but if storms fail to materialize, crude could fall back to $55, as it did last year.
“Crude oil has one of the most bullish structures of any commodities trading right now,” says Darin K. Newsome, senior analyst for DTN, and the fact that further out contracts are trading at a premium to the nearby is proof that commercials are locking in supply. Consumer demand is nearly constant, he says, and therefore deferred buying indicates smart money concerns. “And for that reason alone, we are certain to test $78.77,” he says, pointing out that the 2006 rally was driven by speculators who were betting on hurricanes that never materialized. If the market takes out $78.77, he expects crude to trade up to $80 and picks a low of $69.50.
