The market is absolutely getting pounded in the midst of financial turmoil in the U.S. markets. Fed Chairman Bernanke in testifying before Congress indicated that inflation remains the main worry of the Fed. This comment has halted the dollar selling for the moment bringing the dollar back to almost unchanged on the day after flirting with record lows versus the Euro. A stronger dollar will push prices for oil down as both the dollar and oil have been trading in sync. As shown in the table below each 1% firming of the dollar could translate to a little over a 7% decline in the price of WTI.
Further impacting oil at the moment is the accelerating weakness in the worldwide equities markets. There is a tremendous amount of bad news floating around over the state of the U.S. economy, especially in the financial sector. In addition GM also raised fears in the market today after announcing a suspension of their dividend payments and laying off 20% of their staff. Weak equities markets usually translate into a view that oil consumption will also decline.
The market is undergoing a significant correction. It is still too early to determine if it will follow the pattern of short and shallow. For the moment stay buckled up and be cautious in your trading and hedging executions.
Currently prices are lower across the board.
Current Expected Trading Range
7/15/08
Change
Upper
Lower
From
Resistance
Support
11:14 AM
Yesterday
Aug WTI
$138.67
($6.51)
$150.00
$130.00
Aug HO
$3.9119
($0.1530)
$4.0000
$2.7100
Aug RBOB
$3.3805
($0.1772)
$3.7500
$3.0000
Aug NG
$11.475
($0.484)
$13.500
$11.000
Euro/$
1.59
0.0037
1.6000
1.5200
Yen/$
0.9596
0.0139
1.0450
0.9000
Dominick A. Chirichella
Energy Management Institute
dchirichella@mailaec.com
www.energyinstitution.org
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