Holy Short Squeeze Batman
I took a break from work this afternoon to sneak a peak at what oil was doing and I was blown away. Obviously, I'm about as bullish on oil as they come and I wrote this morning that I strongly believe that the recent government bailouts are bearish for the U.S. dollar and in turn bullish for commodities like oil (see post: Inflation vs. Deflation). However, I didn't expect such an rally only hours after I wrote this.
The October crude oil contract today rallied briefly to $130 per barrel before dropping falling to $120 at market close. Today is the final day of trading for the October contract and apparently there were a number of traders caught with short positions in crude oil who had to pay dearly to get out of their contracts. Good.
It is difficult to say whether oil will find support at the $120 level. I suspect it might pull back a little in the short term. The December contract is a good baramoter of where oil is headed over the next several days. It was up "only" $5.77 per barrel today to $108.31.
The short-term fluctuations of the market are always hard to predict. I strongly believe that we will see and I have positioned my portfolio to benefit from triple digit oil in 2009. My oil plays are fairly conservative. They will be fine with anything over $80 and absolutely amazing with anything over $100. Any prices above that are just gravy.
Also of note on the oil front:
- Mexico May Say Oil Output Fell, Pressuring Congress: Week Ahead (link)
- Bloomberg: Dollar May Get `Crushed' as Traders Weigh Up Bailout (link)
- Company blames lagging output in oil sands as it pushes back project to 2014 (link)
- China cuts benchmark interest rates to ensure steady growth (link)