Oil has rallied faster over the past 75 days than it did during the "bubble" last summer
Oil has been on an absolute tear lately Bespoke Investment Group had a great post a couple of days ago detailing just how far how fast oil has rallied recently (see post: Oil Up 99% In 75 Trading Days.
The price of oil has nearly doubled over the past 75 days. To put this move in perspective, this is a larger move than we experienced during any 75 day period during oil's bull run from 2001-2008. Prior to this recent rally, the fastest oil had ever rallied in 75-days over the past decade was 55% from December 2001 to April 2002. Over the recent stretch oil has risen from $33.75/barrel to $67.75 again in 75 trading days. During the oil "bubble" the same move took 409 trading days(January 2004 through August 2005).
It certainly appears as though oil was oversold when it bottomed recently in the low $30s. At the same time, it certainly looks as though oil may have gotten a little ahead of itself and may be due for a pullback in the short-term. This is why so many traders are going long natural gas and short oil. The former has barely budged during oil's recent explosion.
Possibly the thing that scares me the most about oil at this level is Goldman's analysts are saying that oil is headed higher. These scumbags manipulated the market and they were partially responsible for oil's huge surge to $147/barrel last summer...allegedly... (see post: Scumbags: If you can't beat 'em, join 'em). Fool me once, shame on you...fool me twice shame on me. I've got my position in oil and I'm not going to chase oil all the way up while these guys manipulate the market and then have the rug yanked out from under me.
I'm not really a trader by nature. I have added to my oil position several times in 2009. I personally would be a little hesitant to buy any oil-related stock that does not have exposure to nat gas at this point. U.S. crude oil stockpiles are 19% higher than they were at this point in 2008. We're currently sitting on enough for 25 days of U.S. demand, versus 20 days then.
Here's a great quote on oil from today's WSJ:
Some analysts warn that with prices being driven by investor sentiment, not market fundamentals, the leap in prices could give way to an equally sharp drop -- just like last year.
I completely agree. Having said this long-term (two to three years from now) I strongly believe that price of oil will be higher, perhaps significantly higher than it is today. I plan on holding my current positions and adding on any pullbacks.