Oil trading difficult to predict, well why wouldn’t it be?

30 July 2010 30 July 2010

BonTrade

With current stock market volatility, it’s true to suggest that trading oil futures, getting the upside and downside on oil pricing is difficult to predict, well what’s new?

This week, Dennis Gartman a hedge fund manager says oil trading investors should best head for the exits until an expected round of volatility works itself out.

A bearish supply report Wednesday as well as a widening spread between the front month contract and later months has Gartman convinced the trade will be difficult in the days ahead.

“Interestingly, oil prices have rebounded from their lows and some would find this impressive,” he wrote Thursday. “We find it an opportunity to mitigate damages done to our long positions and will urge those who are long to exit this morning and rush to the sidelines.”

Gartman’s advice didn’t work out well for the day’s trading, with US light, sweet crude advancing more than 1.5 percent in afternoon trading.

Are Oil Prices Too High?

Peter Beutel, energy analyst at Cameron Hanover believes oil prices are too high and is only at its current levels because of investors borrowing money at low interest and buying the commodity.

“Someday, and I don’t know if it’s when we go to slightly higher interest rates, if that’s when it occurs…a lot of people have to wake up and say, ‘What am I doing long oil at even $70, or even $65, maybe $60, maybe $55?’ based on the amount of oil we’ve got right now,” he said.

Beutel said there is 22 percent more crude oil in storage than two years ago “and we don’t have near the kind of demand we had two years ago,” when oil reached its record high of $147 a barrel.

He added that he could “make a very good argument” for oil between $30 and $40 a barrel, but doesn’t see oil prices going there.

Are you bearish oil prices prices?

Oil prices have been trading around the $75 to $80 recently, mark but the undertone remains bearish as it seems that the failure to test $80 levels could lead to an extended sell off if the US dollar appreciates anytime soon. What do you think?