OPIS on the Bull Rush
My daily OPIS summary weighed in on my side over the level of oil prices. I am beginning to think I may not be crazy at all.
Today’s “excuse de jour” for the rally has been the reported shut-in of 600,000 b/d of crude oil by Mexico’s state-owned oil company, Pemex, due to inclement weather. In a climate where U.S. crude supplies are dangerously low, such a shut-in would likely spur some panic buying.
Supplies are not dangerously low, however. In fact, stockpiles are near the upper end of the average range for this time of year, according to the U.S. Department of Energy. And in that kind of a climate, news like the Pemex shut-in becomes justification for a move that has little to do with fundamentals.
As has been the case for the better part of 2007, money flow continues to drive this rally. According to the most recent Commitments of Traders report from the U.S. Commodity Futures Trading Commission, speculative long positions on the NYMEX outnumbered short positions by 60,026 contracts for the week of Oct. 26.
In my mind, the only question is whether the correction begins before or after I lose my bet.
(Yes, I know that almost all I have been writing about for the past week is oil prices, but this is a news story that in my opinion dwarfs most of the other happenings in energy.)