President Bush is credited with bringing around a trend change in the price of crude oil.
Crude oil cracked below the $138 price in early pre-U.S. pit trading on July 16, likely setting up the United States Oil Fund (AMEX: USO, Stock Forum) for a break of key support to start the day.
Something big is going on in crude oil, which could change the intermediate-term trend of prices in a hurry.
President Bush is being credited for bringing about a trend change in the price of crude oil. During his morning news conference on July 15, the president stressed his lifting of a ban on offshore drilling in the U.S. and taunted Congress to do the same.
What is not widely appreciated, though, is that the ban on offshore drilling expires on its own on September 30 of this year and that there is some kind of work ongoing in Congress to keep it from being renewed.
There are also reports that suggest that oil from California offshore deposits could be available within a year, not ten years as is commonly thrown about by those who oppose offshore drilling.
According to Larry Kudlow in a recent commentary, “A new report from Wall Street research house Sanford C. Bernstein says that California actually could start producing new oil within one year if the moratorium were lifted. The California oil is under shallow water and already has been explored. Drilling platforms have been in place since before the moratorium. They’re talking about 10 billion barrels worth off the coast of California."
Meanwhile, OPEC is ratcheting down its demand forecast for the year, citing signs of economic weakness as the major cause.
Add this to the fodder: the U.S. and Iran are meeting this weekend, in Geneva, to have face-to-face talks about Iran's nuclear program. This puts our July 10th commentary Iran Contra: Bush Style into a new perspective, while explaining why it seems as if some smart money guys with big bucks are bailing out of crude oil futures.
This is a good time to be very vigilant about sell stops and volatility in crude oil as it looks as if there is full court press unfolding from multiple and very interesting places.
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