Jan 05 2007
Yesterday, oil prices plunged more than $2 per-barrel mainly due to the warm winter in United States (U.S.). Today, the oil prices follow through when it dived to below $55 per barrel (lowest at $ 54.90) at midday in Europe (as of writing, the NYMEX Crude Oil is trading at $55.70 per-barrel) on the New York Mercantile Exchange.
Associated Press reported that Ministers of the Organization of Petroleum Exporting Countries (OPEC) are monitoring whether the lower price trend will continues before taking any further action. As a yardstick, a warm winter and a mild hurricane season last year had put pressure on oil prices. It’s pretty normal or routine that weather remains the most important factor in determining oil prices during winter season every year.
Warmer winter weather also means the distillate inventories record surplus figure as reported Wednesday – diesel fuel and heating oil increased by 2 million barrels to 135.6 million barrels due to lower demand. Analyst such as Oliver Stevens at IG Markets maintain that price could rise again but should the $55 per barrel support level be broken oil may well trade lower to find support at the $50 level. However, I believe the current low price is only a temporary phenomenon, just like the previous years. Furthermore, OPEC will not just sit there chewing gum enjoying the price plunge – it will definitely cut production to raise the price to their preferred price of $60 and above as previously stated. In addition commodities normally would do well during weaker dollar situation such as now.
Some of my favorite energy-related stocks are:
It’ll be interesting to see if the Malaysia Government will reduce the fuel (petrol) price since it previously mentioned the government will only consider lower the price if the oil pull-back to below $ 60 per-barrel. I won’t be surprise if the government cook-up the same old boring story on how the government actually still subsidizing fuel and the citizen should continue to help share the burden. What is your bet on this?
# TIP: I’m bullish on the oil prices in the medium term so I would leverage on oil-related stocks with option trading. My favorites are SLB, RIG, HAL and VLO – remember to have at least 6-months of time-value to your advantage.
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January 5th, 2007 by financetwitter
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