After hitting a high of 8715 on May the third and a low of 6424 on the flash crash low, oil has barreled back to near the $75.00 a barrel area and it appears the great retrace is on. Oil rallied on the illusion of economic stability and a strong euro only to have those daydreams be shattered in financial deception.
The oil market has come to a major decision point and may be getting ready to get back into a bull market mode. Yet oil, like a lot of the major markets, are at key technical turning points and they had better make it now or we are going to break it.
The markets are acting like the ghosts of May and the nightmare of Europe are behind us and the market is acting like they want to believe again in economic aplomb. The strongest China exports in 6 years have traders forgetting about heir hot inflation.
They had good debt auctions across the euro zone and now the markets want to try and believe the crisis in Europe never even happened. And besides Jean Claude Trichet says the euro is a stable currency.
Why didn't he tell us that last week and save us all a whole lot of worry! Yet seeing is believing. The stock market and the oil markets have to follow through and the bonds are going to have to break to keep oil going. The question is: Do you believe?
Well I know someone who does not believe in the dollar. Guess who? Well it is Iranian President Mahmoud Ahmadinejad who said on Friday that U.S. dollars are worthless paper that the U.S. government injects into the world economy in exchange for goods and services. He said the U.S. deficit is the theft of the wealth of other nations.
Now guess who was a big buyer of US dollars last week as they dumped Euros. You guessed it, Iran. Go figure. On second thought, why bother.The Obama administration continues to cost us jobs in the gulf. The API says that the drilling moratorium is having a major impact and we are not just talking fishermen. As I have written before, the drilling moratorium is going too far and that revenge and emotion always makes bad policy.
The truth is the drilling moratorium is more about politics than safety and the environment. The drilling moratorium is not well thought out and is costing us jobs. Jack Gerard at the American Petroleum Institute says,
Restrictions on offshore energy production could result in thousands of lost jobs, billions of dollars in lost government revenue, and a significant decrease in U.S. energy security 120,000 lost jobs by 2014; $120-150 million in lost government royalties; and $300-500 million overall decline in government revenue in 2011-revenue that funds roads, parks and schools.
Not only that in the near term the administration's decision means that 33 drilling platforms will be idled leaving as many as 42,600 persons out of work with $165 million to $330 million in lost wages per month-that's $1,800 per week, per worker.
We are ready seeing small oil companies and drillers are being hurt as insurance rates for these companies are already rising. This means higher energy costs will hurt small businesses across the country.The oil market is getting some wide swings.
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