Oil Keeps Falling, Retesting the Lows

Saturday, October 10, 2009

Crude traded little changed, set for the biggest weekly decline in a month, after the International Energy Agency said demand will fall for a second year, the first back-to-back contraction since 1983.

The adviser to 28 nations cut its 2009 forecast by 1 million barrels a day on expectations the International Monetary Fund will lower its economic growth outlook. The IEA estimates global consumption will shrink 0.6 percent to 85.3 million barrels a day.

“Global oil demand is still reducing at an alarming rate,” said Rob Laughlin, senior broker at MF Global Ltd. in London. “This latest report from the IEA is another warning shot across the bows of OPEC that supply is still outpacing demand and the situation is getting worse.”

Contango is still sky high making the holders of Oil ETF`S like USO, DBO, DXO or OIL pay an extraordinary carry charge. When will this contango diminish and how is the million dollar question. Will prices along the curve move closer to the spot price or will the spot price go higher to meet ahead of the curve prices? I am not sure, but I think spot prices will move higher.

When trading oil futures or ETF`s like USO look for the lowest comissions. Low round trip comissions are key to profitable trading.

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