Oil Markets: Ivan, OPEC, And Supply Figures

Crude oil futures were trading near $44 per barrel on 9-14, in very early pre New York action.

According to Accuweather forecaster Joe Bastardi on CNBC, the big risk from hurricane Ivan is not to New Orleans, but to Mobile Alabama, where refinery facilities could suffer significant damage. While Bastardi expects that New Orleans could get a "formidable" blow from Ivan, the Mobile area is at higher risk from suffering what he called its "biggest storm."

The big influences of the moment are the OPEC meeting, the path of hurricane Ivan, and the supply figures from the API and the U.S. Department of Energy.

The latest reports suggest that Ivan may miss the bulk of the oil producing region of the Gulf of Mexico. CBS Marketwatch reported that "According to the most recent report from the U.S. Minerals Management Service, 382 of manned platforms, or 50 percent of the total, and 60 rigs, or 51.3 percent of them, operating in the Gulf of Mexico have been evacuated. Operators have shut down more than 61 percent of the 1.7 million barrels per day of Gulf oil production, as well as 34.1 percent of the 12.3 billion cubic feet per day of natural gas produced."

The OPEC meeting, as usual, will be full of leaks and hints throughout the day, as delegates haggle about production quotas. Initial leaks hinted at the possibility of a million barrel per day increase.

And as always, expect surprises in the supply figures. The market is expecting decreases in supply.

The crude oil futures are either making a double top or forming a trading range between $42 and $44 per barrel. Little has changed. Supplies are still tight. OPEC is meeting this week. Event risk remains high.

On the fringe are the rising problems in Baghdad, and the tightening of Democratic rules in Russia are also lurking as reasons to keep oil prices high.

The key remains whether crude can close above $45 per barrel, remain there, and whether the oil stocks can make new highs. If this combination of events takes place, the odds that we are in a new up leg that can take crude above $50 per barrel are on the rise.

The Philadelphia Oil Service Index (OSX) remained inside the 112-115 band. A sustained close above 115 would be very bullish. A break below 98 its 200 day moving average, could send it plummeting to the 88 area in a hurry. For more details on trading the energy sector visit our energy timing page, featuring our highly effective OIH timing model and our Top Ten Energy Stock List.

The Amex Oil Index (XOI) closed above the 660 area, which is now short term support. A sustained close above 660 would be an all time high for XOI. This is still a crucial juncture for the entire oil sector, as a continued failure in the near term could lead to a major top forming. A close below 600 would be a very negative technical development. For immediate analysis, including stock picks, and the latest in technical analysis of the entire energy complex, our subscriber section has a full complement of recommendations in oil service and the rest of the energy complex.

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Brent Crude Oil : $50.47/BBL 0.98%
Light Crude Oil : $49.72/BBL 1.09%
Natural Gas : $2.76/MMBtu 1.09%
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