Crude oil moved back above $48 in overnight trading. Reports surfaced overnight that OPEC, despite considering production cuts, may be planning to continue to produce at maximum capacity in order to prevent major shortages for next winter, given China's continued demand.
According to Reuters, overnight: Oil prices firmed on Friday, bolstered by expectation of possible OPEC production cuts and partly reversing a slide the previous session that was triggered by hefty stock builds in the United States.
The psychology change that we have been describing for some time seems to have taken place: "Global demand has climbed much faster than most analysts expected over the past two years, helping to push oil to a record high of $55.67 last October. Although the surge took many by surprise, producers and consumers have adjusted quickly to new price levels and sustained economic strength in Asia and the United States has lent support to the view higher fuel costs are not affecting growth severely. ["I think the world can live with $45 oil,"] said Jeffrey Immelt, chief executive officer of diversified manufacturer GE, the world's largest publicly traded company."
Oil stocks continued took the day off on 2-16, and may consolidate for a few days before deciding what to do, as the charts are saying that some of them are getting a bit ahead of themselves. Thus, some kind of pause may come in the next couple of days.
The longer term picture for oil supply remains tight, as refineries are pumping at nearly full tilt, despite improvements in gasoline supplies before the summer driving season. If refineries are working at full tilt now, when demand has slowed some, they may not be able to keep up for the summer months when gasoline demand rises.
The Philadelphia Oil Service Index (OSX) pulled back, but made new highs earlier in the week, and is now testing long term multi year resistance. Volatility will likely increase here in the next few days. 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) has made a series of new highs lately, and delivered another one on 2-16. XOI remains above the 50 day moving average, preserving an up trend. 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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