The Case Against $60 Crude

Speculators continue to goose this gas-bag whenever the release of phony inventory numbers suggests that the supply of crude has tightened. In fact, the fudge-factor for determining how much oil is ‘out there’ is so huge as to make swings of several million barrels statistically irrelevant. Many sovereign oil producers no longer even offer estimates; moreover, with skittish producers holding their cards closer than ever to their chests, it can no longer be reliably determined whether supertankers sitting low in the water are filled with oil or seawater. Thus, the absurdity of traders going nuts every time inventory data are released.  This is exactly the way the Powers That Be want it. The banksters have lent heavily into the energy sector, and that is why we get a steady stream of planted news stories calculated to drive up prices. The most ridiculous of them are supply-side Rube Goldberg-esque think-pieces that would have us believe that the mere threat of oil cutbacks by the likes of Nigeria or Venezuela is sufficient to buoy prices even as the world, China in particular, skirts recession-or-worse.

The foregoing should not cause us to overlook a technical picture that is decidedly bullish. The chart shown projects to 50.51 (see inset), which would imply a 9% rally lies just ahead. Still, I’d need to see a decisive pop above the red line, a midpoint Hidden pivot resistance at 46.76, to be convinced the rally will fulfill its target. Even then, if crude were actually headed toward $60 a barrel, mid-August’s rally should not have failed to clear July 7’s 49.53 top by a measly 18 cents. That was chicken-hearted action, and it is why I regard any rally in crude as just a dead-cat bounce.

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