Oil Prices To Fall Further Despite
Production Cuts
The Dynamic Wealth Report
October 24, 2008
OPEC Caught Manipulating Oil Prices!
Did you see the news today about OPEC? We’re entering a global
recession, and they cut oil production by 1.5 million barrels a day. OPEC (Organization of Petroleum Exporting Countries) for those of you
who don’t know is a global cartel of oil producing nations who meet
regularly to set production levels. They have the power to influence the
global economy, and here they are doing it again.
It’s not the first time.
Every time OPEC decides to adjust oil production levels the impact
ripples through the economy. Back in May I penned an article
called
Gas
over $8 a Gallon? At the time, oil had just surged past $120 a barrel
and it wasn’t going to stop any time soon. President Bush was begging
Saudi Arabia (and the rest of OPEC) to produce more oil.
Goldman Sachs had just put out a research note calling for oil at $150.
Other issues were also driving up oil prices. Nigeria was having
problems with anti government groups threatening oil production. (I’m
sure they’re still having problems but it doesn’t make the news
anymore.) At the time Iran was saber rattling and creating a problem on
the world stage (what’s new?).
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Gas prices were up over $3.75 and heading towards $4. And oil prices
were so high, Congress started investigating the oil markets.
Consumption of oil was driving the markets at the time.
But right now oil prices are falling. We’re down more than 50% from the
high, and we keep falling. So, back to OPEC. Today they announced major
production cuts. Anyone with half a brain would tell you that if supply
is cut back, prices should go up. But they didn’t go up! They actually
fell – as I’m writing oil prices are off more than $2.
This is an amazing sign.
This is a flashing beacon, we need to pay attention to. This little data
point tells me we’re not in normal times. It means oil supply is
falling, but oil demand is falling even faster. We are seeing the start
of a global recession.
Take a moment and look around the globe. You’ll find country after
country, economy after economy being flushed down the drain. Hot, high
growth countries like China are slowing. Huge stable countries like
Japan are shrinking. And the US is teetering on the edge of recession.
All this economic turmoil is causing demand for oil to fall.
As an economy slows or contracts, the demand for oil and other
commodities falls. It’s a cycle we’ve seen before. But I’m not the only
one thinking this.
Just a few days ago I shared a glass of wine with a good friend. This
friend is no ordinary individual. He’s a venture capitalist focused on
the Alternative Energy industry. He knows about cutting edge energy
technologies that will cut our dependence on oil. Because of his job, he
also has an incredible grasp on energy policies and of course the energy
markets.
He told me his investments assume oil at $30 a barrel. I had to ask him
to repeat what he said. I couldn’t believe it. Oil around $30 a
barrel!?! We’re over $60 - now. That means oil's going to get cut in
half again. I knew oil was going to fall further, but that’s a huge
drop.
The more I thought about oil prices, the economy, and global
consumption, I realized oil is going to fall. Will it hit $30? I don’t
know. But at $60 it’s way over priced. This tells me if you aren’t
already profiting from the fall in oil prices, there’s still time.
Just this morning I sent a trade alert to the subscribers of my Elite
Option Trader service. I showed them how to profit from a further fall
in oil. Just as an aside, the last oil related trade I recommended ran
up 766% at peak value. Now I’d like to tell you about the trade, but
that wouldn’t be fair to my paying subscribers.
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service
click here.
• Biogen Idec (BIIB) was upgraded to “Buy” over at Banc of America
Securities. Just this week the company reaffirmed their 2008 guidance to
the street.
• Credit Suisse (CS) was downgraded to a “Hold” rating at Deutsch
Securities. I love it when one investment bank downgrades another . . .
can you say cat fight?
• Banc of America Securities started research coverage on AK Steel
(AKS) with
a “Sell” rating. If you’re just going to tell people to sell a stock,
why do all the work to cover the company?
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