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Crude Reality: August of '08
Media types I have either heard or read believe commodity crude-oil prices may approach $100.00 per barrel by the time of the U.S. general election in November.
It appears to be a pretty reasonable expectation.
Based on my analysis of historical prices of New York Mercantile Exchange crude-oil futures contracts over the past 10 years as provided by the U.S. Energy Information Administration (EIA), I conclude the second half of August is a neutral-to-bearish period for crude prices and the following six weeks constitute a bearish period for oil prices. Ergo, I think commodity crude-oil prices may be higher now than they will be Nov 4.
In my assessment of contemporary commodity crude-oil prices, I focus on the West Texas Intermediate continuous contract's 13-week simple moving average (currently $131.25), 26-week SMA ($121.06), 39-week SMA ($111.55) and 52-week SMA ($104.66) as likely areas of resistance and support. I also look at WTI's price objective on its point-and-figure chart (now $96.00). Therefore, a price of $100.00 per barrel over the next two and one-half months strikes me as well within range.
Of course, either geopolitical events, such as the current Georgia-Russia war, or weather events, such as those potentially associated with the likes of the two systems now being tracked by the National Hurricane Center, could rip this price estimate to shreds.
Should commodity crude-oil prices moderate more than I anticipate, I believe it would be wise to consider an oil-and-gas equity on the refining-and-marketing (R&M) side, especially one involved more with heavy sour crude and less with light sweet oil. One alternative would be the Valero Energy Corp. (VLO - Analyst Report), which is a Zacks #3 Rank stock whose group has a Zacks Industry Rank of 135 of 217.
With 90 minutes to go in the equity-market trading day, VLO's share price is $34.48, representing a gain of 70 cents or 2.07% when compared with the closing price of $33.78 yesterday. Earlier in the session, the stock of the nation's largest pure-play R&M company by market capitalization had traded as high as $34.85 and as low as $33.50 on below-average volume.
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| Market Summary | Feb 10, 2010 00:43 am ET |
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