Oil prices fell in overnight trading as traders anticipated that OPEC will keep production levels steady at today's meeting. We'll the traders were right! Today, OPEC confirmed it will hold production at current levels to bring prices down, and the Energy Department reported a higher than expected build in crude inventories.
Now, that crude oil has dropped below the $60/bbl mark, prices will probably stabilize in the $50-$60 range. Remember what President Bush said during his State of the Union address:
"We Are On The Verge Of Dramatic Improvements In How We Power Our Automobiles."
This initiative will not become a reality unless consumers experience pain at the pump. Prices must remain high to convince consumers to buy hybrid vehicles. So, get use to higher energy prices, and big profits for the oil companies.
Another feather in energy's cap is the current situation in the Middle East.
There is no way that tensions in the Middle East will be resolved quickly. The Arabs and Jews have hated one another since the beginning of time. Don't expect this situation to change.
In the latest Commitment of Traders Report (CFTC), large speculators have been taking profits on their positions in crude. This is the third week in a row that traders have taken some profits while switching to short positions in heating oil.
All in all, I see a buying opportunity coming in our favorite oil stocks. For details on our positions, click on our portfolio.
