Tuesday, June 3, 2008

Tomorrow's Oil Market today

Oil closed under $125 barrel today, and it should fall sharply again tomorrow. Here's how I see the action.

At 10:30 am we get the oil inventory numbers, so oil shouldn't sell-off that much overnight. Last week, they showed a drop of 8.8 million barrels of oil. Oil rallied, and then sold off on the news.

Why the drop-off? Because we are heading lower. But here's some anecdotal evidence to consider.

Lloyds MIU, is the best and most comprehensive source of global ship movements in the world. They have an AIS (Automatic Identification System) network that gives you real time data on vessels in over 1,000 ports, and you conduct a search on 120,000 vessels in 2,800 ports around the world.

Remember how oil sold off on the news last Wednesday? Oil speculators have been buying two-month subscriptions of Llyods for $1400 to track oil and shipping vessels. (It pays to know if oil is sitting on a ship in a port.) The two month subscription was set up in part because of the demand by oil speculators.

Here's a bit on Llyods:
They offer a subscription to "Vessels" plus AIS for the following subscription periods:
Two Months - $1,400
Four Months - $2,586
Six Months - $3,395
One Year - $6,465

The subscription provides you with access to 120,000 vessels including:
Vessel Movements (latest sighting and destination plus most recent movements)
Vessel Overview with basic characteristics
Casualty and Detentions - up to 10-year history
Best Company Contact
AIS Global Network

If you used this properly, you wouldn't of been taken by surprise by the oil sell-off on the seemingly bullish news of the 8.8 million barrel drawdown in crude. Here's more on that:

The U.S. Energy Department's Energy Information Administration said delays in unloading oil tankers along the Gulf Coast had led to the 8.8 million-barrel drop in crude oil inventories for the week ended May 23. Analysts surveyed by Platts had expected a gain of 750,000 barrels. Usually such a discrepancy would send prices soaring.

A very speculative play on oil cracking is Macroshares Oil Down (DCR 1.30). You can read about that here:

Last Wednesday, it traded as low as .95, and as high as $1.27.

But if you do your homework yourself, and get real time information, then, I suspect, you'll act like the oil speculators who sold down oil last Wednesday on the supposedly bullish news.

They are using real time data. Or at least, they have someone else mining it, so they can concentrate on laying out shorts on crude rallies!

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