Oil Price

Viewed historically, the oil price is about to enter a period of seasonal
weakness that can last well into Dec. The sharp 8.8% decline in the
crude price this past week is not without seasonal precedent. The
decline did fracture a sharp uptrend that began in Feb. '09 off a
another seasonal low point, a trend that essentially belied the broad
supply / demand fundamentals, and one which was fuelled by
speculation on eventual economic and oil demand recovery. I think
the run - up came early, but I guess one has to recognize that newer
long only and price - mimic ETF funds have brought more purely
financial players into the game. Some of these guys do take actual
bunker crude, but most have no intention of riding at home at night
on the train seated next to a barrel of oil.

As mentioned, there has been a break in trend line, and a break in
shorter term trend relative to the 10 and 25 day m/a 's. (Chart
below). The market is also approaching a mild oversold situation,
and there is more downside possible.

In days well gone by, one might have plausibly assumed that the
downward seasonal adjustment in the oil price into Dec. could be in
a range of $15 - 25. a bl., which could take crude as low as $50. But
with more financial players on board, that easy assumption is no
longer assured.

If, indeed, there is a period of seasonal weakness, then we might look
to a test of support at $60 as the first line of defense. A break below
this area might well signal that a more traditional seasonal swoon is
at hand. Chart is here.