Oil Price -- Unexpected Fade

Since mid-2009 WT oil has traded primarily in a rising trend channel of 11% per year and
mostly within a $18 - 20 bl. range. The range for Aug. is set at $99 - 119. WTIC today at
roughly $96.50 has slipped below the low end of the channel for the first time in five years.
Despite the chaos in Libya and potential concerns for the long term potential output from
Iraq and Iran, there seems to be a little surplus developing at the wellhead despite rising
demand. And, the culprit may be none other than the US which has fast rising domestic
production and which is cutting Its imports. Late Jul. / Aug. is generally a seasonally firm
time for the oil price followed by a strong seasonal pop in Sep. WTIC is trailing the seasonal
pattern. Crude Chart

This is the first little warning of a shift in the dynamics of oil supply / demand since the deep
recession of 2008 and it bears watching. Oil supply overhang carries significant implications
for inflation, the US dollar, and consumer real incomes and confidence. Naturally, sloppy
oil pricing and a stronger dollar are unintended economic sanctions for Russia as well as
oil developers in general.

Given the volatility inherent in the industry since the 1970's, it is too early to make a big deal
out of it, but sometimes change sneaks up on you.