Over the longer run crude oil is now following the stock market. Watch the USD, Dow, and S&P500 and we begin to see more and more linking of supply and demand. Floyd thinks it has been weakness in the USD that had fed the recent rebound in oil prices, and that over time the heavy supplies we have will be secondary to our perceptions in the market. Others believe the recent rise in the price of oil are what actually did fuel the USD weakness. In these studies there was little correlation between the dollar between 1986 and 2000.
And natural gas is at an overload of supply.
Even OPEC, Venezuela, Nigeria and the Middle East conflicts or statements do not seem to long term effect the price of oil. I suspect that over this year oil will settle into a "range", and hit highs of $70.00 to $90.00 by the end of the year. $50.00 is a strong support line for light crude oil.
Traders should watch geopolitical events, the bottoming or rebound of the USD, and the Dow itself to correlate oil prices.
We've seen a potential bottoming of the USD and a likely rebound, so a drop in oil, but also Floyd sees strength in Gold (GLD) to bring it to potentially $1200.00 to $1300.00 by the end of the year.
We'll be trading puts and calls on GLD and DUG (shorting of oil) at various times over the next few months, as we follow the whipsaw in both commodities.
