Crude oil hits $120.36 record on Nigeria, economic data

This article belongs to the NYMEX crude oil price records story arc.

bloomberg.com :

Crude oil traded near a record $120.36 a barrel in New York after a report yesterday [5 May 2008] showed US service industries expanded in April, signaling higher energy use. The Institute for Supply Management's [ISM] index of non-manufacturing businesses, which make up almost 90% of the economy, grew for the first time since December, the group said. The report came after an oil-pumping station was attacked in Nigeria over the weekend.

"The U.S. is entering the summer driving season in three to four weeks. There's the Beijing Olympics and new refineries coming online in China, they are going to need to fill their stocks," said Jonathan Kornafel, the director for Asia at Hudson Capital Energy in Singapore. "There are bad news coming out everyday on the supply side, it's a scary picture right now."

- Right, and it's only going to get scarier. And of course they have to give a reason, whether on the upside or downside. One day it's demand destruction due to the economy slowing, and another day it's demand increasing due to the economy growing. Could somebody please make up their mind here?

Looking from a peakoiler's point of view, we see oil production in Mexico's Cantarell field crashing, we see Kuwait reporting that their reserves are actually only half of what was stated earlier, and we see Russian oil production about to peak. At the same time, demand continues to increase globally, and oil exporters like the Saudi's are starting to use more of their own product instead of exporting it out. If you were to talk about being bullish on oil prices, then peakoilers should be the super-bulls. Not that we are necessarily cheering it on or anything like that. Many of us are probably staring at the crude oil live quotes with a mixture of fascination and horror or something of the sort.

Back to the technicals. The $120 resistance level is breached, though I would not say decisively until at least the high $120's are achieved. We'll probably have some sort of pullback and consolidation pattern again, anywhere between the usual $5 range, $115-120, and the next resistance levels could be at $150, $180 and $200. Before that, the next $10 milestone would obviously be $130 and that'll be the next upside target. On the downside, support levels are $110, $100, $90 and $85.

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