NYMEX crude oil prices drop over $34 from record highs to $112.31 on stronger dollar

news.xinhuanet.com, channelnewsasia.com :

NYMEX crude oil prices fell Tuesday [12 Aug 2008] on a stronger US dollar and a report of a decline in US crude oil demand. The dollar rose to a 6-month high against the euro. Meanwhile, Russia announced the end of military operations in Georgia. The International Energy Agency (IEA) forecast a steep drop in demand in developed countries because of high prices and cooling economies. Light sweet crude for September 2008 delivery fell to $112.31 per barrel on NYMEX. Crude oil prices have plummeted over $34 since hitting a record high of $147.27 a month ago as the market frets about weakening demand amid the slowing global economy.

- Now that crude oil has broken through 3 support levels and come down over 20% from the current record high, the search is on for the next local minimum. Could $112.31 be "it"? Or is oil destined to blow past $110 support and re-visit the $100 level? The jury is out and most likely will stay out until the 2008 Beijing Olympics shutdown is lifted at the end of August. The worry now is that some of those idled factories may find that they might not need to re-start after all because US consumer demand has fallen through the floor. That's not entirely impossible, though a little unlikely. What is for sure though, is that the 1.5 million cars that have been taken off the roads around the Beijing area will be getting right back on.

Meanwhile, USDX, the US dollar index, has seized the opportunity to break through the 72-74 trading range where it had been for the past 3 or 4 months and has broken 2 consecutive resistance levels, through 74 and then 76. Based on what fundamentals I have no idea, because the fundamentals still look as bad as ever. Expect USDX to come crashing back down to 74, 72, and I heard from various sources that traders are watching for levels in the 60's : 62 and 60 are actually being discussed out there. In forex terms, USD/EUR 1.60 is apparently just another milestone, and word is 2.00 is a viable target.

At current prices, gold and oil are great bargains. It's like you have gone back 6 months in time and are being given the chance to accumulate more. So start accumulating those barrels and ounces while you can. Jim Puplava has a personal target of a tonne of silver, and a friend/partner of mine has his own personal target in the million-dollar range. My own personal targets are somewhat more modest : perhaps a 1000 barrels of oil, and a 100 ounces of gold, in various forms. Whatever your budget is, this is a great time to scale in.

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