Trader Savvy Newsletter

In 2006, oil prices are on the rise once again, with crude setting fresh record highs in the process. In April alone, crude prices increased by a whopping 20+ percent, leading many to ask how much longer this rally can continue. The latest round of oil strength stems from Iran's announcement that they have successfully enriched uranium for the very first time. Geopolitical tensions are rising as the oil market fears that the US may respond with an attack on Iran, the holder of the third largest oil reserves in the world. The US does not import any oil from Iran, but many countries such as Russia, China, and some European nations do.

When the mania hits a peak and everyone is screaming that things will only worsen, we may be near a top. Just think back to the hysteria points in August 2005 and February 2006. In both rallies, prices first rose by 26 and 21 percent respectively. At the time, the market became extremely concerned, gasoline prices skyrocketed and unsurprisingly, oil prices tipped over shortly thereafter to erase at least two thirds of the gains before rising once again. Therefore, it is certainly possible that we are at a similar turning point in oil at this moment. Back in November and December of last year, when we were entering the winter season, the prospects for oil looked the most dismal because energy usage at that time was a necessity. Now in contrast, even though we are moving into the usually busy summer driving season, taking extra road trips with the kids is something that can be avoided. Read More...