Oil Speculator

The price of oil has been on a unfettered journey hitting unbelievable heights and psychological barriers along the way. I was just reading a piece published in the WSJ on Thursday, November 8, 2007 titled, " Why $100 Oil Can't Float". The article gave ten reasons, deeply grounded in supply and demand fundamentals on why oil wouldn't sustain this point if it came about. The main argument was based on the 4.2 billion barrels world reserves above ground at the end of June(2007) according to U.S. Energy Information Administration. However, even after all this good analysis the price of oil settled over $100 on January 1, 2008. The momentum came from hard to forecast variables like supply disruptions in Mexico, geopolitical trouble in Nigeria, speculation on further rate cuts by the Fed, and a decrease in reserves domestically. All of these reasons and in addition to speculators looking for any reason to reassert there propensity to push oil and other commodities higher was more than enough of a catalyst to get the job done. And, today the price of oil continued its rein, closing above a new high of $127. All of this suspense begs the question, when will the price of oil descend? The first step to answering this question is to agree on what is really causing oil's ascent. I firmly believe that most of the increases in the price of oil isn't based primarily on demand in China or India, but rather mere speculative investing through new innovative finanical products like index funds that makes it easier to participate in the commodity and future markets like never before. Some events that may trigger a more reasonable price for a barrel of oil is a cease in interest rate cuts by the Fed, a substantial decline in driving this summer by Americans on vacation, or a noticeable increase in the EIA's Petroleum status inventory reports, or a Global slow down. Any of these four events can trigger a run for the border from oil and other commodities. I think one or a combination of these events will occur a lot sooner than Goldman Sachs prediction of $200 barrell oil will occur. If your bearish on the price of oil there are two ways you can play this strategy. One is Proshares Ultra Short Oil and Gas ETF DUG and another is Deutsche Bank Double Short Commodities ETN DEE. Both, are down signficantly because of the price of oil and both will directly benefit if the price of oil begins to fall.