Gas station in San Francisco.

This post is a research note from John P. Kilduff Senior Vice President Of Energy at MF Global Ltd. He's also a CNBC contributor.

Just when the market might have thought everything, including the kitchen sink, was priced into this market, the front page of the Wall Street Journal blares the following headline: Energy Watchdog Warns of Oil Production Crunch.

In an ill-timed interview, the head of the IEA foreshadowed the likely of outcome of a new study underway of the future of oil supplies, and the results do not look good.

IEA head, Fatih Birol, states that “the oil investments required may be much, much higher than what people assume." The study is at its mid-point, and will not be released until November. Mr. Birol's comments have served to embolden the bullish sentiment, with crude oil topping $135 per barrel last evening, on the initial release of the story.

Heating oil has also topped $4.00 per gallon in early trading. The protagonist in yesterday's rally was the weekly inventory report: a sharp decline in U.S. oil imports ran headlong into a sharp uptick in refinery utilization rates causing an unexpected drop in supplies of 5 million barrels.

Implied gasoline demand showed a slight uptick, despite the daily records being set at the retail pump. This data is neither consistent with our research nor the relatively new analysis being circulated by MasterCard, which is showing retail demand down nearly 6%.

Despite all the factors that lie before us, in terms of supply issues, the China diesel demand spike, and the dollar's renewed decline, we are sticking with our $138 price target as a near-term top.

Yesterday, crude oil's prices action went parabolic. The bar on the bar-chart looks like the long robot arm on the space shuttle. In reviewing the daily bars on the chart going back to 2001, we could not find a similar instance of such an exaggerated move at a new price record.

These factors indicate the possibility of a "blow-off" top being put in place. In addition, prices are clearly at a level that represents a full blown energy crisis, and the stock market sell-off, yesterday, evidenced the sentiment that the economic outlook and energy demand are likely to deteriorate at a rapid pace.

Questions?  Comments?  energysource@cnbc.com

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