Even if Congress agrees to lift the moratorium on offshore drilling (a long-shot, for sure), getting that oil into the market will take years. Addison Armstrong, Tradition Energy's director of energy research, estimates it will take 10 years--at a minimum--to get 1 million barrels/day of oil moving from fields in the Arctic National Wildlife Refuge.
With anticipation mounting over this weekend's oil summit in Saudi Arabia, the White House now says it doesn't expect the Saudis to announce a supply hike. So doesn't look like we're going to see a sizeable flow of more oil into this market for a while.
Meanwhile supply disruptions are a more immediate concern. Namely, Nigeria. A key oil workers union there says Chevron workers are ready to strike at "any time" as negotiations failed today. Chevron's daily output in Nigeria was 350,000 barrels last year, and there's a 250,000 barrels/day offshore field that was supposed to start production there this month. What's the likelihood that will happen if Chevron workers are on strike? More important, the country produces the light, sweet crude the world is demanding. We need Nigerian crude to make gasoline -- though gasoline demand here has been waning.
Yet falling supplies--not slack demand--are the focus of the oil bulls. Here in the U.S., oil supplies fell for the fifth week in a row; a decline of nearly 25 million barrels in the past month.
Those are some fundamental factors supporting oil right now, but a lot of today's trading was purely technical. The bears failed to push prices much below $132, holding support there. Prices rebounded through key resistance around $135 and, if the bulls have their way, it now looks like another test of $140 is well within reach. This market just doesn't want to give up.
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