This morning, I am keeping an eye on the EIA report. I believe this is key to understand where commodities are heading after the ECB rate cuts.
Despite having an opportunity to purchase more DUG at 3 dollars discount, I stick to my guns to avoid adding more DUGs because I think there is potential for commodities to come alive again after the ECB rate cuts. We will see if Crude Oil prices deteriorate further to hit the lows in the coming weeks.
The strength of the US Dollar will also be put to the test in the coming weeks to validate that fund repatriation activities from overseas are over.
Historically many trend changes happen in October, it is important to see where this market is heading by looking at the fundamentals again. So I am merely taking this elections as just a short term event.
Lets examine the chart of USO.
I think we could be testing 47 soon, ECB rate cuts and other economic numbers from Europe, US and other countries are key here. I see global deflation as a key reason for deterioration of Crude Oil prices and a lot of these has to do with job numbers.
To the extremes, Crude Oil could see further declines to 30 or 40. I expect this decline to accelerate to these levels at one point in time. I think OPEC countries are going to compete among themselves to grab every tiny piece of business available due to slowing demand by lowering prices further. So who sells the cheapest will get the business...
Defending prices by cutting production at this point is in my opinion....not a very wise move...especially when the main goal is to heal the world economy to improve demand for oil.
Sooner or later, consumers are going to find a way to cut their demand for oil.
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