Only So Much Oil
OPEC oil ministers are meeting in Vienna Wednesday to discuss just how much
energy demand will weaken. Although they have cut production three times already this
year, prices have continued to fall in the aftermath of the terrorist attacks. Reduced demand
caused by a
weakened global economy will continue to put pressure on prices, unless of
course OPEC decides to cut production.
The chart below outlines the situation fairly well:
The Oil Index is trading at the bottom of a channel, and at the .618
retracement of the March 1999 low and May 2001 high. When you consider that the Dow has not retraced even half its
move up, the drop in the oil index seems even more significant.
The confluence of support here, plus the fact that the index has been down
for eight straight days, might provide
the makings of a bounce here.
Eddie