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CNBC.com |
] and Oil Service HOLDRs [OIH
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] and he's added to those shorts as this market sells off this morning. A smart move as XLE was down $2 at the lows and OIH fell $6 earlier today after the Energy Department surprised the market by reporting crude supplies rose 800,000 barrels when the consensus estimate was for a decline of 900,000 to 1.7 million barrels. The fact that distillate supplies also increased by nearly 1 million barrels more than expected is also seen as bearish for prices
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Energy analyst Andy Lipow points out that "this week's refinery distillate production was an all time record surpassing the previous high produced the week ending July 1, 2005 which was prior to Hurricanes Katrina and Rita. Distillate inventories have increased nearly 14 million barrels or 13% since May 2, 2008." And he expects those increases to continue.
Now traders are just waiting for the Fed. No change in interest rates is expected, but strong commentary about inflation, rather than recession, could boost the dollar and pressure energy prices. Watch the $132-mark, that's a key support level for crude oil, which has traded between $131 and $139 a barrel for the past two weeks. With oil already down over $4 with just 2 hours left in the session, floor trader Anthony Grisanti says "a recovery is unlikely."
Depending on what the Fed says, the sell-off could accelerate this afternoon.
Questions? Comments? energysource@cnbc.com
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