LGX Oil + Gas Inc ROAOF

Opec Price and Supply concerns

[DaycareKid007]

I was just reading some articles about the oil price.  It seems that there is some dissention in the ranks of OPEC in regards to the price of oil. The Saudis wish wants to keep the price lower to help the US and their recession and other countries wish to keep prices higher as their budgets must be met.  Iran the second largest OPEC producer says that it requires $100 oil and Hugo Chavez says that Venezuela requires prices of $120 (which is just him talking out of his butt again). Prices lower that $70 will in the end IMO casuse a shutdown in many oilsand projects as it will no longer be economical to continue development or production. Some oilsand projects require $95 oil to be economical.

Canada supplies 19% of the United States Imported oil with most of it coming from Alberta. If this excess supply isn't cleared off the market the price can indeed goto the low 60's or high 50's. The funny thing is that Iran and Saudi Arabia together are still producing 640,000 barrels per day over their combined quotas as indicated by September numbers. All of the excessive oversupply as a result of overproduction was supposed to have been eliminated from the last OPEC meeting where each member agreed not exceed their quotas. If indeed they do cut by 1 million barrels below combined quotas and eliminate production excess the effective cut would be closer to 2 million barrels as I am sure other OPEC members were probably overproducing as well. If they cut by 2 million barrels/day there are going to be a lot of pissed of politicians in Europe and the US who will probably try to apply pressure to OPEC. All in all it could be a little rough until Friday so I am going to put in my hedges again and raise some more cash to take advantage of some upcomming weakness.  Look for a selloff on high oil inventory numbers today as usual, and oil to possibly plunge to the mid-60's for a short time.

It is time once again to be extremely cautious.  The rally never did confirm an uptrend and fear and irrationality will most likely take over again. Mastercard reports that Americans have decreased fuel purchases by 6.4% from last year further fueling fear that there will be excess supply.  I am really amazed that Mastercard can so accurately state these numbers especially since there could be many reasons that Americans may not be using their credit cards. It is just one of those things that make you go hmmmm.

Happy trading today and try not to get killed.

DC