Mother of Mercy... Is This The End of Rico?

My title is a famous quote from "Little Caesar", the great Edward G. Robinson film about a hoodlum who went from nothing to having it all ... then lost it all. And that's what many people are now saying about oil. It's finished ... done ... kaput.

Ah, but I think we're just changing reels in the film, my friends.

Here's a chart...Indeed, in the futures this morning, oil is down ANOTHER buck. However, as you can see on the chart, I believe oil will come into serious support between 69 and 70.

If oil closes below 68, that is short-term bearish. That said, we must still consider the long-term factors, which are decidedly bullish...

• The world used 31 billion barrels of oil in 2005. That’s the most oil used in a year … EVER.
• And yet, despite the highest oil prices in decades, despite the fact that every rig that could be hauled out of storage was put to use, less than 9 billion barrels of oil were discovered last year. That means we’re using up 3.4 barrels for every 1 we find.
• It’s going to get worse. Global oil demand is expected to grow by 1.2 million barrels per day (mb/d) this year to 84.8 mb/d and grow again next year by another 1.6 mb/d, according to the International Energy Agency.
• Major oil fields are peaking around the globe, in the North Sea ... Mexico's Cantarell ... Kuwait ... possibly even Saudi Arabia.
  

What we're seeing is a "relief" pullback because BP is doing "work-arounds" on its Prudhoe Bay pipelines that will allow half its normal production to keep flowing ... Peace seems to be breaking out in the Middle East ... Iran hasn't done anything crazy lately ... and ditto for Venezuela. Even Nigeria seems more peaceful.

Does anyone seriously think this "best of all worlds" is going to last. Things will go wrong. Indeed, I've been reading some details on America's oil and gas infrastructure that is simply frightening ... frightening!

Enjoy the cheap oil while it lasts. The long-term trend is definitely up. The only thing that could derail it is a severe global recession, and I don't think we're facing that.

And that makes pullbacks like this real buying opportunities.

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