Red-Hot Resources

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Tuesday, November 04, 2008

2 Forces Driving Oil Higher Today

Crude oil is up about $7 a barrel as I write this. What the heck is going on? I'll show you.

First, we have the bearish outside reversal in the U.S. dollar.

Since crude oil (as well as gold) is priced in dollars, as the dollar goes lower, crude tends to go higher.

Second, we have this story: "Oil Jumps 11 Percent on Saudi Supply Cuts."
Oil jumped more than 11 percent on Tuesday on signs Saudi Arabia had made substantial cuts in crude supplies and as global financial markets rallied.
Saudi Arabia, the world's biggest oil exporter, has reduced exports by around 900,000 barrels per day from a peak in August, one source estimated.

This one-two combo is giving crude oil its own outside reversal -- a bullish one:

Also you'll note that crude oil's recent downtrend is over. This doesn't mean crude oil is going back to triple digits (soon, anyway). But we could see a playable rally.

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