| October 03, 2014 | | | | | |
 | | | | The Path to $60 Oil Starts Here | | | - A new "point of reckoning"
- Crude could get 30% cheaper
- Plus: A small-cap comeback?
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| | | Greg Guenthner coming to you from Baltimore, MD...
 | | Greg Guenthner | Yesterday for the first time since April 2013, crude's spot price dropped below $90. It's back above that mark this morning—but the damage is done.
Oil's breakdown could take crude lower. Much lower. In fact, according to a report from one of our experts that's currently making the rounds at the office, oil might have just punched its ticket for a one-way trip to $60.
"Simply put, America is bursting at the seams with oil," exclaims our own resource maven Matt Insley. "Shale plays across the country are continuing to increase production. According to the U.S. Energy Information Administration's (EIA) September Drilling Productivity Report, oil production has risen in each of the three major U.S. shale plays (Permian, Eagle Ford, Bakken) every single month this year.
"We're witnessing a steady, relentless march higher in U.S. oil production. Not just any oil, mind you -- we're talking about light sweet crude oil -- the good stuff!"
It's been dubbed "America's point of reckoning," and according to one forecast, it could slash the price of oil by over 30%. That means oil could soon drop to $60.
So how the heck could an event like this happen?
"With current estimates for crude production in 2015 (heading higher as far as the eye can see), the U.S. could soon eclipse its capacity for refining light sweet crude oil," Matt continues. "This is 'America's point of reckoning,' the day the U.S. produces more light sweet crude than our refiners can handle. Under current legislation -- in which U.S. crude exports are banned -- this point of reckoning, according to energy consulting agency Wood Mackenzie, 'could drive down domestic crude oil prices more than $30 per barrel versus their international benchmarks.'"
Even if you aren't very good at math, you know that a $30 discount to current crude prices would put oil around $60 per barrel. That would be a massive drop.
But what do the charts say about $60 oil? Let's take a look…  You can see how crude has broken below its long-term uptrend. And while $60 remains a long way off, it's not completely out of the question (the last time oil traded below $60 was May 2009).
Oil is down nearly 1% again this morning. It the $90 fails, it's time to begin looking for support between $76-$80. | | | | | | | | | Live Rich -- to 150 and Beyond
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| | | | 5.9% | is the unemployment rate in the U.S. as of this morning's jobs report. That's the lowest level reported since July 2008… | | 15,800 | is where the Nikkei closed for the week. The Japanese index gained more than 1% Friday, marking its first gain of the week… | | $1,207 | marks the spot for gold futures. Gold is off by about $8 in early trading… | | $1,250 | is the price of platinum this morning. Platinum is again the worst performing precious metal on the market. It's down $20 on the day… | | 1,948 | is where you'll find S&P futures before the bell this morning. Stocks are looking to extend their comeback in early trading… | | | | | | | | Rude Trends | When to Buy... When to Sell
| | | It looked like lights out for stocks Thursday morning. But by the afternoon, big comebacks in the major averages and key individual stocks set the table for the beginnings of another bounce. Of course, we'll need to see some follow-through today. However, yesterday's action was promising enough to at least open the door for the possibility of yet another one of the infamous "V-bottoms" that has characterized the market's bull run… Out of all the action Thursday, the most important is the Russell 2000's comeback. Small-cap stocks have been on the brink for weeks—and yesterday morning, the Russell was plummeting to new 2014 lows. But someone flipped the "buy switch" around noon. The Russell quickly reversed and ended the day up more than 1% (for comparison, the S&P finished the day barely in the green). I honestly can't remember the last time the Russell outperformed its large-cap cousins on the day. Just like with the rest of the averages, a bounce like this one needs follow-through. But it's a great start. I'll be watching small-stocks carefully as the trading week comes to a close. If the Russell continues to lead, we could be witnessing the beginnings of a strong market comeback. [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner] | | | | | | | Ignore At Your Own Peril | Today's Must Read Links
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