We're going to a range of $95 as downside support to $130 as resistance this year on light sweet crude. Jim's old range of $85 to $110 has been tested on both ends, though barely so on the bottom end, and so it's time for a revision. Even with the U.S. economy likely to become deeply mired in recession later this year and through 2009, any reduction in output from any player in OPEC, or outside the cartel, will have a very meaningful upside impact on prices. Demand also remains strong enough from countries like China and India to keep the price quite supported.
We're in a paradigm now where U.S. DOE inventory figures should take a back seat to weekly Chinese input/output data, were such data available and reliable. In other words, the price of crude is no longer a proposition of just U.S. demand. The weakening dollar shall also remain a constant millstone around the necks of the crude oil BEARS.
Make no mistake about it, crude does look over bought, but it can remain so, longer than you can remain solvent betting against it. Short and sharp corrections are baked into the cake, but the exact timing is far beyond our expertise. You'll certainly know when they hit.
Will post Memorial Day provide some relief? Stay tuned, because once the anticipation of the summer driving season passes, the next worry will be hurricane season and then the winter heating season.