Crude Tumbles on Bullish News in Energy

For the past year, energy has been on a tear.

Breaking through hallowed resistance, crude oil passed $100/barrel, $120, $140, before reaching a peak around $150. Then it fell back to earth. Right now, it doesn’t seem like anything will help it reach that high in the near future. Whatever the news, energy continues to fall. As of the close today, crude settled at $121.43.

Several events are happening that would usually cause the sector to rise. For one, there’s another tropical storm brewing in the Gulf of Mexico. Edouard, which may become a hurricane before reaching Texas, is slated to hit Galveston tomorrow. Galveston seems prone to these storms — in 1900 a category 4 hurricane slammed into the island killing 8,000 residents making it the deadliest natural disaster in U.S. history. So with the history, the busy port, vulnerable nearby refineries, and Gulf platforms under siege by hurricane-force winds, shouldn’t crude oil be climbing? You would think so.

Other energy-bullish events aren’t moving crude up either. The threat of war with Iran is still looming? This morning, the New York Times posted a new Iranian threat that mentioned Tehran closing a key waterway in the Persian Gulf. Crude was unmoved. Or take that fire in the Valero oil refinery in Houston. With slowing production at Valero, this would mean less production for end users. Still, energy keeps falling.

We mention these events for your portfolio. When news like this hits the New York Mercantile Exchange (NYMEX), energy prices usually soar. When that doesn’t happen, there’s cause for concern. There seems to be excessive downward pressure for crude. If you are still holding onto your Energy stocks, Funds, or ETFs — and they’re not in a long-term portfolio — you should consider offloading some of that exposure. No doubt you have already lost a chunk of your gains in the past month, but there’s still much left to lose. In the mean time, we will continue to scan the horizon for new opportunities.

Have a pleasant week.