Has Oil Broken Down?

David Gaffen, writes in WSJ's MarketBeat Blog:

Many theories exist as to why the price of crude oil zoomed from about $120 a barrel in mid-May to threaten the $150 mark in mid-July, only to sharply reverse that trend in the last week.

Was this the top in crude oil?

But one emerging story revolves around SemGroup, an oil marketing firm that filed for bankruptcy, disclosing heavy losses on short positions in crude oil that they were forced to reverse as the market’s gains went from steady to accelerated to explosive.

It wouldn’t be the first time that a long, ongoing bull-market rally in a commodity turned into a buying frenzy, fueled at first by speculators caught up in the mere expectation of higher prices, later by the same smelling someone on the wrong side of the trade trying to get out of their positions, such as what seems to have happened with SemGroup.

Source: WSJ MarketBeat

http://blogs.wsj.com/marketbeat/2008/07/24/has-oil-broken-down/