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800-528-0559(October 21, 1999) ENERGY COMPLEX: December crude oil is oscillating between $25 resistance and $20 support. But if OPEC holds firm, crude oil could soar in fourth quarter and first quarter due to increasing demand and also Y2K problems in refineries offshore. The fourth quarter (winter) is usually the heaviest time of oil demand for the year. Unleaded gas and heating oil are moving with crude oil. Crude oil above $25 will certainly knock the economy down. Near term, however, oil stocks pulling back could mean we have more of a correction coming in energy. Does OPEC want $18-$20 per barrel oil? Commercials are buying energy on the break. Natural gas could be where the best play is on the long side. The tightness in this market already occurred during a time of light consumption. If heavy demand picks up due to Y2K problems and/or a severe winter, prices could move on up. Consumption this winter is expected to be higher than in the last three years even if temperatures are normal.
RECOMMENDATION--High-risk futures investors may purchase January natural gas on scale-down weakness with $2.79 open protective stops. Target $3.50-$4.00.
R.E. McMaster, Jr.