The Market Direction…

Conditions Supporting Short-Term Oil Prices: 1) Hurricane Gustav is expected to reach Category 3 status by this Saturday and has the potential to become a major storm in the Gulf of Mexico. It is projected to hit central Louisiana on Sept 2nd before heading northwest to other parts of Texas and Louisiana. 2) Meanwhile, on the geopolitical front, the Jerusalem Post reports that Israel will not allow Iran to achieve nuclear weapons capability and that it will do whatever is necessary to prevent this from ocurring. 3) Tensions between Russia and the West over Georgia continue. Reports have emerged that Moscow/Kremlin is prepared to cut oil supplies to Germany and Poland via the Druzbha pipeline in the event of any EU sanctions and NATO naval activity in the Black Sea.

Commentary Analysis: So far, oil prices have remained fairly stable instead of their typical knee jerk reaction to surge higher on such bullish news catalysts. The possibility of global economic slowdown may be balancing some of this risk, but the above conditions will likely lend support to oil prices over the short-term until resolutions are manifiested. Looking at the charts below shows that any drastic outcome could easily result in oil trading above its short-term resistance level of 122. Hurricane season is far from over and the geopolitical issues will not be easily solved which makes the outlook over the near term slightly bullish for oil prices.

Chart #1

Chart #2

Disclosures: Hillbent nor its affiliates maintains a long or short position in any of the above mentioned securities at the time of writing or publishing this report.