Many commodities posted notable losses today, especially oil which was down to $106 from $110 per barrel.  The brief sell off is said to be about looming worries of the US Economy, if the economy slows so will the demand for oil.

It seems that the US had economic woes when oil moved from $70 to $100, now the same worries are causing a drop in price.  The drop in price is probably related to something much more logical, the sell off by investment banks to cover losses.

After the collapse of the lending industry and many mortgage backed securities falling drastically in value, some investment banks have had a considerably hard time meeting margin calls on stock holdings and investments.  The mortgage backed securities dropped enough to topple Bear Sterns which was said to be unsinkable due to its size.

After a short run in oil prices, it seems like institutions are dumping oil to cover their positions in the stock market.  The last few weeks on the exchange have been particularly rough and might soon reach the bear market threshold.  Institutional traders and investment banks look quick to take money off the table in the commodities market to pump up their weak returns on the stock market and in the home lending business.

$110 appears that it will be the new price to beat.  As consumers, we’re lucky to finally have an idea of resistance again.   The banks are likely going to be selling positions and even short selling around $110 per barrel.  The $110 is psychological, it seems as though $110 per barrel is much higher in cost than a $100 barrel of oil.  In the future, $120 and $130 oil will probably be thought the same, although we aren’t there yet.

I’m expecting a moderate price for oil in the next couple weeks, it is likely that oil will retreat to stay in the $100-$110 range.  A fall through $100 or upticks through $110-$111 are highly unlikely, at this point it looks like there is a lot of buying at $100 and plenty of selling at $111.