The price of crude oil seems to be building a trading range of between $135 and $147 per barrel in recent days. It seems to me unlikely that crude oil could move much lower than $135, especially during the hurricane season, which should last until November. The first storm in the Eastern Atlantic that shows a high probability of entering the Gulf of Mexico will almost certainly send the price of crude oil to fresh record highs. We nearly reached one today. It surprised me today, however, that this plunge in the price of crude oil hasn't lead to a stock market rally.CNBC attributes this price drop to the need for banks and hedge funds to raise cash for capital and margin requirements. If this is true, this tumbling price will be short-lived, because both hedgers and other speculators will perceive an opportunity to buy crude oil at bargain prices. This phenomenon even now appears to have put a floor under the price of crude oil, which is already moving higher again, having already risen $3 from its lows.
