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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. Now you can get this highly sought after analysis with your daily research newsletter from Phil Flynn. Learn more about this complimentary offer and sign-up today.

Hello stargazers. You are a shooting star oh yes you are! Could a reversal in oil signal that finally the bullish oil nightmare is about to come to an end! Jack be nimble and jack be quick it looks like a shooting star on the old candlesticks. Perhaps after further review that Saudi oil may come in handy after all. Thank you very much. Call it a shooting star or a key reversal but oil after making a new all time high in another wild session gave up all its gains to close lower giving steadfast bulls a signal to take profits. Oil prices seem to be taking the formation seriously without any serious news on oil driving oil prices higher. Yet it is possible that oil is hitting a major top?

Perhaps the larger question is why oil rallied to new highs. The first reason was the weak dollar. The dollar got slammed and oil rallied. Yet it does not explain the entire move on oil. Oil seemed to accelerate after the Empire State Manufacturing sector report showed that the Manufacturing sector in New York is much weaker than expected. Yet still the sign of the move was crazy. That type of move seems to suggest that there was something more to the move.

Could it be Sanction on Iran or rumors of an attack on Iran are the reason for explosive moves. The AP reported the EU nations agreed Monday on the need for a new round of stronger sanctions against Iran to discourage Tehran from developing nuclear weapons. That comes a week after an Israeli Defense minister was quoted as saying an attack on Iran was unavoidable. President Bush says that a military action is still on the table.

Still that seems to not be a surprise. In the end the technical may give us our clearest sign of where we go next.

Yet the main factor that has driven prices has been the dollar. 

The key is how the G8 will fight its hot inflation? Is the rapid rise in commodity prices all about consumption or is the weak dollar that dominates the world's commodity price structure in commodity price inflation? The G8 was a bit of a disappointment as G8 leaders talked a good game on inflation but failed to really do anything about it. Inflation is bad, we got that but how you fight it is another question. The Wall Street Journal said "They [G8 leaders] refrained from commenting on foreign-exchange rates in their final joint statement. However, the subject was a hot topic in meetings on the sidelines where U.S. Treasury Secretary Henry Paulson repeated his recent support for a stronger dollar." Yet what is the dollars impact on commodity price inflation is still a matter of deep division and debate The Journal says "The G8 says that high oil prices were fundamentally a reflection of rising world demand at a time of supply constraints." Yet their is also a call for more information on how much money is flowing into the oil market indicated that there are serious concerns among some G8 members as to the effect speculation was having in the market place.

And more oil could help. As Saudi Arabia prepares prepare for the great Saudi oil summit. The Saudis are putting their best foot forward by pumping an additional 500,000 or 200,000 barrels a day depending on who you believe or how you choose to do the math. The result will lead to the highest amount of Saudi oil output ever or at the very least the last 25 years. But will more oil calm the markets?

What do the Saudis want in return? Well one thing is a call by consuming nations to do their part by lowering taxes on oil and gas to help bring down price and increase consumption.

The Saudis according to the Wall Street Journal are blaming the rise on the falling dollar, U.S. interest rate policy and the increasing involvement by investment funds.

And they have a point. The bottom line rightly or wrongly two of the biggest moves in oil's history was driven by the Feds comments and the European central bank comments and whether it rational or not it just happen to be the facts. In the end the dollar seems to trump all. In the Financial Times A.F. Alhajji said "The declining dollar, the rhetoric of energy independence, increased energy consumption in oil producing countries, natural disasters and technical difficulties round the and are the key factors that will push oil to record highs. Dollar devaluation reduces oil supplies and increases the demand for oil. The result is a steady increase in oil prices. A prolonged decline in the dollar reduces the purchasing power of oil-producing countries and increases the costs of the international oil companies as reinvestment in oil production declines. A decline in the dollar increases the demand for oil in countries with appreciating currencies and reduces the negative impact of rising oil prices on their economies."

More oil and a strong dollar is the best hope for a major top in oil.

Phil Flynn is Vice President, Energy and General Market Analyst with Alaron Futures and Options and is one of the world's leading energy market analysts. Phil heads the Alaron Energies Futures Brokerage Division offering brokerage services to individual investors, professional traders and institutions. Phil provides up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

Phil and his energy team were one of the first to predict that global crude oil prices would exceed $30/barrel in the year 2000, a correctly predicted market milestone that has highlighted the economic scene in the new millennium. Phil also called the rise of retail gas prices in 2001. Most recently, Phil Flynn has again accurately predicted that global crude oil prices would reach close to $40/barrel ($39.99/barrel) in 2004. Through hundreds of media interviews, Phil Flynn and Alaron Futures and Options have become familiar names in living rooms and boardrooms worldwide. The world's print, broadcast, online media and small businesses have come to rely on Phil's accurate and animated forecasts, analysis, speculative and hedging opportunities.

Get daily research letters from Phil Flynn of Alaron Energies

Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. Now you can get this highly sought after analysis with your daily research newsletter from Phil Flynn. Learn more about this complimentary offer and sign-up today.