Looks like oil topped out yesterday

I apoligize for the lack of posting. I've been too busy shorting oil to post much.

It looks yesterday's spike to $83.95 marked the top for the most recent rally in oil. Weather is warming, inventories are up (massively judging from today's API report) and the chart now looks like quite bearish with $80 offering the next support.

I suspect that we will get a very ugly inventory report tomorrow as physical traders dump from offshore storage to take advantage of the relatively narrow contango. As of the end of the year, there were 125 M bbls of crude and products in floating storage and physical traders could book nice profits offloading that into last week's narrow contango. Remember that the contango was much wider just a month ago when oil hit $69. Since Cushing inventories are close to full (35.7M bbls as of last week's report) this could put a lot of pressure on front month crude spreads.

Finally, recent EIA data shows that non-OPEC oil production surged in the last few months of 2009. This is not at all bullish as falling/flat non-OPEC production has been a key component of the peak oil case for the last few years. For more detail I've attached a link to a great piece by Gregor at http://gregor.us/