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Once again, we were right! Crude oil tanked hard since we recommended selling call options, back August 3. Roughly speaking, those who followed my advice, and sold November call options at $90, pocketed $560 for every option. Those options are selling for less than half that and falling every day. That is called hitting the jackpot, without those expensive hotel rooms in Las Vegas. So what now? I t has been a wonderful week, with crude oil sinking like a stone in a sump. Hopefully, it will hold here a while, so we can sell more options, before the next tumble. It never stops amazing me: There is still a hype in the air, that we are running out of crude, that demand is booming. In fact, worldwide demand for crude rose just 0.7 percent last year, and this year probably not at all. At more than $60 a barrel, we are probably seeing Peak Demand for fossil crude oil. This year, many things have gone wrong to propel crude north. Venezuela is being run by a lunatic. Iraq is a mess. Iran is run by loonies, but wants to export more, but the United States is actively dissuading foreign investors from going in. OPEC cut production. Nigeria is another mess. Mexico, always frightfully corrupt and inept, let its prime oilfield (Cantarelli) go into decline, and simply consumes the profits. Russia is run by thugs. To have oil is to be nuts. All that bad oil news, and the world economy keeps rollicking. But now, the screw has turned, certainly at more than $70 a barrel. All the bad news is in. There is $40 a fear in every barrel of oil. What happens when that fear goes away? Any hint that the world economy may slow is a harpoon pointed at the oil price blimp. Any good news from any oil-exporting state is bad news for $70 a barrel oil. Fascinating is the loves and kisses that Iraqi Prime Minister al-Maliki (supposedly our stooge) has for Iranians, whom he recently visited. Maliki loves those Iranians. He signed a deal to build a pipeline to Iran from Iraq, and pump crude to Iranian refineries. Do you get the idea that Maliki is enamored with Iranians? When President Bush finally leaves office, and our troops finally, finally come home, most probably the Iranians and Iraqis will pray together, and establish a Shiite stronghold across their swath of the Mideast. There will be a despotic peace in Iraq, and you better not be a Sunni, Christian or Jew in that country ever again. The Kurds will have their autonomous region. The Iraqis and Iranians will ask foreigners to come in and develop their fields – and together they can rival Saudi Arabia. What will the U.S. do? Who knows. The Saudis may continue to finance a Sunni-led Al Queda in Iraq, and maybe some elements in the U.S. government (think Bushies who love Saudis) will then say Al Queda is not all bad. But, sooner or later, Iran and Iraq are going to start pumping the crude bigtime. Oil has a long way to go down. Advice: Wait a week, then look to sell November calls at $85. Right now, they are selling for $450. We may get a little oil rally, in which case go and buy. They expire October 17. If you are feeling macho, you can sell October calls at $80 for $380. They expire September 17. Can oil rally $10 in a month? Yeah, but probably not.

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