One commodity analyst warns on oil: ‘Look out below’

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The stock market had a bad day Monday, but oil escaped most of the blame this time. Instead, the market was primarily rattled by renewed worries about the financial system’s health (or lack thereof), as noted here. The Dow industrial average slid 134.50 points, or 1.1%, to 12,503.82, but it recovered from a drop of more than 210 points.

Oil, meanwhile, had a relatively placid day. Near-term futures in New York closed up 41 cents at $127.76 a barrel. The record closing high was $133.17 on May 21. Could it be that oil has gone as far as it can go for the time being?

One notable bear (a short-term bear, at least) is veteran commodity-market analyst Dennis Gartman, who writes the daily Gartman Letter from Suffolk, Va. He has been warning clients in recent days that crude prices could fall sharply. Amid increasingly intense political pressure, Gartman expects the Commodity Futures Trading Commission to soon crack down on trading in commodity futures by institutional investors who’ve been riding the bull market in raw materials.

If that happens, Gartman wrote on Friday, ‘We may be stunned by how far down some commodity prices shall fall.’ And that threat ‘is even more seriously to be taken regarding energy specifically,’ he wrote.

Just one man’s opinion, but Gartman has been analyzing commodity markets for about 34 years.