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Saturday, August 2, 2008

Semgroup LP's bankruptcy is one of the Main Factors Behind the Recent Decline in Oil

I strongly believe that Semgroup LP's bankruptcy is one of the main contributing factors behind the recent decline in the price of oil. In the short term, speculators clearly determine the price of oil. Semgroup had a large short position in oil which had to be covered. This drove the price of oil to $147 per barrell. Once all the short covering was complete the price of oil has stabilised.

I still believe that the longer-term fundamental factors reign supreme. The current high price of oil is in my opinion clearly justified by fundamental factors and while short term factors such as the Semgroup blow up are important they should not detract from the story behind the oil run up.

I am still invested 90% in oil and gas income producing assets.

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