In the last three weeks crude oil prices have risen better than $10/barrel, trading within $1 of two month highs, albeit very briefly Sunday evening. The failed spike higher in recent sessions can be attributed to unrest in the Middle East. Attention turned towards potential conflicts over Israeli airstrikes in Syria over the weekend... obviously, any escalation of military conflict in this oil-rich region has the potential to send oil futures higher.

I do not see any immediate danger of this and think crude oil is over extended, and short term we experience a setback. A trade above the down sloping trend line (white line) was denied, and a settlement back under the 8 day MA (orange line) would confirm a setback is underway.

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While I a m not expecting the bottom to fall out, my objective is the 18 day MA (dark blue line), which also

Oil prices are headed down, and I mean down at least $20 a barrel. The key reason is that prices have been high. It's not a paradox, but a result of the long time lags in oil production.

Oil prices were fairly stable from 1986 through 2001, averaging just $20 per barrel. Then prices started rising, spiking to $134 just as the recession began. The price of oil has been above $80 for the past two and a half years. With rising prices has come a dramatic increase in exploration activity. During the era of low prices, the number of drilling rigs in operation around the world was 1,900 on average; now we are at nearly double that pace, and we have been for nearly three years.

Drilling activity results in oil production, lasting for many years after the drilling is over. Take a look at the accompanying chart of

Today's release of energy inventories from the Department of Energy (DoE) showed that crude oil inventories declined by 1.233 million barrels, even as traders were looking for a build of 1.2 million barrels. Even with the decline