Short Oil - The Trade for H2 2008 ?

Crude oil hit record high price of US$147 twice and can't seem to break beyond that and starts getting bearish.

There are a few fundamental reasons that markets have in mind that makes oil to drop... at least for now and probably till end of 2008:
1. Significant demand destruction worldwide. There are no exact number to justify this, however, developing countries like India and Indonesia (which together accounts for 20% of total world population - according to this site as of 2007 estimate and net importer of oil as of today) whose governments lifted oil subsidies due to budget constraints, helped to kill some demand from these developing worlds. As for the USA, you know the sub-prime that leads to housing problem and credit crisis, all these helps to reduce demand in the country.
2. Recession risk in Europe & Japan. With Spain and UK are entering recession (but not in recession yet) with strong possibilities of other European countries following suit, this will help curb potential demand in Europe. Japan helps to contribute to this risk and thus demand destruction.

Analysing the following 2 ETFs will help understand the actual interest in shorting oil:
1. Proshares Ultra Oil & Gas ETF (AMEX:DIG) has market cap of USD 120 million and this represents just 5% of the market cap of its short counterpart. Technically, it has formed double top during the time oil was at record price of USD 147 and this is a good indicator for a change in price direction of this ETF.
2. Proshares UltraShort Oil & Gas ETF (AMEX:DUG) has market cap of USD 1.99 BILLION and this represents 16.6x the interest in the long counterpart. This indirectly means that for everyone that bets oil will go up, there are at least 16 others who bets it'll go down. Technically, the reverse of the former ETF has happened here: double bottom which is a good indicator for a change in price direction of this ETF.

I personally feel that this trade is good only till roughly end of the year or when oil drops below the USD 100 mark.

Conclusion:
Short oil and hold till end of the year or when oil drops below the USD 100 mark.

PS: Invest at your own risk.