Crude higher than it was 2 years ago. Only difference is that we are now in world recession and producers have had to cut back because of worst demand in a years!! Kinda goofy? Only explanation is Crude is about to fall. Or it was really undervalued in the 60's two years ago.
My take is crude is the "new" gold, an over-crowded inflation trade. Only time will tell who was right on this one. Of course I must tell you that I am looking for a W shape economy at best, over the V shape we have thusfar.
http://omrpublic.iea.org/currentissues/full.pdf Looks like OPEC has been successful in finding a good balance of production against demand. Not sure how much I buy the inflation argument yet, considering gold has moved all of 8-10% while crude has moved 40% in very recent weeks... Looking at the S&P chart today, it looks on the verge of a bullish breakout to 1250-1300 with minimal resistance after 1000... It doesn't make any sense from a fundamentals point of view, but just as probable these markets can get way ahead of themselves. That API # was strong for crude. Sometimes price doesn't get confirmed by an explanation until far after it happens.... (i'm not long crude) so Papa -- either this is the greatest short opportunity for commodities and equities (and all thus a big headfake), or we are on the verge of a massive price move up... I am one to always buy into the idea that the government will get its way and be successful with reflation at any cost. If something doesn't work, they'll print more. I think QE2 on 6/24 is the next catalyst for another move in 'reflation'.
Crude was about this price when Dow hit 14000 in Jun 2007. World economy was firing on all cylanders then. I'm guessing that it can't hold the 44% rise it just made last 6 weeks. Just doesn't make any sense for the price to go up so much while we know demand is falling every day. At some point we run out of floating super tankers to store the stuff.
$40 to $80 would be 100% gain in a year which would be almost an annual record. Seems unlikely in the middle of a global recession. But who knows. I figured $69 would be the top for awhile. I find this rally very suspect as we know demand is not going up and supplies only get larger even with production cuts. I'll be shocked if $75 trades for more than a few days this summer. I don't get it as an investment either. The next 10 year oil consumption has never looked worse.
weak dollar is a big reason behind surge. bloomberg just said that there is a 2 month waiting list for cars in china. 2k cars, the chinese splitting cars 4 ways, subsidized gas, and an absurdly low car to people ratio. india is in a similar situation "there is only one car for approximately every 1,000 Indians. In the United States, the ratio is three cars for every four people." as of 1/2008 washington post
The dollar really isn't much different from the December dip. I think it hit 1.43 euro in December. Funny there was no movement in commodities on that. Think dollar just a way to hype it. Good point on India and China demand for cars going forward.
Valero broke the secondary price. Refiners are going broke, trying to raise cash and are closing down refineries because of weak demand (Valero shut down Aruba refinery today). Demand is crummy for the commodity. But strong for the price. Also, Airlines announced more flight cuts today. Less demand.