Lancelot was the man....
How about not so long ago when all the bearish news in the world couldn't bring down the price of oil even though people said it was way overvalued at $80? Higher then normal inventory levels, mild winter, a big new find - all of these things just could not keep oil from going higher. CEO's and industry experts saying the rise in oil was just not sustainable. At the time many others stated, if all of this bearish news for oil can't take the price down then what possibly can?
Have we reached the other end of that spectrum today? We have the strikes going on in Nigeria and Scotland affecting large amounts of output not just from the couple of days on strike but the supplies also lost in the time it will take to get back up to 100%. The news that output may have peaked in Russia and Saudi Arabia along with the possibility that a slowdown may be milder then expected and we still aren't breaching that $120 level. We did have a little skirmish in the Hormuz Straight but that turned out be nothing. I have no doubt that if any real fighting did erupt there we would see a real spike in oil but that has yet to materialize.
So what will it take to get oil to pass this $120 barrier... or is it done for now? I think the market is waiting for what the FED says as oil is so extended nobody wants to get in the way if the FED decides it wants to take the hammer to it. If however the FED says we are still going to focus on cutting rates to stimulate growth, then oil will be able break up to the next level. I don't believe that the FED really wants to see oil and other commodities go to the next level on an ever weaking dollar.
How about not so long ago when all the bearish news in the world couldn't bring down the price of oil even though people said it was way overvalued at $80? Higher then normal inventory levels, mild winter, a big new find - all of these things just could not keep oil from going higher. CEO's and industry experts saying the rise in oil was just not sustainable. At the time many others stated, if all of this bearish news for oil can't take the price down then what possibly can?
Have we reached the other end of that spectrum today? We have the strikes going on in Nigeria and Scotland affecting large amounts of output not just from the couple of days on strike but the supplies also lost in the time it will take to get back up to 100%. The news that output may have peaked in Russia and Saudi Arabia along with the possibility that a slowdown may be milder then expected and we still aren't breaching that $120 level. We did have a little skirmish in the Hormuz Straight but that turned out be nothing. I have no doubt that if any real fighting did erupt there we would see a real spike in oil but that has yet to materialize.
So what will it take to get oil to pass this $120 barrier... or is it done for now? I think the market is waiting for what the FED says as oil is so extended nobody wants to get in the way if the FED decides it wants to take the hammer to it. If however the FED says we are still going to focus on cutting rates to stimulate growth, then oil will be able break up to the next level. I don't believe that the FED really wants to see oil and other commodities go to the next level on an ever weaking dollar.
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