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September oil futures traded at $79.12 per barrel, up $2.56 (as of 14:40 EDT). Brent crude was up $2.24 per barrel at $77.61.The reasons for the jump were varied. Some cited the possibility of another storm in the Gulf, others cited the fact that oil has been holding above its 200 day moving average. Stocks and commodities trade and then we write about the reasons for the prices changes. One big mover was the US dollar. It took a hit. The September contract traded 82.975, down .798. When the dollar goes down, buying oil gets cheaper.
Yesterday the Fed said it was worried about possible deflation. Today, the dollar is sharply lower, the price of oil is sharply higher and the stock market is surging. This is a "perfect storm" for inflation, not deflation. One of the best ways to create inflation is to pump up the price of oil. The price of all goods and services is directly or indirectly tied to oil.
Whether this is a one or two day anomaly remains to be seen. Nevertheless, since oil and the dollar are inversely related, we should watch the respective prices of these two commodities.
Do you expect oil to trade above $80.00 per barrel?
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Reader Comments (Page 1 of 1)
7-23-2010 @ 9:30PM
william lindblad said...
I always expect oil to trade along the lines of ANY imminent disruption of supply. In other words, it is well that bug spots on one's windshield do not have any impact in the oil market.
Will it sustain and 80.00 level? Hell no, the economy cannot sustain oil at 70 and gas much over 2.00. Personally, I believe that the oil traders are, like the bankers, playing with fire. The current touted regulations, though lengthy, are going to prove inadequate. The banking industry seems to just find a way to circumvent anything that the government throws at them. The oil traders and their constant speculation has been playing havoc with the economy for so long that they are basically taken for granted and the consumer has simply no choice but to grin and bear it.
Everything is getting better - right? That is what the smart money is telling us. Profits are up and forecasts rosy. The FDIC is not dealing with as many closings. Ben says remain cautious, but still expects modest growth. Gee, now with all of the FEDS new powers we might get somewhere but I still can't figure out why they never acted on shady lending practices during the real estate bubble when they were fully empowered to do so since 1994. In fact, they never they never used their powers.
Given that track record, do you have any faith?
While I am here, J.C. is right. I can't post to that blog as the link is not active. Ben may be a student of the 30's, but this is 2010 and this circumstance is different. In truth it is more in line with 1893-1910 than the 30's - so far. There is no dust bowl, nor any other natural event that would compound matters.
Cutting spending, raising taxes and higher interest rates are all in the cards. I go with Trichet and I did say that the Pound would not fall off a cliff and that the EU would solve their problems well before us. They still have plenty, but we have more. We just don't realize it yet.
Silver will hold up well - said that a year ago. Still think gold will do 1400 troy by year end.