13 October 2009

Another tumble coming

People may be cheering the rising loonie.

Some people may be rubbing their hands with glee at the current and forecast prices for crude.

Gold is wonderful, if you own it already.

But, note the references in those articles to “weak fundamentals” and the fact there haven’t been many “signs of a pickup in the underlying oil demand in industrialized countries”.

The same sort of underlying weakness  - particularly in the American economy  - is what fuelled the surges in oil prices before the peak in mid-2008.

Remember what happened after that, right?

Well, get ready again.



Canadian silver bug/Green Assassin Brigade said...

The oil market is probably overbought at this time, but many investors are looking for new foreign demand based on millions of new Chinese middle class who are buying cars and the new demand that the Tata cars in India will create. While demand is weak now the drill count shows that only about half of drill rigs are in service and if not now, soon there will be shortages as depletion will overshoot discoveries. It's not the demand side that's going to kick us in the chops but the supply side. Another issue is that the biggest demand increases are in the exporting countries themselves leaving less for export.

Yes the higher prices will put the breaks on any recovery and might get us stuck in a long term roller coaster based on bouncing energy prices until the west learns to be productive with less energy, bwahahahaha like we can sell that to the average American. “The American Way of Life is Not Negotiable”

A bigger issue with regard to energy prices is the valid concern over the U.S. dollar and its debasement by quantitative easing. Long term the U.S. dollar is headed for the trash heap and energy will be priced out of their reach as it fails, for rest of the world however energy prices are not going up that much, its largely been U.S. dollar pressure and is not impacting rest of the world to adversely. Asian and Latin American energy demand growth plus depletion will step up to keep oil price from totally collapsing as the U.S. crumbles.

Recession or not, over/under supply or not, people will continue to bet on commodities as a hedge against U.S. dollar collapse. For a U.S. citizen even $1060 might be a deal in hindsight 10 years from now.

Edward G. Hollett said...

Two of the big stories driving prices right now that don't have any real substance to them:

- China and India taking the reins and driving demand form here on out, coupled with

- we are running out of oil.

Someone is making a killing off those stories in the short term and it's really the psychology of it that is driving the market moreso now than ever.

At some point, though, the reality will take over just like it rudely intervened in 2008.

Aat the rate prices are going, anyone who thinks this is the bottom is in for a rude, rude shock.

Ward Pike said...

World Oil Prices have less to do with Supply & Demand these days, and more to do with the interest/boredom of speculators on the commodities market.

How else do you think Oil prices tumble whilst gasoline prices rise?

Insanity Incorporated.

Anonymous said...

Call it Capitalist lemonade!