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Oil Crisis Scenario
The oil markets are about to redefine themselves. We expect that within several days, we will have seen either a massive top, or the beginning of a dramatic bull run to new all time highs in the price of the commodity.
Crude oil rallied, finally closing above $39 per barrel on 5-5. Overnight markets had taken the June contract to the 39.85 area, just shy of the magic $40 mark. Integrated oil stocks, as measured by the Amex Oil Index (XOI), see below, made all time highs, once again on 5-5. Oil service stocks fell on a downgrade by a Wall Street analyst, but came off of their worst levels by the close.
The supply figures from the API and the U.S. Energy Department showed supplies of crude oil that were increasing, but not fast enough to create a surplus. Meanwhile historically, the current supplies remain below what is considered adequate for balance....
The message here is clear. The market is expecting higher oil prices, at the same time, that it is forecasting a slow down on Wall Street. Both parts carry the potential for major problems in the economy at some point in the future.
Yet, economists tell us that the economy is sound. And the Federal Reserve wants to raise interest rates. The bottom line is that somebody is right, and somebody is wrong.
And that tells us that major things are about to happen, whose repercussions are going to be measured in years, not months.
<ul> ~ http://www.rigzone.com/news/article.asp?a_id=12919</ul>
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