Oil Flirts With $90

I feel like I am watching a car wreck in slow-motion:

Oil finishes at all-time high above $89

NEW YORK (CNNMoney.com) — Oil prices pushed into record territory Thursday, finishing at an all-time high above $89 a barrel, helped by a further decline in the dollar and fears about supply disruptions. Light, sweet crude for the November contract jumped $2.07 to settle at $89.47 a barrel on the New York Mercantile Exchange, shattering the previous record of $87.61 a barrel reached two days earlier.

Helping to lift crude prices higher was a decline in the dollar, which fell to an all-time low versus the euro and also dipped versus the yen. Since oil is priced in dollars, a declining greenback makes oil less expensive for consumers outside the United States, encouraging more consumption.

If Turkey invades Iraq within the next week, that may do it. On the other hand, that is probably already factored into the price, so it might take news of a different sort. At this point, though, it’s just under 12% away from $100. But I still feel like we are very near a top – at least for now. Again, I would not be a buyer at $90.

However, I think this is setting up a very nasty gas price shock – especially with gasoline inventories still near record low levels.

12 thoughts on “Oil Flirts With $90”

  1. How are gasoline inventories doing overseas? Is there enough slack to allow increased imports? Enough to have an impact on demand here in the US?

  2. Didn’t think it would come to this, RR, but if Turkey invades your $1,000 is toast. Or if Cheney gets his wish and invades, sorry… bombs Iran.

    The Turkey thing is a lot more likely, of couse. At least, I hope…

  3. latest TWIP suggests gasoline stocks are just back into the 5-year range. looks to me like refiners are running much tighter stock margins this year – which so far has resulted in a much less volatile price at the pump. perhaps to avert the claims of gouging from last year?

    but yeah, worryingly close to $100.

  4. Has anyone looked at the accuracy of the InTrade prediction market for oil futures?

    InTrade Commoditiies

    It might be useful for those who want to play$ in small amounts, but there are always thinkers who think that prediction markets are the future of prediction.


  5. RR, I think you will be safe on the bet. If and when Turkey goes into Iraq, it will be for an extended period of time (several weeks at least). It would be difficult for the General Staff to launch such an incursion now as the mountain passes into and around Kurdish Iraq are already getting some snow, making military operations difficult. Don’t expect any significant military operation into Iraq until the Spring. There may be some limited bombings or “hot pursuits” in the next few weeks but such things have been occurring for a while and are not likely to trouble the oil price. There could, of course, be some other random act to trigger a run on prices but what are the odds of that? 😉

  6. “The Market hates uncertainty”. It’s entirely possible, even likely, that the the occurrence of a much anticipated event, will result in the market falling. As investors realize that the reality is not a bad as was feared.

    I think Rob’s right though, weather and geography still affect military planning, so Turkey isn’t likely to commit any “incursions” for several months.

  7. Call it Thug Oil vs. Peak Demand. Which will prevail?
    In the short run, alway bet on the thugs. And the current thugocracies look strong. It pays to be a thug backed up by oil money. You have guns, money and power.
    Longer run? Bet on man’s brains.
    Check out The Energy Blog today. A battery car with more than 100 mile range will come to market in Norway in 2008. And the city of Ann Arbor is installing LED city street lights.
    Look for radical declines in fossil oil demand if this price regime holds.
    Oil may hit $100. If it does, probably a good time to go out a few years and buy $40 puts. But even $90 may be a good time to do that.
    2009 Dec. $40 puts are selling for $140. Buy 10, be prepared to piss it away. That’s $1,400.
    My guess is that you will triple your money well before Dec. 2009.

  8. “Look for radical declines in fossil oil demand if this price regime holds.”

    Not when India and China are starting to manufacture cars in the $2000 range – affordable to their middle-class.

    Efficiency won’t make much difference. Norway could get wiped off the face of the earth and world consumption would still go up. Hundreds and hundreds of millions of people who have never driven before now want cars. The more efficient the cars, the more will drive.


  9. Hello David,
    Just one question, nothing to do with the content of this blog, how do you get to publish your blog on Reuters? Thank you so much, Hannah

    October 21, 2007 1:23 AM

  10. Hi Hannah,

    Actually, it’s Robert, and I am not sure how Reuters picks up those stories. They have picked up a half dozen or so stories from here, but I have never figured out any pattern to it. I am not submitting them. Maybe someone else is.

    This is what Hannah was talking about:

    R-Squared on Reuters

    I just noticed the Blogburst widget above the article, so maybe that’s where they are getting them.

    Cheers, RR

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