What a week! When I posted the previous Saturday Oil Report two weeks ago, the Nymex price was $95.70/barrel. Today it stands at $85.38, a drop of about 11%. The oil price fell with the crash of the major stock indices, once falling into the $70s during intraday trading, but recovered about 4 dollars on Thursday and Friday.
It's time to downgrade the alarm level.
Oil Alarm Level —Yellow
It's hard to say how much longer the price will be in the $80s. If the stock market crashes again, it may fall into the $70s. Its astonishing to see just how fast the oil supply & demand picture can change! (That's a joke, folks.)
The phrase of the day is global recession. If we have one, there will not be an oil price shock next year. If we don't, the chances of there being a price shock next year are still pretty good, though somewhat diminished. We now turn to party-hardy, sex-god, glam-economist Nouriel Roubini to assess the odds. Here he is, from the Wall Street Journal.
Economist Nouriel Roubini says the risk of a global recession is greater than 50 percent, and the next two to three months will reveal the economy’s direction. In an interview with WSJ’s Simon Constable, Roubini also says he’s putting his money in cash. “This is not the time to be in risky assets,” he says.
[My note: the video is long but worth watching — 22 minutes. Was Karl Marx right? Self-destructing capitalism, a second Great Depression, etc.]
What happens to the world economy in the next 3 months will likely affect the global oil markets for years to come. I will report on important developments as they arise. What will the oil price be in 2 weeks? Who knows!
It is amazing how much reaction there has been from the drop last week in both the markets and oil. Normally they are not correlated. But the herd has changed the narrative from bull to bear in two weeks.
Dave has been saying for a long time the "recovery" was not real. Last week, that was confirmed. The EIA reduced in demand forecast and Dave went to yellow. All this from a herd reaction to ????. I even read an article that $2.50 gasoline will help with the recovery.
The last sentence says it all. Who knows? All I know is the dollar is becoming worthless and most people still drive to work alone in their car.
Posted by: BS | 08/13/2011 at 03:03 PM