Keeping up with crude oil is a bit of a migraine these days.
It's an essential task, of course. Gasoline, diesel and kerosene play a double-faced role in our modern world. When we are ahead of the curve, they grease the wheels of the grand machine, allowing people and goods to freely seek their best markets.
But when we are behind the curve – when the cost of energy rises in anticipation of future demand – crude oil and its distilled children become the disease vector that allows inflation to penetrate into every little nook and cranny.
So we watch, wonder and speculate on crude oil's every little spike and dip. "Was this crude oil rise demand driven… was that 50-cent drop related to changes in the dollar? Will it rise or fall next week... month... year?"
The Gnat's View…
As I sit to write to you, I have the week's summations in front of me. These supposedly represent the most complete picture we can have during the work-a-day week, as most all variables have been factored in.
From Bloomberg we learned that "ten of 27 analysts, or 37%, said that futures will drop through Nov. 27. Ten more respondents predicted that oil will be little changed. Seven said that futures will rise."
Unimpressed? Just wait, it gets better! Bloomberg provides context for this remarkably vacuous reporting by noting that last week, "50% of correspondents said that prices would fall."
The true beauty of that non-stance is that it was 100% correct – more or less. In New York, prices opened last Monday around $77.20 a barrel, then ran up just over $80. As I sit typing this screed, they have fallen back to $77.40.
How did those bold fellows come to nail it down so accurately? Pretty simple really. Crude futures have run nearly that exact range for the better part of the past 40 days. Clearly, there is no education to be garnered from these clowns.
A Slightly Longer Timescale…
Another report on my desk purports to take a longer view of these things. The Macquarie Group's oil economist Jan Stuart claims that failing demand from developing countries will lead to excess inventory in the last quarter of 2009 and the first quarter of 2010. Macquarie is betting that crude will drop all the way to $60.
That made for a pretty impressive headline, all right. Except that by the end, Stuart totally hedges his bet. He figures that three to six months out, "the strengthening world economy will push it back to… (wait for it)… $80 a barrel."
Is that why they call them "Hedge Funds?" Obviously, these guys at the banks are all playing it real close to the vest.
What's Going On Below the Waterline…
Here are a couple of clues from some folks that are really bringing some serious cash to the poker table.
