Oil > $120
While some traders feared that the dissolution of Yahoo would impact the market negatively, it appears that the $4 pop in Crude is the bigger issue.
This morning Crude Oil broke over $120, to set a new record, as reported by Briefing.com and Bloomberg COMDX ("Crude moves above the $120 level, now up $3.74 to $120.06").
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Crude Oil June 2008
Source Bar Charts
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You can get the most recent futures data via bar charts (including intraday prices)
Monday, May 05, 2008 | 11:36 AM | Permalink
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Come on now ... even the longterm oil bulls, have to understand that this is a bubble. I would be willing to bet that a good chunk of the pros are shorting oil (all commodities) now.
Posted by: Donny | May 5, 2008 11:52:36 AM
This is just the beginning for oil. We are past peak, and there is no plan B.
Posted by: JTR | May 5, 2008 11:52:52 AM
Wage growth nil, unemployment up, oil and inflation way up, I'm not an economist by any stretch but this appears to be a toxic recipe for the consumer. Are we now forecasting US GDP, ex consumer? Otherwise, WTF.
Posted by: mitch | May 5, 2008 11:56:40 AM
How much of today's pop is due to the weekend news item about U.S. plans to strike inside Iran? The "plans" may be nothing more than coercive diplomacy at this point, but commodity speculators don't do nuance when it comes to political analysis.
Posted by: Sonic Seuss | May 5, 2008 12:18:03 PM
Everybody just relax. Don Luskin and Jerry Boyer said last week on Kudlow that everything is just fine. We have the bottom in the market and look out above!
Gag.
Posted by: B.B. | May 5, 2008 12:19:29 PM
Francois: "So you believe there is no recession?"
It is not me. The data suggests that there is no recession.
Look at the data around you, start with today's ISM (services are more than 70% of US economy) is expanding (it is above 50).
“The Institute for Supply Management's non-manufacturing index came in at 52.0 in April versus 49.6 in March.”
Posted by: Lyse | May 5, 2008 12:27:01 PM
Crude target zone is 120.50. Natty gas target zone is 11.50. Those markets are throwing up huge bearish RSI divergence. Calpers piling in big money here at the tail end of inflation-driven parabolic move....yeah they're the "smart money."
AT.
Posted by: Andy Tabbo | May 5, 2008 12:28:46 PM
On CNBC's 'Power Lunch' a few minutes ago on Dennis Kneale mentioned that rising oil prices are deflationary (something about people drive less so that can't buy iPods.)
So are food prices deflationary too? If you can't eat, you don't have enough energy to walk to Best Buy can carry home Vizio flat panel TV?
If true, either the core rate is used because the inflation from food and energy is really deflationary, or...
...or a new economic orthodoxy is taking over with John McCain, Hillary Clinton and now Dennis Kneale showing how the 'economic elites' are just plain wrong.
Posted by: VennData | May 5, 2008 12:47:49 PM
VennData,
Inflation/Deflation have nothing to do with consumer demand. They are either properly defined as increasing/decreasing supply of money (inflation/deflation) or the inevitable consequence of such.
It is a common misconception to conflate inflation with consumption. This misunderstanding seems to be very common in the US even amongst people who should know better.
Posted by: Jodie | May 5, 2008 12:55:13 PM
But the dollar is rallying with oil -- that's unusual, Barry, and makes it suspect.
Posted by: John Navin | May 5, 2008 1:01:03 PM
Oh well, as Eddie Chiles used to say: "If you don't have an oil well, get one!"
Posted by: DownSouth | May 5, 2008 1:17:07 PM
"It is not me. The data suggests that there is no recession.
Look at the data around you, start with today's ISM (services are more than 70% of US economy) is expanding (it is above 50).
“The Institute for Supply Management's non-manufacturing index came in at 52.0 in April versus 49.6 in March.”
Oh! I'm looking alright! Consumption is also 70% of the economy and consumers are not doing good, to say the least. Unemployment is el stinko, whichever we choose to look at it.
On the other hand, the NASDAQ is showing real strength supported by volume. Something good is up out there. What is it? Dunno, but worth noting.
The bogeyman is the financial sector. I do not believe for a minute that the Fed has calmed the markets; why have they increased the TAF size and scope if the financial markets are feeling alright? Because this is a solvency crisis, not a liquidity one. And that has repercussions on the physical economy, which runs on available credit. No credit, no expansion. No credit long time? Contraction big time!
I will need to take a closer look at the ISM. The headlines number rarely tells the true (read: whole) story nowadays.
Time will tell, and soon.
Posted by: Francois | May 5, 2008 1:27:56 PM
"Come on now ... even the longterm oil bulls, have to understand that this is a bubble."
Really now, ask yourself if Exxon increased their reserves for what they sold us? After you find out, come back and tell the rest of us, so we will know it is not speculation, but a peak oil problem.
Then, you can find out and let us know why the Saudi's have pumped less oil for the last 3 years?
And then you can tell us why the top people were fired at BP (hint: overstated reserves).
Then you can find out why Venezuela pumps less oil.
Then you can find out why Mexico pumps less oil.
Then you can find out why Norway and the North Sea are in decline.
Then you can tell us why Russia just came out and said we can't pump any more.
Your task is enormous Donny to show that the price of oil is speculators versus lack of supply.
Posted by: me | May 5, 2008 1:30:00 PM
The strikes in Nigeria and the UK removed roughly 300,000 barrels per day from the markets in May, after declining worldwide production in March and April. That means a price rise.
Posted by: Moe_Gamble | May 5, 2008 1:37:24 PM
Actually, this is good news. Somebody out there put the brakes on the Iran attack so the boyz are getting all the profit they can before the end of the Cheney administration. Yeah, it costs us money but it beats killing people any day.
Posted by: AGG | May 5, 2008 1:41:25 PM
Posted by: John Navin | May 5, 2008 1:01:03 PM
“But the dollar is rallying with oil -- that's unusual, Barry, and makes it suspect.”
DX-Y.NYB 73.19 down 0.31, down 0.42% 1:20PM ET
What seems suspect to me is the rising dollar, falling commodities forecast that has emerged in the past two weeks.
Posted by: KJ Foehr | May 5, 2008 1:42:41 PM
hybrid sales - Barry, would be interesting to do a blurb on this one. my brother in law went shopping for one this weekend for his parents. main reason: commute. my sense is sales are skyrocketing. isn't the real story with oil that the economies which can afford the cost to convert do fine, and the third world will truly feel the impact of - not via inflation - but the cost to extract as the primary economies simply stop investing, leaving the owners of proven reserves to fund extraction themselves? once again, a Marshall Plan will be needed for the third world, but this time it will be to convert from pure fossil fuel dependence?
Posted by: Fred | May 5, 2008 1:45:29 PM
For all of those who are concerned with peak oil: Don't worry about it.
1) If only 10% of the homes in America had ONLY enough solar power to recharge the battery on an electric car, oil would be really cheap.
2)The technology to do this was available 40 years ago. Don't tell me that it's a big deal to put solar cells on buildings and switch to golf carts for commuting. I won't buy your thinking.
3) The "inertia" on the oil economy infrastructure is total bullshit. I'm a scientist and I can prove with real world examples everything I say. Don't buy the hype.
4) You don't have to turn into a tree hugger to reduce oil consumption by 20 or 30%. That's all it would take to make oil producing countries shit wooden beebees.
Posted by: AGG | May 5, 2008 2:03:39 PM
Let me cut to the point as usual...anytime the market is down, don't look for any insignificant ancillary reasons...look at the household debt chart in Hussman's piece today and that is why.
Posted by: Steve Barry | May 5, 2008 2:10:37 PM
Don't worry, be happy. OK Kudlow.
Posted by: me | May 5, 2008 2:11:17 PM
If the FOMC waits until the December 16th meeting to hike rates, $120 is just the beginning.
Posted by: DL | May 5, 2008 2:15:45 PM
Perhaps the economy isn't in recession but I had a weird experience Saturday. Driving from NH into MA and onto the 128 belt around Boston I've NEVER seen the traffic that light....at 7:30 pm.
It was so unusual I had to ask myself, several times, if I was just imagining things. No Celtics, Red Sox or even the Derby was on to explain the lack of volume (in both directions).
Maybe I'm just too bearish but I thought I'd pass it along in case anyone else has seen/sensed something as unusual as this.
Posted by: jag | May 5, 2008 2:21:21 PM
105 before 125....
Posted by: Eric Davis | May 5, 2008 2:21:26 PM
Regarding traffic, friend and I drove from San Diego to LA and back yesterday in record time. No traffic to the point we commented. In fact, we witnessed car exit to toll road (faster) and then same car pop back on freeway in same place relative to us miles up the road... no traffic.
Posted by: sport | May 5, 2008 2:31:42 PM
☺☺judgement.
7. The power of arriving at a wise decision or conclusion on the basis of indications and probablilities when the facts are not clearly ascertained;as to use your best judgment; discretion; discernment; as, a man of sound judgment
--Webster's Third New International Dictionary
When it comes to oil markets, we know precious few facts. For instance, we don't even know what Saudi Arabia's daily production capacity is, because--like all governments--it lies.
And that (the physical) is the easy part!
The tough part is the part that deals with mental and social processes. Here we get into the realm of politics (the policy decisions of dozens of different sovereign nations whether to produce more or less oil) and psychology (the emotions of billions of consumers and the passions of millions of traders).
But it gets even more complicated. All these billions of atoms and monads are dynamic, in constant change and movement.
That's why economics is pure scientism--the fallacy of believing that the method of science can be used on all forms of experience and will settle every issue. And that's why so many economists have been so consistently wrong about the price of oil. The numbers they have are bad. Their models are blathering nonsense. What they need is good judgment, which is in precious short supply.
Posted by: DownSouth | May 5, 2008 3:17:01 PM
