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Is Oil Going Down?
Group hug in South America….
The 1 hour war I was at the Newscorp building most of Friday afternoon, in NYC. I was shuffled from one studio to the next and as I was I watched as we went from shots being fired over the border of Columbia and Venezuela to an hour later a group hug between Chavez and other leaders. The “war” is over.
I think what happened was that Chavez realizes Columbia has an army that would clobber him and with the happy backing of the US, and all the multinational companies he screwed when he nationalized the oil industry. So rather than take a chance at Columbian tanks rolling on through to Caracas, and along the way taking back oil facilities….He thought about it and decided on hugs not drugs. And whatever drugs he is on they must be powerful. Anyway, the good news is that what goes up eventually comes down, and oil is not immune to that equation. With oil at $106 and yet plenty of immediate supply on the market something has to give, at least short term. Remember, $15-$20 of the oil price is speculative and that money swings either way…There is no doubt oil prices are going higher..and higher…and higher….LONG TERM.
That isn’t to say the downside will not provide opportunity too. Q2 is typically a period of time when we see slower demand for crude oil year after year and also it is a time when refineries shut down for seasonal maintenance. Look for a temporary pullback in crude at least until May… When the pullback comes it could be swift but is not likely to go much below $85 or certainly $80 which is the new”floor” set by our “friends” at OPEC. With friends like that who needs enemies. Anyway, Terry Keenan was filling in for Neil yesterday who I hope is safely on his way to Florida for vacation.
Have a group hug with Hugo!
