sedek

Even Priced in Gold, Oil Is High

"Well, it turns out that even priced in that “currency,” oil is expensive."

The way I see oil priced is on three factors: in relation to gold at 10-1; plus a supply/security premium that factors in Irani embargos or Katrina type damage; plus the speculative premium, standard bubble of new money jumping on an inflated bandwagon.

In today's terms the above yields a base price of $90, plus about $25 for the recent inventory drop and Nigerian threats, as well as the little posturing dances of Bush, A'jad, and Chavez, and the rest as speculation on where oil will go next week or month, basically momentum players trying to squeeze some gravy out of the commodity bisquit:)

The recent drop in oil, 10%, came from speculative positions unwinding because of jawboning by Fed officials. Oil dropped even though inventories dropped, speculative drop overcompensating for what would normally have been about a $5.00 supply spike.

Thursday and Friday's oil spikes resulted from Trichet hinting that the Euro would strengthen from rate hikes and the unemployment jump suggesting that Gentle Ben would give more rate cuts. No concrete actions in sight, just speculation.