Crude Oil = $94

Crude oil a hair under $95, on the Fed rate cut and inventory drop.

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Crude_oil121207

Chart courtesy of BarCharts

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As I am fond of saying, there is no such thing as a free lunch . . .

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  1. Innocent Bystander commented on Dec 12

    Probably not the place, but certainly the time is right. Maria on CNBC, sweeping the failed rally aside, and looking confused has unhooked two buttons on her festive blouse. Wait, she was biting her lip, and holding a picture of Alan G. to her bosom.

  2. Eclectic commented on Dec 12

    Barringo,

    I want to say something and I sincerely hope you don’t take offense.

    Fuck you and your oil. Fuck your inflation, and fuck the horse you rode in on.

    I have found it to be rare when you demonstrate peckerheadery, but in this you need to join Peckerheads Anonymous… and start a 12-Step program for recovery.

    The worldwide financial markets are about to launch on a seek-and-destroy mission for in-f’ing-flation, and your f’ing oil and f’ing commodities and f’ing inflation ain’t gonnnna stoppit.

  3. Steve commented on Dec 12

    Rate cut was yesterday.

  4. Tom C commented on Dec 12

    Still a toppy looking chart. Could change quickly but might be a top. We’ll know soon enough.

  5. SINGER commented on Dec 12

    not that it can’t happen…but if there is one thing I wouldn’t bet on in OIL…its a top…

    there have been numerous price levels where it has appeared that a top was forming but none has formed on the march from $8 to $100…

  6. techy2468 commented on Dec 12

    TOP in oil….

    maybe in the short term, but in the long run we all know where oil is headed.

    india/china consumption must have definitely added to the demand, which i am sure may be increasing at the rate of 20% every year.

  7. peter from oz commented on Dec 12

    ummm eclectic
    I refer you to my Fed post
    and barry re eclectic my french friends would ask
    “qui peut le cochon dans la chambre?”
    rgds pcm

  8. justino commented on Dec 12

    What good does this move by the world FEDS do? It is not going to make the banks have to show the amounts of all their bad debts to the world. What we need is a “financial SIV search warrant!” I think we have probably cause.

  9. justino commented on Dec 12

    Few mis-spelled etc….it’s another pinot noir night. Enjoy.

  10. MikeR commented on Dec 12

    I love you top callers. You’ve been wrong since I bought my gold at $380/oz and my oil at $25/bbl.

    Keynes was wrong, Mises was right.
    Yergin is wrong, Hubbert was right.

    IV0

  11. tekel commented on Dec 12

    Hubbert is still right. Deffeyes is happy to tell you all about it :-D

  12. VJ commented on Dec 12

    Innocent Bystander,

    Maria on CNBC, sweeping the failed rally aside, and looking confused has unhooked two buttons on her festive blouse.

    Bartiromo was on the NBC Nightly News this past Sunday. She said:

    remember, there were 94,000 new jobs created in the month of November, and only 4.7% of the country is unemployed. That’s virtually full employment. We’re certainly not in dire straights here.

    I suppose pity is the only reasonable response.
    .

  13. sujal commented on Dec 12

    for the future, as I suspect this will come up a lot over the next few months as cramer freaks for more rate cuts, here’s a typing saver:

    TANSTAAFL

    Their Aint No Such Thing As A Free Lunch

    Enjoy!

  14. PTodd commented on Dec 12

    Well, its back to 89 in time for the free dinner.

    Our Plunge Protection Team says enjoy.

  15. Mike_in_Fl commented on Dec 12

    Wasn’t just oil either:

    Soybeans traded to a fresh 34-year high.

    Wheat traded limit up at one point.

    Corn is closing in on its old high from several months ago.

    Some metals were less than inspiring (copper), but gold definitely liked the “more liquidity now” Fed approach.

    Meanwhile, in case you missed it, the overall rise in import prices in November clocked in at 11.4% YOY. That would be the single-largest monthly gain on record (data goes back to 1982). Ex-petro and ex-fuels were around 3%.

  16. jake commented on Dec 12

    wow dennis gartman called for the removal of bernanke…..he was ticked off bernanke didnt announce all their moves at the same time.

  17. will rahal commented on Dec 12

    At these levels, Oil Imports are equivalent to 80% change of y/y in M2.
    This level is similar to 1980 when Paul Volcker raised rates that generated a recession when Oil was also skyrocketting.
    See “Has the Fed provided ample Liquidity”

  18. Tom C commented on Dec 12

    As for Oil- Place your bets. If oil can only go higher bet the farm. I’m not betting ’cause I don’t know. Near term, the chart still looks toppy. That’s a fact, jack.

  19. Eclectic commented on Dec 12

    peter from oz,

    I suspect it’s because he’s intelligent enough to understand ribald ironic counterpoint without being offended.

    Oneway orgivesfay ethay orkerpay enwhay itway indsfay ufflestray.

    As to your “Fed post,” I tried to read it, but your writing, punctuation, paragraph spacing and general logical organization make it too hard to do for anyone not starving for your ideas.

    Why not just make the point, instead of sending me on a treasure hunt to clue it out of your scratchings?

  20. Innocent Bystander commented on Dec 12

    VJ, I heard her make that comment. I just turned off the TV and made myself some hot chocolate. No sense in wasting any more time.

  21. Steven Soh commented on Dec 13

    Given the fall of the dollar and the interest rate stepping down, crude would certainly be on the way up with inflation catching up fast. If crude rallies over $100, the psychological watershed, crude would have every excuse to move further on and up….

  22. phil commented on Dec 13

    World Bankers Resort to Firebreak

    By Ambrose Evans-Pritchard
    The Telegraph, London
    Thursday, December 13, 2007

    Never before have the central banks of North America, Europe, and Britain acted together as such a unified phalanx, but never before have transatlantic credit markets seized up with such violent effect.

    “This is a drastic action. The central banks want to place a firebreak to stop credit tensions spilling over into the broader markets and becoming the catalyst for a global economic crunch,” said Ian Stannard, an economist at BNP Paribas.

    While yesterday’s joint move was sketched at the G20 a month ago and fine-tuned in encrypted telephoned calls over the past month, the final trigger seems to have been the spike in the crucial three-month money rates that lubricate finance. Dollar and sterling Libor spreads have vaulted in recent days. Euribor spreads reached an all-time high of 99 yesterday morning.

    “A co-ordinated move like this has the ‘wow factor,'” said Paul Mackel, currency strategist at HSBC. “But there’s a lot of scepticism over whether this will be enough medicine to end the credit crisis. Is it already too late?”

    Ben Bernanke, chairman of the US Federal Reserve, made his academic name studying the “credit channel” causes of depressions. He must have watched with growing alarm as the debt markets limped from one mini-crisis to another, failing to recover from their August heart attack despite three emergency rate cuts.

    The asset-backed commercial paper market in the US has now shrunk for 17 weeks in a row, shedding almost $400 billion (L196 billion). Lenders are refusing to roll over short-term loans as they fall due, leaving borrowers desperately searching for other sources of money.

    The crucial elements in the Fed’s move yesterday is not so much the sum of money on offer — $20 billion next week, $20 billion the week after — but that all depository banks in America can draw from the tap anonymously, without the risk of being found out.

    “People looked at what happened to Northern Rock in Britain and said ‘we’re not going to risk that,’ so hardly anybody has been using the Fed facilities,” said Bernard Connolly, global strategist at Banque AIG.

    The Fed is now spreading the net wider by allowing all US banks to use the Term Auction Facility, which offers secrecy and allows them to hand in a much wider set of investments as collateral to raise money, including mortgage securities. Perhaps some credit will at last reach those in urgent need.

    The Bank of England’s L20 billion injection over the next two months has a different flavour. It fires a double-barrelled dose of liquidity: priced by auction at far below the penal rate of 6.5 percent, and eligible to any lender with half-decent collateral and — crucially — securities backed by housing and credit card debt. Northern Rock might have escaped a deposit run if all this had been on offer in the summer.

    Officials denied the worldwide action was orchestrated to pressure the Bank of England to open its credit spigot, giving Threadneedle Street global “cover” for what amounts to a major volte-face. The Fed vice chairman, Donald Kohn, said two weeks ago that “strong bids by foreign banks in the dollar-funding markets” had complicated efforts by the US authorities to manage the liquidity problems. It is unclear whether British lenders were the culprits.

    In Frankfurt officials are seething at the enormous scale of borrowing by British banks at the European Central Bank’s window, calling much of it “central bank arbitrage.” There is irritation that the British are trying to have their cake and eat it too, dipping in and out of the eurozone when it pleases them. The bad blood has undoubtedly strengthened the push by EU insiders for more EU-wide financial rules.

    The ECB ($20 billion) and the Swiss National Bank ($4 billion) are playing a support role in the latest joint action, backing the US move by offering dollar liquidity to European banks caught in the sub-prime mess. Part of the problem in August was that the Fed and ECB lacked swap arrangements, causing a mad scramble by European banks to obtain dollars. “The Europeans are acting simply as agents of the Fed,” said Neil MacKinnon, a strategist at the ECU hedge fund group.

    “There’s a real danger that this may not work. Both the Fed and the ECB have injected a lot of liquidity before, but the banks are hoarding it. We’re still seeing all the signs of stress with Libor and the VIX [fear gauge] at very elevated levels. The reason is that people still don’t know where the bodies are buried,” he said. “This may be a made-in-America credit crisis but the Americans have cleverly exported their sub-prime cancer to pension funds all over the world. The risk now is a recession on both sides of the Atlantic,” he said.

    Julian Jessop, chief economist at Capital Economics, said the move was a stop-gap measure. “These measures should tide the markets through the potentially awkward new-year period but do not and cannot address the underlying imbalances threatening the world economy. Risk premiums are likely to remain permanently higher after the excesses of the last few years, and it will still be harder to obtain credit,” he said.

    For now, investors and hedge funds are scrambling to buy risky assets again, renewing bets on the yen “carry trade,” piling back into equities and pushing up commodity futures. Gold jumped $12 to $814 an ounce. They forget that central banks are having to fight two battles at once: against the credit crunch and against inflation. The liquidity rescue has its limits.

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