June 6th

Wow,
what a ride.
I wanted to start writing about alternative energy but instead I need to at least mention the amazing day on the NYMEX. Maybe someday people will look back at the 6th of June and view it as some kind of red letter day. Perhaps we will call June 6th "Yergin day" and celebrate the totally reidiculous prophecies from the now infamous Daniel Yergin of CERA.

So what happened. Well only about the biggest one day surge in oil prices in the history of the NYMEX. Not much then. We started Thursday the 5th with oil around 122. We gained about 5 dollars that day ending around 127-128.
This run started because for a couple of reasons.
Some European finance minister anounced that some interest rates would be raised in the Euro, which strengthened the Euro against the dollar (weakening the dollar). The rush to move money caused the price of oil and most other commodities to rise.

Also Israel announced that it would act against Iran if it did not suspend its nuclear program - I think act means "attack", maybe even they just came out and said attack. Either way it frightens the oil industry to think that Irans production might not be secure.

So we gained a few dollars. I'm thinking well thats mostly speculative, itll come down.

Then Friday came along and so did Ole Slorer Executive director at Morgan Stanley. Ole decided to tell everyone that he had been looking at the tanker traffic crossing the ocean, and that he didnt think that what is on its way will be enough to maintain inventory levels through the summer. $128 turned into $138 even 139 for a moment.

Well we do know that the last 2 weekly reports have shown significant declines in inventory.

So anyway my prediction of a few months rest in oil prices is now in tatters. At least for a while.

If Ole's precitions turn out to be true theres every reason to expect higher oil prices this summer. Maybe the market rest I predicted is done, not quite the 2 months or so that I expected, more like 2 weeks.

I always thought I was quite pessimistic, I assumed that oil should be priced around $120 and just as it was getting there we got more bad news... Maybe $130 is a better price. With all the news of demand destruction, Im still seeing plenty of Ford Excursions and H2s driving around like they have their own personal oil well.

While my oil predictions are going sour, the Cubs have lost 2 straight games in LA. When it rains it pours...

this was my favorite article.
The Goldman Sachs analyst that predicts the super spike, also thinks that after the spike hits we might return to lower levels of pricing - like $75. Im not sure. I can believe $100 or $120, but not $75. And after the "crash" from 200 to 120, the long term trend would be upward again...

Why would we return to $75 when at that price demand was still growing rapidly.