Why the High Oil Prices?

Tuesday April 30 2013

The WSJ reports that the Permian Basin is pumping some 550,000 barrels of oil per day, up 38% from three years ago. This is creating   a rail boom in tiny Barnhart, Texas. 

The SPX notched right up to its previous high. Interestingly there is neither a shortage of stocks nor oil. so why are prices this high?  The answer has to be the social mood of seasonality. 

Stocks bottomed in November and have raced to their typical April tax time high six months later. 

Crude oil is racing out a large megaphone pattern on its weekly chart. This exhibits both lower highs and higher lows!  Given the collapse of copper and steel prices, something seems to be amiss here. Oil prices typically move up with stock prices and this has happened again. I am just wondering what the fundamentals are that support such high oil prices?  there is no shortage, driving is down, and we are producing more than ever. It seems a good time to be cautious on oil. that market is getting closer and closer to a resolution of this megaphone pattern. 

Comments

[Farley]

Take a look at the USDollar today.

I think they're doing this to try to prevent the markets from crashing.

Of course, it takes MORE money away from the consumer since a falling USDollar makes things more expensive.

I would think they can only go so far.

Then what, an Overnight-Market-Correction? ... (like they did with the Metals-n-Miners).

Just Thinking Out-Loud.

[Neil Master]

I concur with Farley. It is the only explanation. While production is up, there are more dollars floating around, driving prices up each day. The Precious Metals crash was a temporary phenomenon. Witness the reaction by the physical market and the latest CoT, with a huge move to the most bullish position in ages. Inflation is here to stay, no matter what the capital markets do.