It is hard to gauge the market when geopolitical currents rather than fundamentals or technicals are driving price movements. Since the self-immolation of the vegetable vendor in Tunisia back in December led to the end of the Mubarak regime in Egypt in January, analysts have been watching tv monitors for news of North Africa and the Middle East rather than the movements of the currency markets or the price channels or even supply and demand. Nobody is talking contango or backwardation because it is hard to gauge the future. Nobody is talking technical because we are in uncharted territory, the Middle East is in ferment and it is not even an Arab-Israeli confrontation but the old order is being overthrown.
There is also considerable worry that prices are moving too high too fast. The worry is that the world economy, just trying to get out of the current recession and facing the sovereign debt problem in Europe, will have a hard time picking up momentum for real growth if prices go too high. There is a secondary worry that with the world awash with oil someone is going to get caught holding the bag with these high prices. There is also the problem of which product, WTI or Brent, really reflects the world price. The Middle East unrest has widened the gap between Brent and WTI which has approached $20. The oversupply is never more evident than in the full storage tanks in Cushing, OK, that are more loaded with inventory than at any time in the past.
Today, the market took a breather as Hugo Chavez made an attempt to help out fellow dictator Ghaddafi by offering the Venezuela plan: WTI -30¢, $101.93; Brent -$1.88, $114.78; gasoline -0.5¢, $3.0245; distillate -0.84¢, $3.0493.
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