OIL SURGES $11 to RECORD $138
June 7th, 2008This was an insane move. I’ll have some charts up next post.
Earlier, I wrote, “Gold, oil and the U.S. Dollar Index are all rangebound slop now. Know that your indicators contain more noise here.”
That was midway through the session. With this weekly candle in, the picture is substantially different now. We’ll look at the charts.
Via: CNN:
Oil prices shot up nearly $11 a barrel and settled Friday at a record $138.54 on geopolitical jitters, a dollar decline and a forecast that oil would hit $150 by July 4.
Friday’s spike in the July contract for light crude on the New York Mercantile Exchange marks the largest single-day increase in oil prices on record. The contract hit an intraday record of $139.12, breaking the previous trading record of $135.09.
“The bulls are running rampant and the bears have panicked,” said oil industry analyst Stephen Schork, editor of the Schork Report. “It’s pure hysteria, absolute panic,” he added.
The rally highlighted concerns that retail gas prices, which have surged near a nationwide average of $4 a gallon, will continue to crimp consumer spending and fuel inflation.
Stocks fell more than 400 points Friday due to the rally in crude prices and a report from the Labor Department that showed the unemployment rate rose to 5.5% in May from 5% in April, the biggest monthly jump in more than two decades. The economy lost 49,000 jobs, marking the fifth straight month of job losses.
Meanwhile, the dollar continued its slide versus the euro on the weak jobs report and comments Thursday that the European Central Bank could potentially raise interest rates. The dollar also tanked versus the yen.
Concerns about instability in the Middle East flared after hawkish comments from Israeli Deputy Prime Minister, Shaul Mofaz, about possible attacks on Iran.
Also contributing to the surge: Morgan Stanley (MS, Fortune 500) analyst Ole Slorer released a report saying that he expected a “short-term spike in oil prices,” as high as $150 a barrel by July 4.
Softening dollar
The dollar began its slide Thursday after European Central Bank president Jean-Claude Trichet said the bank might raise interest rates, which would strengthening the value of the euro. If the euro gains, oil becomes cheaper, European investors buy more oil, raising the price of oil in U.S. dollars, according to Phil Flynn, senior market analyst at Alaron Trading.
The “European Central Bank pulled the rug out from under us,” said Flynn.
Trichet’s comments came the day after Federal Reserve Chairman Ben Bernanke said he wanted to try to support the dollar to bring energy prices into check. “The two central banks are out of step with each other,” he said.
Global demand, especially for gas and distillates in emerging markets, supported the record build in crude prices.
However, the governments of a number of countries, such as India and Malaysia, have started lifting their government fuel subsidies, prompting gas prices to rise in those nations.
