August 10, 2005

Oil Prices, Stock Market, etc

Oil prices closed at $65 a barrel today. Not too far back, when amazon closed at nearly $47 I thought that it's stock was trading on momentum and on people having to cover their positions and priced ahead of itself. Today amazon dropped to $44.

The federal deficit has been smaller than expected in the past month, which is a sign of the economy heating up (since they have their hands in about every cookie jar). I think oil is now trading on momentum though. People are looking for excuses to raise the price of oil.

If I had lots of money right now, oil stocks I would have bought a month ago (like NXY) I would short now, expecting a 20 to 30% drop in oil prices from today's close in the next 2 months.

Posted at August 10, 2005 3:54 PM

The big problem with the oil prices is the underlying inflation it brings - for some reason I don't see the UK economists looking at that factor adequately.

Will be interesting to see how FTSE markets are impacted not simply by the slowing UK economy, but also the inevitable interest rate rises.

Back on topic - I wouldn't expect the oil stocks to go down anytime soon - I could have sworn I'd covered a story which spoke of crude futures into 2009 being priced above $60. I really don't see that coming down unless the higher prices seriously hit consumer spending.

2c this late Scottish evening. :)

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