Brent In Euros Just Off All Time Highs - Is The Free Liquidity Run Almost Over?

Tyler Durden's picture

As always happens following massive liquidity injections, there comes a time when the price of oil ends the party prematurely. And with localized Cushing issues preventing another 10% to be tacked on to the cost of gasoline for now, we once again look to Europe for the fair view of what is happening with the energy market. To our surprise we find that there is now only a 5% difference between the all time highs hit in 2008 and currently in the price of Brent expressed in euros. Yet what is of particular interest is that the liquidity induced rally may be about to fizzle: we have no experienced the same near-parabolic blow off top move that we saw at the end of the summer 2008 rally (which ended up with the market plunging over 50%), and the first QE1 which plateaued oil prices and only further hopes of more QE prevented the market from dropping. Is the same fate in store for crude if indeed the Fed is prepared to let the market find its natural clearing price without daily injections of billions.

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HamyWanger's picture

" Is the same fate in store for crude if indeed the Fed is prepared to let the market find its natural clearing price without daily injections of billions."

Is the FED stops QE, who will buy the 30yr, which is near its 1-year low? 

And who will buy stocks? 

No, QE will continue, and that's why I'm long DOW. 

r101958's picture

You should see what type of returns you are getting there by pricing the DOW in gold. It will tell you a different story.

Tense INDIAN's picture

....thats rite ...definitre DOW 13000 or more

SWRichmond's picture

Is the FED stops QE, who will buy the 30yr, which is near its 1-year low?

More importantly, if the Fed stops QE, what happens to federal tax receipts, and therefore the deficit?  And when the deficit explodes (if one were to believe it hasn't already) what happens to USD?

hedgeless_horseman's picture

There is your v-shaped recovery. 

Abitdodgie's picture

When oil hits about $140-145 the dollar will die , so the start of the great reset is almost here , time to air the bunker ,rotate the last food ,and get ready final days which will be here soon

Abitdodgie's picture

By the way April 9th is the first day of the second night,bad things always happen at night

tomster0126's picture

i feel you...the transition period is approaching, the death of the dollar and fiat are inevitable.  check my dude's site out he has some similar predictions to yours

RobotTrader's picture

I'm wondering if the Fed is planning another "Midnight Massacre", Don Coxe style.....

Internet Tough Guy's picture

Crude oil pole-axed on inventory "glut"
RobotTrader - Wed, Mar 30, 2011 - 10:34 AM

Once again, the Peak Oilers were foiled again.

Looks like the long specs are finally running for the hills.

CrashisOptimistic's picture

The last three words of this snippet say all that must be said, from the IMF.

"WASHINGTON, April 7 (Reuters) - The International Monetary Fund on Thursday warned that the global economy was entering a period of scarcer oil that could drive prices up rapidly. In new analysis by the Washington-based global financial institution, the IMF said market tensions were increasing between growing demand for oil from fast-growing emerging market economies, like China, and production constraints due to maturing oil fields."

Cursive's picture

It doesn't matter anymore. The American middle class has been crushed and tje American Dream has been exposed for the myth that it was. Nations do not recover from pandemic frauds such as that perpetrated by the Treserve. Life goes on, to be sure, but huge socioeconomic and political changes are only just beginning.

FunkyMonkeyBoy's picture

"It's called the American Dream because you have to be asleep to believe it."

-George Carlin

topcallingtroll's picture


The american dream is still alive.
I am proof of it.

Big men take chances and live dangerously.
Small men are afraid to take any risk.

Guess which group has the best chance?

What group are you in?

cougar_w's picture

There is a reason they created the "Darwin Award"

germanicus's picture

It is a joke, you are brain washed! It seems to me that you are the typical american, who has never been abroad!

Have you ever been in Asia, in China or Hong Kong? Open your eyes US is second world at the most, you do not have a single speed train, the infrastructure is like South America, your airports are surpassed, your cars are old, you are not able any more to build airplanes and even the space shuttle does not fly anymore? Of which dream are you talking about, Warren Buffet, Bill Gates? Mr. Gaddafi and Mr. Mugabe in Africa are also rich men...

Did you ever ask yourself why everything is produced outside the US? Did you really believe the story that the reason, ist that it is cheaper than US made things? Did you ever think about that may be Americans are not able to do it anymore?

Have a trip, visit other countries in the world, open your eyes and keep reading this blog

The American Dream is like the story of John Rambo... it never existed!




topcallingtroll's picture

Ha! The american dream is still alive. I am proof of it. Big men take chances and live dangerously. Small men are afraid to take any risk. Guess which group has the best chance? What group are you in?

thames222's picture

all I know is I'm paying over 3.75 a gallon in my area and I'm about to flip my lid.  We need some solution because these prices are killing us, literally.  It goes back to simple economics, pricing and demand.  Bernutty and is crew really just think too hard.

been there done that's picture

Oil is STILL cheap. A slushy from 7-11 costs more, water passed through a cow is close, and many liquids priced in gallons are way more expensive. The work that a gallon of gas will do is still amazing, AND still a good deal. (for now)

HamyWanger's picture

No chance, robot. If QE stops, long rates will go up and finalize the double dip in RE. Banks and municipalities are way too fragile right now for this. 

And I'm not even talking about bankrupt pension funds which are ultraleveraged, trying to play the momentum in equities to pay benefits month-on-month. 

Fiat to infinity. 

topcallingtroll's picture

Cmon can be.funnier and more annoying than that.

JOHNICON's picture

If QE stops then I think long rates go down, possibly big time.  Not logical, I know, but the flight to safety thing and all that...

r101958's picture

Although QE exacerbates the problem....the real problem with oil is the fact that resources are finite.

It seems I keep having to repost......:

'Oil will decrease in price when we see demand destruction again or perhaps temporarily when the dollar has a spike. All resources are finite and will get more scarce in this economy which survives and thrives on exponential growth. So, the alternatives are: Fewer and more expensive resources as in the current economic paradigm OR the current paradigm collapses and demand is destroyed in the process (2008 style). Nuff said.'

Note to self's picture

That saw tooth is gonna extend forward in time, going higher in every cycle, till the oil is gone.

Votewithabullet's picture

Nein nein nicht zo schnell. Price will climb forcing alternatives to market, price will drop. Rinse repeat .

cougar_w's picture

And every time investors jump into funding alternatives, and are then killed on the price pull-back, that investor segment is murdered and doesn't come back the next time nearly as strong.

Rinse. Repeat. The lack of a strong price signal has been the lament of alternative energy investors for eons. The jagged, turbulent end of oil is also the end of alternative energy investment. We could have managed this better, but we didn't and we won't and the chance for a do-over is past.

css1971's picture

Actually... Part of my strategy is to use the sawtooth to buy alternative and nuclear as well as conventional energy on the crash.


unwanted flatulence's picture

this is very likely - having studied this from a geologic perspective and investment one--  my best guess is repeated sawtooth price pattern hammered down when it get so high economy's remant crashes, then recovery at ever increasing new low in each new cycle.

the beauty of PM is you own oil and gas is a relatively stable [relative to oil] currency.  just chart oil vs gold in 2008-2010 and longer.


Village Smithy's picture

Hey you can look up north for the true energy cost picture as well. Up in Canada they are paying well over $5.00 per U.S. gal. and that's in $C. My friend up there told me that  everyone at work is saying the same thing. "No summer travel plans, hello staycation". 

The Axe's picture

No tightening  No Gas

JonTurk's picture

spot on.. look for the euro start diving next week

JOHNICON's picture

That would be great since I'm visiting Spain to see my sister next week.  :)   Every other time I've gone to Spain the Euro had been near all-time highs.  :(

bob_dabolina's picture

This is because Waddell and Reed is long oil and also because of George Bush.

topcallingtroll's picture

The strategic petroleum reserve ought to be selling into wti 110 and buying.wti at less than 80. They could make money and moderate volatility a bit.

CrashisOptimistic's picture

The SPR has a flow rate maximum, too.  And it can't get to all markets, because that's not what it's for.  It's for the military.

A Man without Qualities's picture

Germans love their big cars.  Now it's costing 100 Euro to fill the tank, they are starting to understand the cost for bailing out the south.  

Andy_Jackson_Jihad's picture

Wha?  I thought it was all due to increasing demand because of all the green shoots are sprouting into self sustaining growth.  You telling me my neighbor isn't selling his SUV and boat because he's upgrading to better ones?

firstdivision's picture

It still has room to run up in Euros as the EURUSD was rich then compared to now. 

simon says's picture

Is liquidity run over?  No for the following reasons:

-  2008 was private liquidity binge which the Fed would have kept going, but it was new to QE at that time

- 2011 is public liquidity binge which cannot stop since it will crash the UST market

- Bernanke loves inflation - he sees it as the evidence of avoiding a depression

Fed and Bankstas may tease the market with false tightenings (to keep Bankstas spread profits flowing through frontrunning), but this liquidity tap cannot be turned off.  This is a one way street to the reset of the global monetary system - could take months, years or even decades (unlikely) - timing based on ability to keep the ponzi going (and btw we are all actively playing this ponzi game together - only fools will stay out with this level of signalling).

JOHNICON's picture

Your 2011 point is wrong, I think.  Ending QE and other liquidity programs will force down quite a few markets (equities, commodities, etc.) but USTs will be the beneficiary of that.  

plocequ1's picture

Of course the answer is no. But this is the type of question where the answer is already known. The answer is NO. But it  doesn't hurt to ask. Got to keep that yes no paradigm going

JonTurk's picture

EUR will be a huge short at around 1.45.. its on the brink of a big rising wedge -- inversely, USD index is about to bottom up with a perfect timing as everyone is bitching dollar now and whole mo-mo food chain piled into long commodities.

weekly technical negative divergences all set in place. starting next week it will be a tough ride for the commodity longs until the next QE (which will not happen unless markets take a big hit like the one last summer)


Arseclown's picture

Good luck jumping in front of that train...

falak pema's picture

DJ up on QE-infinity but down on USD real value. One day it will all melt as nobody will want to export to US to be paid in USDD. So QE is a route to lose-lose.

t0mmyBerg's picture

"if indeed the Fed is prepared to let the market find its natural clearing price"

Well there's the rub isnt it.  You have the Doviest Doves ever to occupy Marriner Eccles cooing about as they rain destruction on the land with giant dollops of radioactive feces, or is it faesces, and the term of the head Dove doesnt end until January 31, 2014, some 33 months from now, and the one guy who could do something about it is either content to see the country destroyed, if you believe the right-wing conspiracy cranks, or is just plain too stupid to see the darker consequences of destroying the currency in an attempt to inflate away glib progressive spending if you dont.  Good luck with non-centrally-planned price discovery any time between now and then in the absence of the system falling down around them.



buzzsaw99's picture

Is the same fate in store for crude if indeed the Fed is prepared to let the market find its natural clearing price without daily injections of billions...


The fed serves at the pleasure of the joo york banksters.

Tense INDIAN's picture

but dont we have time till June ...its April 2nd week now....

John Law Lives's picture

If oil prices are about to collapse, it would seem like a good time to load up on major airline stocks (AMR etc.).

ivars's picture

It going as it should. It will come down a bit ( 105-110) in May, when money will move into PM spike (just  before 40% correction there)