With the world's attention diverted to Japan for the past week, WTI managed to drop substantially trading just above $96. Well, just as we predicted a few days ago observing the ongoing developments in Bahrain and Libya, and the imminent realization that Japan will need to boost its petrochemical imports due to drop in nuclear power output, crude spike by the most in over a week, in what was virtually a straight line touching $102/bbl and closing just below. Mocking the concept of a perfectly efficient market is Reuters with the following update: "Oil prices recovered for a second day from three-week lows, which had been sparked by prospects of lower oil demand from earthquake-stricken Japan, and was part of an advance across markets on worries about increasing geopolitical risks, analysts said. "The focus is back on continuing unrest in the Middle East and what will be a lot of disruption in Libya for a long time," said Christopher Bellew, an oil trader at Bache Commodities. "The risk is more to the upside -- there was a lot of long liquidation on that sharp sell off at the beginning of the week," he added." Then again in describing some of the "bullish" reading in the economy, Reuters itself seems to be a little confused: "Data showing that inflation remained contained despite rising prices also helped boost investor mood." Uh, come again? Anyway, following the French invasion of Tripoli some time after 7 pm Eastern, when Paris finally reveals the undisputed military beast it has always been, against an air force consisting of 20 or so Mig-21s with one million air hours of service each, look for oil to attempt recreating the JPY melt up from last night.
More from Reuters:
The U.N. Security Council scheduled a vote on Thursday evening on a resolution that Britain said would authorize all steps in Libya short of a military occupation to protect Libyan civilians. The vote was scheduled for 6 p.m. EDT (2200 GMT).
Ahead of the vote, Libyan state TV quoted a statement from Libya's Defense Ministry as saying "any foreign attack on Libya will endanger air and maritime traffic in the Mediterranean basin and expose both short and long term risks."
"The headlines about Libya's response to any potential foreign military act and the crackdown of protesters in Bahrain are adding fuel to the fire and heightening tensions in the Middle East, said Tom Knight, trader at Truman Arnold in Texarkana, Texas.
"Prices have extended higher from yesterday, also aided by by positive U.S. economic data today."
"The news that the U.N. Security Council will vote on a resolution to authorize a no-fly zone over Libya and imposing more sanctions against it has helped crude rally here," said Phil Flynn, analyst, at PFGBest Research in Chicago.
Bahrain arrested seven opposition leaders, a day after its crackdown on protests among the Shi'ite Muslim majority drew rare U.S. criticism and raised fears of a regional conflict.
Libyan troops pushed forward towards the insurgent stronghold of Benghazi and launched air raids on its outskirts as Washington raised the possibility of air strikes to stop Muammar Gaddafi's forces.
In Yemen, security forces used live fire and tear gas on on anti-government protesters, wounding at least 84, activities said.
And this is how the BOJ would intervene in the Crude market if it had the authority to buy the black oil in addition to ETFs, REITs and dollars.
All that said, we can't wait for Joe LaVorgna, Thomas Lee and Ron Insana to tell everyone just how great the positive impact to US GDP will be as a result of having to rebuild a flattened Libya.