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OilPrice.com Weekly Oil Market Update: 2/1/2010 - 2/5/2010
Submitted by OilPrice.com, originally published at:
http://www.oilprice.com/article-crude-oil-prices-drop-as-investors-seek-safe-haven-in-the-us-dollar.html
After starting the week on a firmer note, oil prices fell sharply toward the end of the week in a general market sell-off as investors sought the dollar as a safe haven amid worries about European Union economies.
Debt problems that have plagued Greece are now spreading to Portugal and Spain, driving the euro down temporarily below $1.36 and bringing the dollar to an 8-month high. Because oil and other commodities are priced in dollars, gains in the U.S. currency usually translate into declines in oil prices.
Even a decline in the U.S. jobless rate below 10% on Friday could not stop the downward trend in commodities.
Some analysts were predicting that crude oil futures, which crashed through the longtime support level of $72 dollars a barrel to dip briefly below $70 for West Texas Intermediate in Friday afternoon trading, were sliding downward into a new trading range of $65 to $72 a barrel, after oscillating between $72 and $80 the past several weeks. Crude oil, which settled just above $71 a barrel on Friday, has dropped nearly 15% since hitting its 15-month high just above $83 on Jan. 6.
Energy news also depressed prices. Crude oil inventories in the U.S. rose 2.3 million barrels in the week, several times what economists had been expecting. In Asia, China is importing more crude than it needs, analysts said, apparently with intention of exporting more refined products, which would weigh on the global market.
Earlier in the week, positive manufacturing data from several economies had driven up energy prices to above $77 a barrel as market participants saw signs of stronger economic recovery. But that gave way to the concerns about a debt contagion in Europe and the impact of austerity measures to bring debt under control.
The new scramble into the dollar as a safe haven was evident in the sharp drop in gold prices, which fell more than 4% on Thursday, and fell further on Friday to about $1,050 an ounce. Gold had risen in the past few months as a safe haven from the dollar.
Now cash – dollar cash – seems to be the preferred safe haven for many investors. The Dow Jones Industrial Average, which spent most of the day well below 10,000, recovered in a late rally to close above that threshold with a small gain.
By Darrell Delamaide for OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Crude Oil Price and Geopolitics To find out more visit their website at: http://www.oilprice.com
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It doesn't really have anything to do with the possible strength of manufacturing, or the weakness in Greece, or any of this bullshit.
The dollar is getting more fairly valued, as it took a whoopin forever there.
Just as the market that went up for ten straight months was bound to go down, the dollar that has been going down was bound to go up.
There are some nuances regarding the strength of the dollar that are true, but other than that, it's as simple as this:
Dollar worth more = commodities purchased by dollar worth less.
Master Bates,
I do believe you use more words to say nothing than anyone I've ever seen.
As opposed to you, who only uses about 10-20 to say absolutely nothing.
So who is this really? Chumbawumba? Somebody else that was all "Gold Bitchez?"
I've noticed a lot of the gold bugs completely gone, while there has been anonymous opposition to my posts.
I guess I'd want to be anonymous too if I looked like an ass and lost all my money.
I made a very firm statement as to you're waste of words..without wasting to many.
P.S. is an ass what you see in that crystal(mirror) ball of yours?
Fairly valued?
You're aware that the sovereign behind the dollar is inarguably, mathematically BANKRUPT, right?
A fair value of the dollar is zero. Seriously. If you discount these deficits into the future, we're straight-up BK. A person who will NEVER earn as much as he spends writes IOUs with fair value of ZERO.
What is happening is NOT a rush to "safe haven" assets. This is absurd bullshit and I hate it every freaking time I hear it. What it is is the sale of foreign currency assets against dollar loans with cash proceeds always getting swept into the shortest duration notes.
Futures markets that used to be price-discovery mechanisms and used by producers to hedge against spot market volatility have turned into speculative casinos
Yeah, more fairly valued. What part of currencies are relative is hard to understand? In other words, who isn't bankrupt these days? Some people are just more bankrupt than others.
I never said anything about a rush to safe haven assets. My argument is that liquidity is drying up, so nobody can blow shitloads of money buying stocks, gold, oil, etc, etc.
With fewer dollars in float, the price of dollars goes up. With the end of QE looming, people aren't chasing worthless bullshit stocks, or worthless bullshit assets anymore.
Also, how can you say that the fair value of the dollar is zero? Dollars are the currency of the world. I can take my dollars anywhere in the world and buy just about anything with them. I can buy services now, and I'll be able to buy services in the future with them. Is the dollar worth less than it used to be? Yeah. But how can you say it's worth NOTHING? That's kind of absurd.
Like I said, currencies are relative, and as the dollar floats against more worthless currencies, the value of the dollar goes up. I guess that maybe I should hold Euros from even more bankrupt countries than the dollar? Or Yen from a country that has twice the debt to GDP ratio? Or loonies from a country in a well... looney housing bubble?
Compared to the alternatives, the dollar isn't so bad. Its in an uptrend, which means that oil, coffee, and everybody's favorite Mr. T bling will come down in price.
Yes currencies are relative but two years from now youre gonna have a much diff view of currencies once all the debtor nations default. Initially this will benefit the dollar you love so much, but by 2012is only the strong will survive (creditor nations).
Yes, this might be true, but life goes on, doesn't it?
so ya incremental dollar supply = higher commodity, but it is more than that.
dollar up- weekly oil imports up... Venezuela devalues currency ... agreed dollar in uptrend, oil down in price. But it is not just supply of dollars it threat of a net imported commodity. The dollar is a medium-term play on commodities- look at oil price/ dollar late 90's- correl in high 80+.
Nonetheless oil demand is floating down the toilet... go to <eco10> or <doe> <weekly implied demand>
Agree on Mr. T bling... but as long as the fed is playing in the middle part of the curve cant say when...
After starting the week on a firmer note, oil prices fell sharply toward the end of the week in a general market sell-off as investors sought the dollar as a unsafe haven amid worries about European Union economies.
Debt problems that have plagued Greece are [now] still spreading to Portugal and Spain and Ireland and Italy, driving the euro down [temporarily] below $1.36 and bringing the dollar to an 8-month high...
[Even a] A typical January [decline] hiccup in the [U.S. jobless rate] BLS propaganda to below the psychologically magic number of 10% on Friday could not stop the downward trend in commodities...
The new scramble into the dollar as a unsafe haven was evident in the sharp drop in [gold] Comex "gold" prices...Now cash – dollar or yen cash – seems to be the preferred unsafe haven for many investors. The Dow Jones Industrial Average, which spent most of the day well below the psychologically magic number of 10,000, recovered in a [late] last-minute [rally] rescue to close above that threshold with a small gain.
=====================================
There ya go, fixed it for ya.
You're welcome.
When the dow crashes back to 6000 or so later this year then oil will be about 50 something dollars again...
It'll just become blindingly apparent to everyone that it's completely rigged and won't be attractive at any price. Because people will know crashes are just trying to draw in suckers. It'll just be set it and forget it while stuff crumbles and they try to come out with too good to be true 1Q results which will spook people even more and speed up the collapse.
Last time it was in the 30s at Dow 6500 or whatever.
oil's in permanent supply decline...its longterm fundamentals as an increasingly scarce commodity are intact.
In fact, its supply peak is what caused the need to start deleveraging. The raw inputs to cause growth just won't be there. Growth requires growth in energy input, period.
I wonder at this point if the funding needs of the gov are driving this...without a dollar spike, is there a real risk that bonds are going to go TU? The Fed is ending its liquidity swaps at a time when the USG has unprecedented funding needs...nothing like a little dollar liquidity problem in euroland to drive up the bid-to-cover, eh?
We're in the process of making our deficits their problem. We infected the world with dollar debt and carry bullshit, now they will pay the seigniorage. If this gets bad enough, they will have to collectively tell us to shove our FRN up our asses. I don't think our "export sector" can really withstand a legitimately strong dollar. The BOJ is doing yet another QE; perhaps it's you print, then I print, then he prints, repeat
1. We haven't reached peak oil. They're still discovering huge fields all the time. Ever hear of Brazil?
2. While supply is decreasing, so is demand. Saudis are cutting back production. Refineries are halting shifts.
3. Even if the federal government is insolvent, so is Europe, and Japan, etc.
You want to know why people don't want to hire gamblers or drug addicts. Because broke people are not in control and will break any rule to get money. We are living in an entire system that is broke and bankrupt. Right now Verizon is padding peoples bills with fake data usages hoping they won't notice. Right now comcast is outright lying about what people owe them but instead of doing it to 10 percent of the people so they don't get people to fight them they are upping it to 15 20 25 percent of their customers.
Right now the emerites are lying out thier ass about discovering new oil reserves. We have freaking HAARP at 30 watts of power it can find every oil field every gold mine every mineral deposit and map it out. We know what we have and people are LYING about what is out there and what is going on. We have stuff or can get stuff that is lied about to keep it's price artifcially high. We don't have stuff and lie about it to keep it's price artificially low.
Fractionl reserve monetary systems are lies. They do not work. They are a scam. They are in the middle of money creation and debt destruction to align it back up a bit. Europe will have the next lehman brothers. Be it deutshe bank or something smaller. There are basic limits to how fast it can be inflated and it's going to pop and continue to be inflated against the smaller and smaller destructed debts until it reaches equilibrium.
Or it could just all get chunked into the trash and an honest sytem gets imposed. It can go so many ways. Tax refusals. Purely cash societies with no credit cards no bank accounts no nothing. Only cash and money orders.
It's too far gone. It's going to crash this is the ejection seat ride before the sidewinder missle impacts the plane. Everyone is in the plane. Some will eject some will explode with the plane. All that matters is if you're willing to see it and ride the crazy chair or go poof. Golds not going down to $600 and the stock markets not going to crash to 6000. Everyone will stand their ground and it will create a hurricane. No one with sense stands out in a hurricane and tries to fix their roof. You simply choose your ground to stand and watch it all crash. The dragons are on the field the mortal combat announcer simply says FIGHT.
Although these "new finds" sound huge,
they only represent an 11 day world supply.
Most of these new finds a re deep water and won't
come online for 10 years. Also, # of Barrels is just
a guess or estimate
Each, that is.
We are at peak oil, needing an exponential increase
in drilling rigs to keep supply flat
If we were discovering super giants, like Ghawar,
I would say we would not be at peak oil.
Once Ghawar does a Cantarell type collapse (2.1
million B/D to less that 500k B/D), peak oil
will be reality and we will no longer be discussing
whether or not peak oil has arrived..
We really need to start converting our cars to NG,
NG being abundant and cheap in North America...
I don't necessarily agree with the oil assessments, but at least your post is well thought out and reasoned.
Just one question about all that though... where are we going to get the money to totally change our infrastructure to a natural gas economy?
MB, you are an excellent BSer.
So how about telling me where my views are BS?
At least I have views aside from "the world is ending tomorrow."
1. We haven't reached peak oil. They're still discovering huge fields all the time. Ever hear of Brazil?
If I'm not mistaken, We haven't replaced our consumption with new discoveries since the late 1970's. Peak Production was 2007 and Peak production per capita was decades earlier. We are in decline.
I don't know enough about the Oil markets to comment at all knowledgeably about anything having to do with them. And I don't know hardly jack shit about the equity markets to pronounce any kind of judgment on them.
But this much IS obvious, even to a novice like me. When ALL 3 main US exchanges, at precisely the same time (1400 hrs) show a meteoric rise, and Zero Hedge in an earlier post reporting that JP Morgan posted thousands of trades (ALL successful) starting at that precise moment ;and the DOW finishing 1 or 2 points above that so called magic number of 10,000, well you would have to be an idiot to not see that your stock markets are 100% crooked and fixed. (Gamed) You are not gambling, gambling has the element of chance (luck). If you are investing in these markets, or thinking you are actually investing in these markets, then you will probably end up losing.
Over the last 10 months of reading the posts here, it is obvious to me that most of the people here are players in these markets. They (YOU) think you can ride the Tsunami and be one of the successful ones to catch the wave & ride it to shore.
Sorry, I think MOST of you will drown.
All of us see (and believe) that this will end badly. It will end badly.
We would like to see ........ (too many Crown Royals, Goodnight)
"Over the last 10 months of reading the posts here, it is obvious to me that most of the people here are players in these markets. They (YOU) think you can ride the Tsunami and be one of the successful ones to catch the wave & ride it to shore.
Sorry, I think MOST of you will drown. "
So... what would you have everyone do? Are we suppose to go hide in our bunkers starting now? Cause while everyone is preaching this doom and gloom shit everyday and how it just cant go on any longer, I got a little hint for you. YES IT CAN.
Honestly no one can tell you when this is gonna end badly. They can guess, and they can keep guessing. But, just because someone repeats "The end is coming" every week/month/year/decade, doesnt mean anything if and when it finally happens. But they will jump around and say "see, I told you so".
So I can say that the market is going to reach a certain number, and repeat that everyday. Then no matter what the timeframe when it eventually does happen to get there, does that make me some financial seer? Bullshit.
This retardedness could end tomorrow or it can go on for decades. It could still be going well past our lifetimes. You can't just stop your life in fear of something that may or may not happen.
Is is a possiblity, yes. So be aware of it and prepare accordingly. Otherwise, it's pretty stupid to pass up opportunities in the in the mean time because you think the world is going to end.
If it was going to rain, would spending far too much on an umbrella be worth not getting wet?
That's the question that the goldbugs should be pondering.
Well, you'll notice since the price has been falling over the past few days there has been very little "GOLD BITCHZ!" copy/pasted. I suspect that most here only run around screaming it to troll for an argument. And at the moment they would simply get ridiculed, so they are waiting for the price to start going back up.
What I find amusing are all the "GOLD IS A GLOBAL CURRENCY!!! IT IS WORTH MORE THAN ANY FIAT CURRENCY!! ALL FIAT CURRENCIES FAIL!!!" statements.
1) No it is not the current global currency. It was before and it may be again in the future, but as of right now it is not.
2) Wal-mart nor any other retailer will gladly accept my gold for their goods. It's worth is subjective, and as of this moment its retail buying power worth almost zero (by itself). Yes, it can be converted into dollars, but that is not the point.
3) All currencies eventually fail, even gold. At least historically, maybe the future will bring about a better system.
Gold has value simply because people believe that it does, which pretty much makes it just like any other currency. Because, technically, its just a shiny rock.
Now I will probably get disembowled for even implying that gold is not the end all be all, but I'm just stating it how I see it. And just a note I do own PMs, and I do believe they have there place. PM are simply a tool, add it to your financial toolbox, use it where and when appropriate.
I suspect they're still around. Every single one of my posts gets flagged as junk by somebody, and usually it's about two people to every post.
You just can't tell people that gold is going down in this place (like I was doing in the 1200's when everybody was like GOLD BITCHEZ) without making enemies.
Also, it seems you can't ever talk about Glenn Beck or Ronald Reagan poorly without making enemies.
The gold bubble isn't much different than the housing bubble or oil bubble. People just think that "It'll be different this time!" Well, let them believe as they will. They can flag this post as junk too. It doesn't save them from the fact that they were wrong, and worse yet, are probably down in their portfolios.
With all of that said, I totally agree with what you said.
Some of these mofos are ignorant, but that's their right. It doesn't bother me at all. Let the sheep get slaughtered, I like to say.
Moreso, I hope that everything works out well for them. That's why I told them they were wrong in the first place. I don't want to see anybody lose money.
yes, that was quite a turn at precisely 2pm eastern wasn't it?
Scarcity, is an ambivalent aspect, with regards to almost, if not all, commodities.
As for the futures and equity markets beig 100% gamed, well that was pretty much the point of their inception. Do you really think that the system of international finance would create a marketplace with autonomous behaviour?
What is far more interesting is the growing divergence between (any analogy of..) 'spot' prices and delivery prices. It points to an inability for the financial system to account for real economic flows. Put in this way, we see a separate issue from the 'West v. East' debate -yet that remains the ingrained current perspective. Hogwash. All finance ministries, treasuries, large firms have been sprouting mythical numbers, towing the line, towards the same end. So then, how is it that there is a disparity between spot and delivery? If the 'movers' are, and they most definitely are, on the same side... why the need to 'show' the Gold market, or the equity market as broken?
There could be a multitude of reasons, but what might be useful to get from this crisis, is to crack the stranglehold of the principle of what constitutes 'legal tender'.
Yep their still at it.
OT -
Not usually an Alex Jones Fan, but hey, give this one a shot forward thinkers...
Boycott proxy penis gladiatorial diversions.
http://www.youtube.com/watch?v=x_47eLGkA_I
So, who's the next anonymous coward who is ashamed that they looked like a fool for being like "gold bitchez" at the peak?
Flag this post as junk too! Picture me shorting gold...
Hey
If it's any comfort, some of the gold bugs get pretty much all of their posts flagged as junk, too. Some of them (GG, Chumba) are experienced investors and wonderful teachers - I've learned heaps from their posts. (Not the two-word ones, which are just for fun!) :-) For some reason gold seems to inspire emotion to the level of religious conviction, pro or con, which even in itself shows me its power above and beyond all fiats. But it may not be the gold-bugs who are flagging you, since it does happen to some of them nearly ALL the time! (I know who I bet ISN'T flagging you, and that's Chumba and GG, both of whom if they think someone's being an idiot & care enough, tend to simply post a line or two saying exactly that and no more.)
I think of it as cyber-stalking. My guess - if you have strong opinions, and you stick by them, right or wrong you're going to annoy some people and rather than discuss it they'll just push the ol' junk button. Some folks are really, really prone to this. It got so bad a couple times that being flagged became a bit of a standing joke around here, not so long ago. We've had whole THREADS where pretty much every post has been flagged, by some deranged reader. I've seen threads where EVERY comment that referenced China favourably, was flagged.
I've been guilty of flagging a comment once or twice, when the person was being an even bigger idiot than usual and I was just so sick of hearing from them, but that was out of frustration on a bad day. :-)
I've said before, ZH should put a ratings 'star' system on comments, or even an Agree/Disagree button, and then the Flag as Junk could be used as it SHOULD BE: for spam, obvious trolling, or flagrant off-topic. And that's IT!!
Alas, I'm not the one with the clout to make it happen though.
I don't always agree with you, but your posts are valuable and well thought out and expressed. I STRONGLY disagree with you on gold, but there are threads for that and meanwhile I think you're bang-on about currencies being relative, and they represent heaps of opportunity. I ought to - I trade on the forex myself to make money. :-) Reality is reality, and frankly I need that income - to buy bullion among other necessities! This is most definitely the time to be long the USD, and I have done so for weeks, even though I loathe the USD and will joyfully dump it when that seems prudent.
It's annoying to see the Junk button used for some kind of informal and unrepresentative 'vote'. But after awhile, you just kind of ignore it I guess. Hope you won't let it get under your skin too much...just keep on having the conversations! You seem to be a person who knows the value of his contribution and is not easily silenced.