Oil Watch – 05/07/08

After hitting a low of $40.85 on February 17th, the contract for June delivery (now the near term) has rallied to a 65 day high of $58.07 as of this morning.


Of course, we’re supposedly heading into the summer (read: prime time) driving season, so some jump is to be expected. But what’s strange about this 40%+ rally is that crude oil inventories are rising dramatically:

Yesterday’s EIA inventory data did not warrant the price developments seen in the futures markets. It is an odd situation indeed when a 605,000-barrel build in crude stocks is interpreted as bullish by a market already awash with 375 million barrels of crude in storage and another 40 million barrels or so anchored out in the Gulf of Mexico.

We’ll note that some folks are worried about inflation hitting en masse as a result of the arbitrary printing of US dollars to fund fanciful (and unaccounted for) government spending. The Theater O’ Greenback hasn’t yet heard the call to exit stage left, but maybe traders should be looking at this oil stockpiling as an expectation signal.

No matter – if oil continues its march, consumers won’t be joining the summer of love. And any chance of the recovery the powers that be are trying to convince them is well in hand will be swirling in a tanker parked off the Gulf Coast.

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