Mar 31, 2011

Even Before The Middle East Crisis, Oil Was Already Going Up

Even before the recent Middle East political shocks, oil prices had risen above 80- 90 a barrel, an increase driven not only by energy-thirsty emerging-market economies, but also by nonfundamental factors: a wall of liquidity chasing assets and commodities in emerging markets, owing to near-zero interest rates and quantitative easing in advanced economies; momentum and herding behaviour; and limited and inelastic oil supplies.

If the threat of supply disruptions spreads beyond Libya, even the mere risk of lower output may sharply increase the "fear premium" via precautionary stockpiling of oil by investors and final users. - in BusinessDay

Related: United States Oil Fund LP (ETF) (NYSE:USO), iPath S&P GSCI Crude Oil Total Return (NYSE:OIL)