FED UP WITH CRUDE
Contact The Author
Oil’s gaining ground in its dreaded march toward the $100-a-barrel mark, thanks to a weaker dollar and bold speculators.
Investors and analysts differ on when the historic gouging may strike, but they agree it’s now more likely to hit the mark.
Legendary oil man T. Boone Pickens said yesterday he expects $100 oil to come as a big bounce, after crude dips below $80 in coming months.
Large speculators also are betting nearly two-to-one that oil slips from its streak of six straight days of all-time highs here, while still hedging against crude breaking the $88 mark as early as next month, traders said.
Oil hit its latest high yesterday at $82.51 before settling at $81.93 a barrel, up 42 cents.
“We’re trying to figure out what oil is worth now after the rate cut,” energy analyst Peter Beutel of Cameron Hanover said of Federal Reserve chief Ben Bernanke’s surprise half-point cut in a key interest rate a day earlier.
“I was shocked to see him take off the horse’s bridle and slap him on the butt to see where he goes,” Beutel said.
“It’s going to be very inflationary for energy prices and will cut deeply into consumers’ real spending power. The rate cut is going to have the biggest impact on oil markets since the Fed’s 1980 cuts.”
Consumers this year will spend $200 billion more for gasoline and home heating oil than they did in the benchmark energy year of 2002 when crude was at it latest low of just under $20 a barrel, Beutel said.
“It could go to $100, yes,” Pickens told CNBC. “I don’t think that’s going to happen before the first of the year. You’re going to have some kind of pullback in here someplace – I’d say you might see $78 – but the trend is up. Demand is up and supply is flat so it’s got to go on up.”
U.S. stockpiles of crude oil dropped in four of the last five weeks as production waned. The latest drawdown was 3.87 million barrels last week – twice what analysts expected.
“I won’t rule out $100 oil anymore,” said Beutel. “If there’s a gulf storm, or petro-political problem, or just a very cold winter, any two of these things could take oil right up to $100.
“Normally I’d expect it to take a quarter or two, but now I wouldn’t be surprised to see $100 in just a month if we have bad news. We just don’t know which number oil will stop at.”
Threats of hurricanes disrupting tanker convoys and refinery production also could easily rekindle price surges.