In any case, with the situation in Libya not yet resolved, some degree of uncertainty continued to be manifest in global markets but speculators were also seen taking more of a “wait-and-see” attitude following the realization that temporarily interrupted oil supplies from Libya do not automatically mean a return to global economic crisis conditions, and that Libya not pumping black gold is not the same as, say, Saudi Arabia or Iran not pumping it.
Although Iran (despite thus far successful efforts to suppress domestic unrest) still remains at some risk of contagion from the types of movements that have resulted in the departure of Mubarak and will soon result in the toppling of the Gaddafi regime, Saudi Arabia’s King Abdullah has taken certain “steps” intended to keep his subjects less likely to feel the urge to take to the streets of Riyadh. Volatility and intense displays of quickly-shifting sentiment in the oil market (and its effects on gold were unmistakable yesterday) were both reflected in the widest price-swings in more than a year on Thursday.
President Obama has stated that the US could weather the situation from its reserves, and Saudi Arabian Oil Minister Ali al-Naimi has made assurances that his country could ratchet its daily oil production up by 50% or so (about 4 million barrels), if conditions require it. The International Energy Agency based in Paris, France has also come out and said that emergency stockpiles of crude could be tapped in the event of need.
None of the above however has prevented speculators from being able to push black gold to a two-year high this week, or from sending their minions out to talk about some imminent oil “Armageddon” over the financial media’s airwaves. However, certain chart followers see the return of oil to the $103.41 level on Thursday as a 61.8% retracement of the commodity’s major decline from $147.27 peak to the low of $33.55 and caution that it represents a “critical level” –one that might imply a corrective top and potential decline.
Meanwhile, don’t look now, but our old “friends” –the hedge funds are (not so quietly) bailing out of the most recent “darling” of many a commodities-oriented newsletter: the agricultural complex. Over the past week, wheat prices have cratered by nearly 9% and corn and soybeans were not very far behind it. The switch away from edibles into oil and gold during this period was as obvious as a fully-dressed Waldo would be at your average nudist colony.
Continuing of the emergent theme of central bank tightening (we mentioned Messrs. Trichet, Plosser, Bullard, etc. and made references to China, India, Australia, and others in recent articles), the Bank of England’s Mr. Andrew Sentence has apparently…sentenced ultra-low interest rates to a slow death as he reiterated the need to raise the same sooner, rather than later, in an effort to avoid sudden/sharp hikes which could have certain undesirable effects: “the risk of delaying interest- rate rises too long is that this gradual approach may cease to be an option in the future.”