The dollar drops, oil rocks! Libya burns, Japan shakes, Nigeria's nervous, Portugal bails, Bahrain bubbles and now China troubles. Do you need any more reasons for oil to go higher? Well the oil market sure does not, so let's get started going over the reason why oil is taking out key resistance from that fateful year of 2008.
You have the world out of balance in many ways. Some geopolitical and some economic and it's all conspiring to drive commodity prices again to the hemisphere. Oil surged on reports that NATO confirmed that forces loyal to Moammar Gadhafi were able to get a Libyan oil field burning. This raised concern that Gadhafi may attack oil fields as rebels are having some success selling oil to fund their revolution. This increases the risk that the sweet Libyan oil will be at greater risk of being lost for some time.
The other North African producer that can produce that light sweet crude is Nigeria. The oil market rallied on news that the Nigerian election that was scheduled for this weekend has been delayed. Nigeria was calming the Brent market somewhat but fear that this election might stir more unrest is making the trade very nervous.
Japan had another earthquake that sent the markets in a tizzy. The yen surged and stocks dropped on fears of a new chapter in Japan's nuclear nightmare that ran through the markets heads. After it was reported that the Fukushima Daiichii Nuclear power plant suffered no more damage, the markets calmed down. Yet for crude the situation in Japan is bullish. With every shake in Japan it will work against nuclear power increasing the expected increase in oil and gas demand.
The Portugal bailout may have slowed the euro temporarily, or perhaps it was buy the rumor, sell the fact on the EU interest rate increase. Still with Europe raising rates and the Fed still printing money, the dollar is looking weak in comparison. The budget impasse is not helping the dollar. Obama seems to have lost touch with the common man as gasoline prices are cutting into the consumer's pocket books and the President's popularity. The President jokingly told one questioner about gas prices that, "If you're complaining about the price of gas and you're only getting 8 miles a gallon, you know, you might want to think about a trade-in."