Get Ready for $70 Per Barrel Oil Again

Two factors are going to drive the price of oil higher: expectations for higher consumption (by China in particular) and by lower than expected output by non-OPEC producers. The latest batch of data on the state of the oil industry comes from a meeting of the the Institute of International Finance (IIF) in Doha. These figures from the IIF cognoscenti confirm the shocking downward revisions in non-OPEC supply estimates by the IEA last week. By the way, if you dig deeper into that IEA site, there is an excellent discussion concerning why the NYMEX futures complex remains as contangoed as it is... worth the read even if the IEA supply estimates aren't worth Jack.... Frost.

Given the situation with the imploding subprime culture - yes, culture because we're talking a whole class of millions who will lose their homes in the months ahead and the likelihood that the higher rung JUMBO mortgages will be the next group of mortgages to fall - $70 crude while presenting a terrific bullish trading opportunity in CL, XB, etc will be tough for the consumer and ultimately the entire economy to weather. But hey, don't worry be happy - right?

While my overall futures portfolio surged last week thanks to the metals, the one lousy trade I had was a natural gas short (which I dumped on Friday). It didn't stay mild enough for long enough in the northeast to have a meaningful impact and early seasonal Climate Prediction Center (CPC) forecasts are indicating the summer winds may be blowin' in strong this year which would stoke demand for nat gas by way of gas fired electricity generation.