OILY AND OFTEN

I normally don’t like to make explicit predictions, especially about market developments, in the Pontificator, largely because I don’t like to leave a paper trail when I am wrong, which I am about half the time, in line with most human experience. However, a friend asked this morning where I thought oil was going and, since my yen prediction of last month (See my 3/17/11 post, YEN TRADE LOOKS EASY HERE) looks especially prescient at this point, I thought I would chance reproducing a redacted copy of my reply for my readers:

4/8/11

We're oil is at $111.56 as I write this and most people never thought it would get that high. I suspect that on its monetary value alone, it has some room to run and if any of the imbroglios in the Middle East flare over, that's probably good for at least another $10.00. So I would say we'll see at least $120 and maybe another $10 or so.

The only things that would kill oil’s run would be a big Chinese slowdown, which would almost have to be intentional and born of severe monetary restraint, a sudden outbreak of peace and stability in the Middle East, or a bout of sobriety on the part of Mr. Bernanke, all of which are unlikely.