I have to admit that I was a bit taken aback when the Kuwaiti oil minister announced that the world could withstand oil at $100 barrel. It wasn’t that an oil minister said it; it was that the oil minister was from Kuwait and not Iran. Along with that eye-opening statement, we are seeing some very interesting things in the oil markets right now. For instance, anticipation of growth has rallied oil despite an economy that hasn’t really done much in three years; China seems to realize it may have overdone the increase of its currency rates in an attempt to slow down the rally in commodity prices; a computer virus may have set the Iran nuclear program back two years; and an American car company can’t make a competitively priced electric car without the government’s $8,000 tax credit.
But all those factors probably weigh less on the oil markets than currency issues. Yes, oil is up $10, but how much is the U.S. dollar down against the euro and against every other world currency? One thing we know is that the QE2 effort has weakened the dollar against other currencies. (more)
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