by Dave Cohen
Wednesday, 11 June 2008
I couldn’t repair your brakes, so I made your horn louder
I don’t know why the oil markets chose June 6th, 2008, to freak out.1 The upward price movement started the day before, but Thursday’s rise was within the bounds of “normal” single-day volatility lately. On Black Friday, the NYMEX WTI price jumped up nearly $11/barrel during the call-out trading session between 9:30 AM and 2:30 PM EST.
A spate of bad news appears to have “caused” the price hike, but can we honestly say that any of these concerns, or even all of them put together, was extraordinary? Was there a profound shift in the market fundamentals? The answer is “no”—anxieties in the skittish market turned to full-blown panic. The fear-driven stampede reflects the high degree of uncertainty in the markets about the continuing devaluation of the dollar, conflict in the Middle East, unfettered oil demand growth in China and the Middle East, lagging supply growth, and last but not least, the poor health of the American economy.
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