Friday, February 24, 2012

Today's Major Market Move: WTI Crude Futures Climb 11.1% Year to Date

Oil related commodities have been on a tear this week and this includes WTI Crude with the front month future contracts up 6.3% for the week and  over 11% for the year. Even with an 11.1% gain in less than two months, WTI Crude is still only the ninth best performer out of the 29 commodities we track. Silver futures are up more than double that at +26.9%. Here are the top 10:

Click here to go to the live table.
WTI is now just under $110 and at the current rate it won't be long before it moves past the $114 level it reached back in April of last year. Here's the line chart going back to December of last year:

Click here to go to the live chart.
So how much does this rise have to do with escalating tensions in Iran? The fact that silver, gold, copper and cocoa are all also up double digits would point towards there being more to do with these gains than just the middle east. One could argue that gold also rises in times of geopolitical uncertainty but that still leaves the other three non-oil related commodities of which silver has seen the biggest gains by a fairly wide margin (26.9% for silver vs. 18.6% for gasoline). If you look across the entire commodity complex for the year, only 8 commodities of the 29 we track are in the red, and only two of those are down by more than 3% (coffee @ -10.2% and natgas @ -14.7% which we've discussed several times before, the most recent time being on January 31st). So we're inclined to believe that this commodity run has more to do with continued deficit spending, monetary stimulus and currency debasement by governments and central banks around the world.

We normally don't get into the prediction game here - but we believe one of two things (or possibly both) will happen next week: 1) there will be either a rumor of, or an actual release from the Strategic Petroleum Reserve 2) there will be some kind of hint from the Fed regarding the possibility of tightening sooner than expected - most likely in the form of asset sales and/or reverse repos.

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