FRIDAY AUGUST 7, 2009

Oil Market Message

 


The price of oil rose again yesterday, closing the day at $72.13. That is up almost $5 dollars this week. What caused the run-up? Was it an announcement of a fire at a key refinery? Or news that demand has spiked and supply couldn’t keep up? No. Yesterday’s jump in oil was driven by an announcement by the Bank of England that it would continue with its easy money policies. The market has concluded that monetary policy is not only “easy” in the United States, but that it is even easier around the world.  Combined with massive “stimulus” spending, these concerns raise the prospect of inflation, which in turn debases the value of currencies, particularly the dollar. So, to protect against this, traders buy commodities, especially oil.

 

This morning, the Department of Labor announced a better than expected unemployment report. As evidence mounts that the economy is on the mend, look for people to begin to question the easy monetary and fiscal policies around the world. In the U.S., look for folks to question whether we need to spend the 80% of the stimulus money that has not been spent. Here is a thought.  If Washington demonstrated some fiscal discipline and repealed part of the stimulus, I bet the evil speculators would sell oil!

POSTED AT 1899-12-30 09:02:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.