Our crude oil model became bullish on November 3oth, 2011. This purely technical model had me looking for a “fundamental story”. I had broken down the “fundamental story” behind higher crude oil prices into 3 causes: “decreasing supply or increasing demand. A third driver may be as a hedge against currency debasement and inflation.”
With slowing global growth, increasing demand is not an issue. Decreasing supply due to supply disruptions are very credible, and were nicely discussed in this article by PIMCO’s Greg E. Sharenow. With Iran conducting military exercises in the Strait of Hormuz, crude oil is moving higher today.
Here is another article (courtesy of Investment Postcards from Cape Town) by Frank Holmes of US Global Investors discussing the outlook for crude oil in 2012. (The highlights are mine and meant as a courtesy for those time constrained.) Once again, monetary easing in response to a weakening economic outlook will continue to be a driver for higher crude oil prices.
Category: crude oil