Keep An Eye On Crude

05/11/10 -- You could be forgiven for having taken your eyes off the price of crude oil lately, given all the turmoil in our own markets. It's been creeping up steadily, currently residing at a two year high of around USD87/barrel and seemingly eyeing a test of USD90/barrel.

The Fed's new round of QE, and the ensuing dollar weakness, has provided oil futures with some further upside impetus. An improving outlook for the global economy, and the implications for oil demand are also behind the move.

Breaking through USD90/barrel might be more pivotal than you may think. A break through that mark would actually mean that we'd be closer to the infamous mid-2008 USD147/barrel top of the market than the late 2008 low of under USD33/barrel.

The fall out from the credit crisis, and new tighter US legislation relating to new drilling in the aftermath of the BP oil spill may soon start to alter the global supply and demand dynamics for crude oil.

It may be that USD147/barrel looks cheap inside a couple of years.