Commodities Continue On

I have been talking about it for some time now, but this article today from the Wall Street Journal re-affirms my outlook on commodities.  According to a survey of economists, the majority responded that they believe the surge in oil and food prices does not represent a bubble forming. 

Fifty-one percent of the respondents said demand from China and India was the prime factor in soaring energy prices, and 41% said the demand was the chief contributor to rising food costs. Constraint in supply was cited second most often; 20% blamed supply problems for higher food prices, and 15% for increasing energy prices.

The price per barrel of crude went up to $124 in after hours trading today, ultimately settling at $123.69 during daytime trading hours.  The reason for the increases, as affirmed above, is primarily related to supply issues.  We’re also taking into consideration supply disruption situations in Nigeria and Europe, but as I have said in the past, I think that type of news involves a lot more speculation when affecting the prices. 

A key interesting point from the WSJ survey was this:

The survey, conducted May 2-6, showed that the 53 respondents, on average, expect the price of crude to fall to about $105 by the end of next month and to about $93 by the end of the year. (Crude settled at $123.69 Thursday on the New York Mercantile Exchange.) Their expectations for overall inflation continue to rise. They expect the consumer-price index, which rose 4% year-to-year in March, to increase 3.6% in June from a year earlier.

This is another area where I am in lock-step with the forecasts.  I have said for a while now that oil will pull back some in the spring/summer.  Originally, I had said possible to $85 (or somewhere thereabouts), but I think now that we’re approaching that $125 target, we’re probably going to be looking at the low $100’s, in my opinion.  Anything further than that, in my analysis, would have to involve some significant supply developments in a relatively short time.  Not impossible, but I just don’t see that happening.

Yesterday, Goldman released a report saying that oil will hit $200/barrel within the next two years.  All I can say is that I picked a great time to start focusing my complete investment strategy on commodities …

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  1. By Investment » Commodities Continue On on May 9, 2008 at 2:59 am

    […] Reiboldt.com wrote an interesting post today on Commodities Continue OnHere’s a quick excerpt All I can say is that I picked a great time to start focusing my complete investment strategy on commodities …… […]

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