With Brent Crude (AMEX:BNO) having risen back to $114 per barrel and West Texas Intermediate Crude (AMEX:USO) back over $96 per barrel, the Obama administration is looking to put fear into the oil futures markets with another threat of a release from the Strategic Petroleum Reserve to temporarily dampen prices. The problem, of course, is that oil prices are rising due to a number of factors, all of which Mr. Obama had a great deal of either direct control over or his actions created unintended consequences (for him, of course). Off the top of my head they are:
- Crippling sanctions against Iran, the 2nd largest producer of crude oil in the world before the sanctions hit, pumping 2.3 million barrels per day.
- Rounds of QE/LTRO/BBQSauce and currency pegging by various major central banks coupled with open-ended zero-interest swap lines which allows U.S. Dollars (AMEX:UUP) to slosh around and chase yield in a zero-interest-rate environment
- Open trade warfare with China prompting them to sign more than 30 bilateral trade agreements this year removing billions of dollars per day from the flow of international trade which the Federal Reserve can no longer soak up.
- Running a $1.3 trillion budget deficit which ensures that the flow of Dollars from the U.S. will continue unabated, even if the Fed has to buy the majority of the new USTs issued.
All of this, and more, is putting upward pressure on oil prices. Obama can play games, forcing the CME Group (NYSE:CME) to raise margins again while he blusters about evil speculators that he created, and (who’s he kidding) employs/works for, but it won’t change the fact that everything is rising in Dollar terms because there are just so many of the darn things floating around. They can only stoke the fires of Euro-zone incompetence for so long, eventually the short EUR/long USD trade will end and take the U.S. Bond (AMEX:TLT) market with it.Previous Post » Silver Explodes Past $28.30, Eye Now on $30