Crude oil rebels against fundamentals

The price of crude oil has spiked up again. Part, but not all, of the spike was due to the transition from the April futures contract to the May futures contract, which was apporximately a $1.80 overnight jump. The rest of the spike could be explained away by any combination of news factors, but is most likely due simply to yet another inflow of speculative "hot" money. On Friday, the NYMEX May crude oil futures contract closed at $62.28, a rise of 9.1% over the close a week ago of $57.11 for the April futures contract. It may take a few more days for crude to reach a new equilibrium price.

Despite all the chatter, crude oil is mostly trading based on short-term chart "technicals" and speculative "hot" money flows rather than long-term economic fundamentals.

There is more than enough crude sloshing around in inventories to fail to justify even current price levels, but that doesn't bother traders and short-term speculators.

-- Jack Krupansky