The Price of Oil Explained by

What do you think of the chart below? Seriously. Can you really believe spot crude oil is up 53% in the last year? The price of oil rocketed up in New York overnight, busting through US$120 before settling just below at US$119.67 by the time trading got going this morning in Sydney.

It’s the great question about oil right now that no one seems to know the answer to. Is the price of oil rise driven by good old fashioned supply and demand? Is it financial speculation? Is it a weak U.S. dollar? Is it a fear and geopolitical premium? Is petroleum exuberance?

It’s probably all of these things. But saying that doesn’t get us any closer to figuring where the price of oil is headed next. It could be $80. It could be $180. Sometimes charts will tell you something that the fundamentals miss. The chart is the language of the market: a picture of what’s happening between buyers and sellers. The chart has no opinions. It is what it is.

It’s probably all of these things. But saying that doesn’t get us any closer to figuring where the price of oil is headed next. It could be $80. It could be $180. Sometimes charts will tell you something that the fundamentals miss. The chart is the language of the market: a picture of what’s happening between buyers and sellers. The chart has no opinions. It is what it is.

We’re going to depart from our normal inductive approach to finance today and do what human beings have done for thousands of years when confronted with the inexplicable: look to the stars (to explain the price of oil).

“As per financial astrology,” reports Major Ajay (a financial astrologer) “the 17th week of year 2008 represents Saturn. Saturn will ensure that it brings highest volatility and profit booking in oil and metals in world futures market.”

Daily Reckoning