Wednesday, March 31, 2010
The Sweet Spot
At the top of this post you will find an image of the business section front page from today's New York Times. Six months of relative stability in crude oil prices (red oval) has attracted the attention of the Times. I'm sure a lot of people have noticed this, but I think the situation is about to change.
One of my primary reasons is that oil competes with natural gas in power generation. And recent technological advances in natural gas extraction technique have vastly expanded the amount of recoverable gas supplies the word over. This dramatic shift in supply conditions has made itself felt in the natural gas market (middle chart). I think a big drop in oil prices lies dead ahead. I think crude will drop below the $30 level.