The two factors that drove energy prices to record highs last year — and pummeled petroleum in 2009 — are again at the center of the market's focus. But this time supply issues face off against the speculative value of owning crude oil as an investment.
Tight supplies and billions in fund buying drove the bull market, which collapsed as the hot money exited and the economic crisis dampened demand for fuel. Supplies are still more than adequate, according to the government's Petroleum Inventory released Wednesday morning. But the shocking move by the Federal Reserve to massively intervene in the Treasury market could revive interest in owning commodities as a hedge against a weakening dollar.
Crude oil sank by more than $1 by the official close on Wednesday, but reversed to move higher in the after-hours trade when the greenback cratered in the wake of the Fed announcement. By buying Treasuries, the central bank hopes to drive longer-term interest rates lower. While some investors recently bought dollars as a safe haven, the currency's value typically rises and falls depending on the returns available to those seeking a good interest rate.
Get a more in-depth look at the issue with the Weekly Energy Review.
Powered by iNet Solutions Group ©2011 All Rights Reserved.