This is crazy. Today's oil rally really doesn't make sense. There was no new headline about a major global supply disruption.
There are reports Exxon has lifted "force majeure" on its exports of Nigeria crude. The oil giant's inability to honor export contracts--which averages about 800,000 barrels a day--after a workers' strike in late April was a key factor in the run-up to over $120 a barrel. But now that situation has calmed.
Oil supplies--at least here in the U.S.--are increasing not falling. Today's Energy Department data showed oil and gasoline supplies rose much more than expected last week: a 5.7 million barrel increase in crude inventories was nearly quadruple consensus estimates and expectations were for adecline not an 800,000 barrel build in gasoline supplies.
American drivers haven't kept their cars in the garage just because they're paying $3.62 a gallon--the national average, says AAA--or $4/gallon in my neighborhood. The Energy Department said gasoline demand actually ticked slightly higher over the past four weeks. Let's see if that changes as average prices nationally close in on the $4-mark.
The argument that speculators have driven up the price of oil as a hedge against the falling dollar doesn't fly considering the greenback has been retesting it's five-week high against the euro today. Talking to trader Randy Rothenberg on the floor today, he said, he thinks the oil-dollar trade has decoupled in the last few weeks. Afterall, oil has rallied over 10% since the first week in April, while the dollar has risen about 2% vs. the euro.