Ding dong, Osama bin Laden is dead. That is great. We can only hope his heir apparent, Ayman al-Zawahiri, receives a Navy SEAL double tap to the skull as well, soon.
However, we are still left to wonder, unless Bin Laden is the guy who has been buying all of that crude oil of late, how is it that his death is purportedly bearish for the market?
We have yet to find, and the chattering class have yet to provide, a plausible answer.
At 10:30pm EST Sunday, Nymex crude oil was trading as high as 113.50. When rumors of the content of Pres. Obama’s hastily-scheduled late Sunday evening television address began to circulate,
We hope we are wrong, but we are doubtful that the death of Bin Laden will be the catalyst the bears have been searching for.
Osama was the poster boy of radical Islam. Perhaps a case can be made that his demise will alleviate the prospects of contagion fear and the attendant risk premium.
That seems like a stretch to us.
After all, the U.S. killed Bin Laden — not Iran’s Parliament… and, by Iran’s Parliament, we mean Hamas. Unfortunately, it is unlikely that Bin Laden’s death will register but a mere blip on the contagion-fear barometer.
More importantly, the U.S. dollar continues to circle the proverbial bowl. Last night the euro traded above 1.49 for the first time since December 2009. In this respect, the chaps in al-Qaeda, along with their Hamas and Hezbollah brethren, could renounce violence tomorrow and retire to a commune in Vermont, but it would have little impact on oil prices unless the US dollar rallied.
As written in yesterday’s issue of The Schork Report, unfortunately, at this point, the likelihood of the former event occurring appears a little less remote than the latter… and that is not good for oil bears.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.