On January 19, 2009, Morgan Stanley joined a rapidly growing fleet of big-name banks that have traded mortgage loans for oil liners; Morgan Stanley purchased Argenta, an oil supertanker that can hold up to 2 million barrels of crude. The ship and its cargo now sit idle in the Gulf of Mexico, for the dizzying cost of $70,000 a day.
The idea behind the hoarding: Buy in bulk now, while oil prices stand at a five-year low, AND sell later this year, when a supposed "perfect storm" of fundamentals reignites a bull run in crude. Among them: O.P.E.C.'s production cuts, "resilience in emerging economies," a rise in demand, and geopolitical uncertainty.
Of course, the wisdom of oil's "fundamentals" called for an oil super spike back in 2007-2008, too. That's when energy demand was supposedly off the charts, "Peak Oil" theorists saw a crisis in supply, and market pundits claimed the oil bear had become shark bait. Here, the following news items from the time say a plenty:
- Oil offers a "geopolitical premium. We're still in a raging bull market." (CNN Money)
- "If tensions in the Middle East escalate, it would probably result in crude prices skyrocketing to $200 to $300 per barrel." (AFP)
- "Support for crude came… on speculation U.S. mortgage losses will deepen… It would be a brave analyst to call the end of the upward momentum in prices." (Bloomberg)
Yet -- on July 11, 2008, crude oil prices plunged nearly 80% in a six-month sell-off.
In the months leading up to that $147 top, the October 2007 Elliott Wave Theorist presented the following close-up of crude and wrote: "Today, oil is near the end of wave 5 (of (5)). Fifth waves in commodities are not easy to identify. Sometimes they are blowoffs, in which prices move upward vertically and then just fall as fast as they went up… The price of oil and the inflation that propelled it are reaching a historic peak."
When the wheels of change began to turn in earnest, the June 2008 Elliott Wave Theorist set the stage for energy's coming slide and wrote: "I am publishing this issue a bit early in order to alert you to an opportunity developing in the oil market. One of the greatest commodity tops of all time is due very soon.”
Exactly ONE day before the market's reversal, the
July 10 publication of Elliott Wave International's
Energy Specialty Service went on high alert with this warning:
“Two key topping indicators are still evident – extreme bullish sentiment and relentless media attention. Possible third and fourth signs – volatility and cries for more government regulation of commodity trading – are nearing their heads… It all points to a very mature uptrend.”
(Editor's Note:
Energy Specialty Service brings youin-depth analysis and charts on crude on every time frame: intraday, daily, weekly, and monthly. Personalize your package today.)
Know when to hold the bullish ships in crude's harbor, and when to let them sail. Choose the financial service that suits your investment needs best: Long-term analysis of crude oil right from the desk of Bob Prechter in the new, January 2009
Elliott Wave Theorist. Act now.