Drilling Into Oil Fundamentals

It is a moment dreaded by technicians and those who love them: Someone in the room -- never the one who agrees with your conclusions -- will ask, "What do the fundamentals say?" These smugly delivered queries presume the existence of an unambiguous and forward-looking answer derived from various historic data. Surely, most technicians would agree, the ethylene-besotted priestesses at the Oracle of Delphi never had to endure such insolence during the course of their working day. But that was a different showtime for a different Apollo.

Crude oil's brief foray back over $40 last week was partly propelled by the combination of terror warnings from Department of Homeland Security Secretary Tom Ridge and by financial and legal stresses in Russia that one day may present a threat to that country's exports. These factors have yet to affect actual supply/demand balances, but both contribute to an insurance premium in crude oil prices that we can infer.

Let's update a correctly bullish analysis done last August of both this measure and several others directly related to the economics of the oil industry to see where prices might be headed.

No Fearful Need Apply

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