Oil Solidly Above $100 -- Enbridge Decision May Be Part of the Answer -- The Bakken, North Dakota, USA

Snapshot

Dollar stronger, euro weaker.

Brent down, WTI up.

US oil supplies down 6 percent from last year.

Last year: deep recession; this year: hmmmm.

Cushing glut could be resolved with Enbridge decision to reverse pipeline flow. 

What a great country.

Update

If you look long enough, you generally can find the answer  to the question. In this case the question was: why is price of WTI rising today?

This may be the connecting dot needed to complete the picture: Enbridge will reverse flow of oil, taking pressure off Cushing. Incredible.

Oil in New York climbed above $100 a barrel to a five-month high as Enbridge Inc. said it would reverse the direction of the Seaway pipeline, opening an outlet for crude from the central U.S. and Canada.

Futures rose as much as 2.9 percent after Enbridge agreed to acquire ConocoPhillips (COP)’s share of the pipeline that runs between Cushing, Oklahoma, and the Gulf Coast and announced the reversal. The change may alleviate a bottleneck at the Cushing storage hub that had lowered the price of West Texas Intermediate, the grade traded in New York, versus other oils. 

A big thank you to Don for finding this story.

Same story in Wall Street Journal.  The writer points out that the price of oil continued to move upward even when drop in oil supplies not as much as analysts predicted; and, bearish demand for gasoline.

Also this: the nation's crude oil supplies decreased by 1.1 million bbls last week, almost 6% below last year's level. A year ago we were in the middle of a severe recession with no good news on the horizon; this year, there is talk of a bit of an economic recovery. Analysts had expected a decline of 1.5 million bbls, so this news should not have affected the price of oil today; that was already baked in by the analysts. Demand for gasoline has dropped -- again, almost 6 percent less than what it was a year ago. Folks are watching their driving habits and/or buying more efficient cars. I don't think sales of Volts could explain a 6 percent drop in gasoline demand.

Also, this story, which I will post as a stand-alone story later: China to re-enter America's oil and gas play. 

Original Post

This is the headline at Yahoo!Financial today:

• Consumer prices dip 0.1 percent, as gas prices drop

I see the TCOP is now solidly above $100, at $10.45, up $2.45.

For newbies, this is how I model the price of oil:

• Below $60: global recession, depression, very bad news
• $60 - $80: supply and demand; classic market principles apply; OPEC's floor is about $75
• $80 - $100: weakness of the dollar, improving global economy; generally good economic news driving price to this range
• >$100: significant, singular events affecting price of oil

Everyone models the price of oil differently. I doubt anyone agrees with me, but at least I have a model that I can tweak as things change. 

I do not know what the events are today that are driving price of oil up almost $3.00 and solidly above $100. "Everyone" has been saying the price of oil will be volatile and "we" should expect a pullback in the term term, but long term the price of oil will trend higher. We haven't seen that pullback "everyone" is predicting, so it's yet to come.

This is what the AP says is driving price of oil up today:

• Improving global economy
• Tensions in the Mideast

Okay, nothing new with either of those data points compared to yesterday, the day before, or last week. A $3.00 rise when the price had already been trending higher suggests something else going on. Most likely it is simply going through the "emotional" $100-ceiling.