Oil Futures: Up $1.30 -- But Dropping Back

Update

Some minutes later: perhaps it is all about the Iranian situation. If Saudi production fields become a battleground, this will all be very interesting. Apparently, some of that is beginning.

Armored anti-riot vehicles cluster outside the police station in Awwamiya in Saudi Arabia’s oil- producing eastern region, where unrest is turning violent.

“We have enough police force to deal with any criminal or prohibited situation,” says Brigadier-General Yousef al-Qahtani as he drives through the town. In nearby al-Qatif, graffiti scrawled on a cemetery wall criticizes the Al Saud family, founders of the kingdom eight decades ago, and calls for the removal of their fellow Sunni Muslim monarchs in Bahrain. Black Shiite flags adorn religious centers in the back-alleys.

Clashes between police and armed Shiite protesters in the two towns have intensified since October, when 11 police were injured in an attack. Since then, seven Shiites have been killed by security forces, according to figures provided by Saudi Arabia’s Human Rights First Society.

Original Post

Oil futures don't mean squat, of course, but after the recent run-up, it's interesting to see futures where they are.

For newbies, these are the benchmarks I use:

• <$60: concerning, recession, something significantly negative affecting the market
• $60: supply and demand fundamentals
• $60 - $80: general trading range; strength of the dollar; general market conditions; 
• $80 - $100: appropriately bullish on oil; strength of the dollar; improving market conditions; 
• >$100: concerning, traders see short-term supply/demand mismatch; something significantly concerning is affecting the market such as impending Mideast unrest; not due to strength of dollar

So, when I see oil trending solidly above $100, I ask myself what's new today? Why is it trending solidly above $100 today (as opposed to next week, last week, but why today?). I've lost the bubble on the Iranian story -- I see the headline in today's WSJ about the botched Iranian terrorist attack in Bangkok. Getting closer to significant problems in the Mideast, more than usual?

I know the refineries are switching over to their summer blends, but that should result in gradual melt-up if it has any effect at all.

Are economic numbers improving? Possibly; and, perhaps the price is just reflecting that but it seems to be moving too fast based just on economic numbers. Greek bailout story ending? Hardly? Congress extending payroll tax cut? At $20/week, doesn't amount to anything.

So, we'll have to see what transpires today: where oil finishes, and if continues to hold at $102 or higher, to see what the headlines bring.

And perhaps nothing: I see futures have dropped back to a more reasonable number.