Oil may return to $100 a barrel for the first time since the 2008 financial crisis as the U.S. Federal Reserve's stimulus measures weaken the dollar, drawing investors to raw materials.

Crude may rally to three digits next year as central banks pump cash into their economies to revive growth, according to JPMorgan Chase & Co. and Bank of America Merrill Lynch. The Dollar Index sank 7 percent in the past two months as the Fed moved closer to extending a bond-purchase program, luring investors to commodities including oil.

"It's likely to push prices upwards," said Antoine Halff, head of energy research at Newedge USA LLC in New York and former principal administrator at the International Energy Agency. "The past few years have shown that the more liquidity in the system, the more cheap money in the system, the more money flows into commodities, in particular energy."

Eoin Treacy's view This article by Mark Shenk and Grant Smith for Bloomberg may be of interest to subscribers. Here is a section:

Oil may return to $100 a barrel for the first time since the 2008 financial crisis as the U.S. Federal Reserve's stimulus measures weaken the dollar, drawing investors to raw materials.

Crude may rally to three digits next year as central banks pump cash into their economies to revive growth, according to JPMorgan Chase & Co. and Bank of America Merrill Lynch. The Dollar Index sank 7 percent in the past two months as the Fed moved closer to extending a bond-purchase program, luring investors to commodities including oil.

"It's likely to push prices upwards," said Antoine Halff, head of energy research at Newedge USA LLC in New York and former principal administrator at the International Energy Agency. "The past few years have shown that the more liquidity in the system, the more cheap money in the system, the more money flows into commodities, in particular energy."

My view - I posted a number of charts of oil in various currencies yesterday to demonstrate the return of investor interest to this vitally important but lagging sector. Today I thought it might be instructive to look at commonality, in order to assess how demand for energy resources is distributed among various investor interest groups.

Brent crude shares a similar patter to West Texas crude and is testing its April highs. A sustained move below $80 would be required to question medium-term upside potential. We are heading into a seasonally strong time for heating oil and it has already broken upwards to new recovery highs. Gasoline has lagged somewhat but has also firmed of late.

Coal has sustained a progression of higher reaction lows since early 2009 and while the current reaction has been somewhat lengthier than previous pauses, a sustained move below $65 would be required to question medium-term upside potential. (Also see Comment of the Day on October 12th for a review of some of the relevant shares).


Uranium has been building a base above $40 since late 2008 and has held a progression of higher reaction lows since June. It has now pushed back above the 200-day MA which is also beginning to turn upwards. A sustained move below $46 would be required to question scope for some additional upside. (Also see Comment of the Day on October 20th for a review of some of the relevant shares)

US Natural Gas prices remain in a medium-term downtrend, at least in part because of the increased supply emanating from domestic US unconventional wells. However the UK traded contract, which is much less susceptible to US factors, has more than doubled in the last year. A sustained move below the 200-day MA, currently in the region of 40p would be required to question medium-term upside potential.

In the agricultural sector, Sugar hit a new 29-year high today and while overbought by just about any measure, a clear downward dynamic sustained for more than a day or two would be required to check momentum beyond a brief pause. Corn continues to extend the breakout from the 18-month base, soybean oil remains in a well defined short-term uptrend and palm oil is extending the breakout from the 18-month range.

Renewable energy is leveraged to high energy prices, so the sector has been relatively quiet over the last year as oil ranged mostly below $80. However, with interest returning to the energy sector some renewable energy shares are beginning to show signs of life.

Trina Solar retested the January high in early October and would need to sustain a move below $25 to question scope for additional upside. LDK Solar, JA Solar Holdings and Solarfun Power Holdings are all in varying stages of base formation completion. ReneSola completed a first step above its base in September and is currently consolidating below $15. A sustained move below $10 would be required to question medium-term upside potential. (Also see David's piece in Comment of Day on June 8th 2009 covering solar shares)

Wind turbine companies such as Vestas Wind and Gamesa are facing stiff competition from lower cost Chinese manufacturers and continue to underperform.