Remember the good old days when crude oil was $100 per barrel? Since then, crude has traded past $126, and those rabble rousers at Goldman Sachs arc predicting $150 to $200 oil in six to 12 months. "It doesn't make much fundamental sense," says Andrew W. Waldock of Commodity and Derivative Advisors LLC. "The strategic reserves are almost full," and we are nearing contango. "We should be seeing crude oil prices going up the further out we go," which is not the case. "It says that they are willing to absorb the insurance, shipping and storage costs and that producers don't believe these prices arc going to hold into the future," he says. Nor can the run up be attributed to a weak U.S. dollar, as the recent run up occurred as the dollar firmed. Waldock says the situation is attributable to trend following speculators and index funds adding to positions even as prices climb, which could lead to a violent correction. "If we stay on trend, it would plot out to $145 by the end of June," and a collapse to $100 wouldn't even constitute a break in the trend. "It's not healthy," he says.
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