Why Oil Requires a Sense of Humor

I won't be printing any jokes today (April Fool's Day). I promise. But this is pretty funny.

I was cleaning up the website when I stumbled upon this old draft. I'm glad I didn't throw it away. I think it goes well with the material I've been posting lately on forecasting. I haven't found out what Lehman's "revised" forecast is, if somebody knows where to find it by all means post it here. Most likely it has been buried in the recent turmoil surrounding these brokers and banks. Keep in mind that February 20th was more than halfway through the first quarter. Can you forecast history? The comment that follows the piece was written in February.

From Bloomberg last month:

Lehman Will Revise First-Quarter Oil Price Forecast
By Jeremy Naylor and Grant Smith
Feb. 20 (Bloomberg)

Lehman Brothers Holdings Inc. will revise its first-quarter New York crude oil price forecast of $86 a barrel, chief energy economist Edward Morse said.

``We will be revising it up,'' Morse said in an interview with Bloomberg television. Oil prices, which rose to a record $100.10 a barrel on the New York Mercantile Exchange yesterday, are being driven by financial markets rather than supply-demand fundamentals, he said.

The Organization of Petroleum Exporting Countries is unlikely to reduce output at its March 5 meeting with prices at current levels, Morse said. The 13-member group, which produces more than 40 percent of the world's oil, left production targets unchanged at its previous Feb. 1 conference.

``It's unlikely that at $100 a barrel anybody's going to be in the mood for a cut,'' said Morse. ``The Saudis are uncomfortable at $100 oil.''

Consumption in export-driven emerging markets won't be immune to a slowdown in the U.S., the world's biggest energy user, Morse said. Some analysts have said that Asian markets are ``decoupled'' from the U.S. and so demand there can weather a U.S. recession.

``We will be seeing an impact on Chinese demand, probably after the Olympics, and that's because of what's happening in the U.S. economy,'' he said.

Yesterday's price record was part of a broader flow of investment into commodities rather than the result of any genuine threat to crude supplies, Morse said.

``It's certainly not oil market fundamentals and nothing to do with geopolitics,'' he said. ``This is a commodities issue rather than an oil market issue.''

I don't mean to single this story out. Ninety-five percent of business stories and ninety-nine percent of those on oil are filled with this meaningless nonsense. I haven't figured out the percentage of garbage that comes from the analysts, but I suspect it is even higher.