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Gartman: Oil Headed Higher, Sooner

By    |   Friday, 13 Mar 2009 02:15 PM

Economist Dennis Gartman, editor of the Gartman Letter, says oil is headed higher, possibly to $50 or $55 per barrel within the next three months.

It’s now in the mid-$40s.

“A huge sum of oil has been put in storage,” Gartman told Bloomberg TV.

“Over many months, when the contango was extraordinarily wide, you could make almost 30 percent or more.”

Contango refers to the situation when distant-month futures contracts trade at a higher price than front-month contracts. In a wide contango, prices would be much higher in far out months than nearby ones.

You make money off that “by buying front month crude, taking delivery if you had the storage facilities, and then selling deferred futures,” Gartman says.

“If you were borrowing money at 5 percent and lending money via the crude future contango at 35 percent, you would have locked in profit.”

But now, Gartman says, “we are seeing the inordinately wide contango coming in dramatically. When contango narrows, it is really saying to crude itself, we need you. There’s demand; please come out of storage.”

Bottom line: “That’s bullish for crude,” he says. “We can trade to $50 maybe $55 over the next two to three months,” Gartman says.

Other oil experts are bullish too.

Nimit Khamar, an analyst at Sucden Financial, told Agence France Press that “noise of further production cuts from OPEC nations this week, ahead of their meeting at the weekend, might push oil prices toward $50 per barrel.”

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Economist Dennis Gartman, editor of the Gartman Letter, says oil is headed higher, possibly to $50 or $55 per barrel within the next three months.It’s now in the mid-$40s.“A huge sum of oil has been put in storage,” Gartman told Bloomberg TV. “Over many months, when the...
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2009-15-13
Friday, 13 Mar 2009 02:15 PM
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