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$10 barrel ?

As the market does indeed concern itself with the notion that global economic weakness is now pervasive and that demand destruction is now very real
and may become very large. Our friend, Dr. Philip Verleger, writes ominously in this week's "Notes At The Margin" that the consequences [of a global economic
collapse] for energy markets are significant. If the economy plunges into a serious recession, oil prices might fall again to $10 barrel after temporarily surging as high as $200. And this is no joke.

Although Dr. Verleger's comment may be a bit hyperbolic in order to get the attention of his clients and friends, there is much here to be taken very, very seriously. We have learned not to discount what Philip has to say, and when we have we have paid dearly for doing so. As. Dr. Verleger notes, looking at the data from the late 20's and into the early 30's, crude oil prices fell nearly 83% from their highs. Given the enormous sums of money that have flowed into the energy futures markets... most notably into the deferred futures contracts.... and given the liquidation that shall lie ahead simply from this sector if the global economic conditions worsen, can we make the case that WTI crude trades down toward $75/barrel under duress? Certainly... easily... perhaps all too
readily.

- Dennis Garthman/The Gartman Letter/ 09 29 08

- For more on interesting comments, you can subscribe to The Gartman Letter by contacting Dennis Garthman: Phone 757 238 9346 , Fax 757 238 9346 or dennis@thegartmanletter.com

Petroleumworld News 09/29/08

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