HOW HIGH IS THE SKY? 
                                      
Prices pushed to new all time highs again over night and in early trading this morning. After an early price dip, fresh buying appeared; an  unmistakable characteristic of a frenetic bull run that leaves the upside open ended.

Pension funds, educational endowments and other types of investment managers planning to commit more money to commodity investments, along with new commodity specific Index Funds providing new ways to participate, there seems to be limited downward scope for energy prices right now.

The dollar's continued push toward new lows, expectations for the Fed to cut rates aggressively and poorly performing equity and credit markets continues to attract strong flows of investment money to the energy complex as a hedge against inflation and as a way to diversify portfolios.

It is nothing less than amazing that participants continue to discount mounting signs of slackening US economic growth. Forecasts that stocks may expand by as much as 2MM bbls in this week's inventory report don't seem to be registering either.

The market also seemed to shrug off an IEA report for a 190k bpd downward revision in 2008 oil demand in industrialized countries and also for OECD oil supply to exceed demand in Q2  by nearly 1MM bpd.

Easing of tensions in Latin America, which has removed some of the geopolitical heat also failed to prevent the rally from posting new highs. 

Lingering cold weather and news of declining February exports from Ecuador may be providing some upward influence but the level that prices have reached is out of all proportion to the appropriate influence those events should have had .

Certainly, there will be bouts of corrective selling but a 'buy the dips' mentality also seems to have gripped the market, as well. Sooner or later this bubble will burst as they all inevitably must, but the price level that brings that on seems to be somewhere above  and, for the moment, out of reach.                     

M. Fitzpatrick