Will Q-Oil 3 Work? No

I’m deep in the camp that says QE3 — otherwise known as last week’s announcement of eventual release of reserve oil supplies from (mostly) the U.S. — will backfire. It will convince people that economies are weakening, and that sovereigns are just as suspicious as the rest of the us about Saudi’s ability to deliver swing supply when needed.

I see today that I have company:

But at Deutsche Bank, oil analyst Paul Sankey said the United States has effectively injected itself into the equation as another speculator, and the result will not be as intended. “Every oil market comment from the White House will [now] become a market-moving event,” Sankey writes in a note to clients. “In short, this move has added to oil markets’ fear of volatility.

Oil analyst Stephen Schork told Bloomberg that the move will backfire and in fact convince traders that there is something very wrong in the market, which will be reason for them to push prices back up.

More here.


  1. brown_te says:

    I don't disagree – but I'm genuinely curious what a Kedrosky energy policy would look like. Care to elaborate?

  2. Maybe interesting to point out that WTI and Brent were down 5% already before the IEA (Fed lowered forecast for '11 and '12, China prel. PMI was weak, bad Greece day, European PMI fell and horrible US jobless number). WTI moved up after the IEA news, Brent was down maybe 1% after it…

  3. Economics and physics don't mix.