Crude stocks, according to this morning's Energy Information Administration report, remained unchanged, at 311.9 million barrels. Analysts were expecting a 750,000-barrel build. Gasoline supplies, forecast to increase 200,000 barrels, grew instead by 2 million. Distillate fuel inventories, including heating and gasoline, rose by only 600,000 barrels, well short of the prognosticated 1-million-barrel hike.

Three strikes. But we're used to that (see "Oil Analysts Down For The Count").

U.S. Crude Oil Inventories

What might have taken us by surprise, however, was a radical move in the gold/oil ratio. That's the gauge that measures gold's purchasing power in barrels of oil. We last looked at the ratio ("Gold Approaches Record; Makes New High") in October, just as the financial market meltdown began in earnest.

Oil took a drubbing Wednesday, leaving the nearby NYMEX contract below $60 a barrel at the close, a level not seen since March 2007. The sell-off sent the gold/oil ratio to 13-to-1, above the 12.5-to-1 peak reached in January 2007, when crude was trading at $50.

Gold/Oil Ratio

Does this mean that traders might target $50 for crude now?

Maybe, maybe not.

The current ratio, lofty as it is, is not a lifetime high. The gold/oil ratio spent a good deal of its time above 20-to-1 in the late ‘80s and early ‘90s, even dancing briefly around the 30-to-1 level. Of course, oil was pretty cheap back then.

Wait a minute ... cheap oil?