From Bloomberg:

The U.S. trade deficit narrowed more than forecast in March as imports dropped by the most in more than six years, reflecting the economic slowdown.

The gap shrank to $58.2 billion, the lowest this year, from a revised $61.7 billion in February, the Commerce Department said today in Washington. The shortfall with China was the smallest in two years.

Americans bought fewer automobiles and less crude oil, furniture and communications equipment from overseas as the economy grew at the slowest pace since 2001.

So the far-and-away largest buyer of crude has curtailed demand and still the price is making new, record-highs:

Crude oil for June delivery rose $2.09, or 1.7 percent, to $125.78 a barrel at 9:28 a.m. on the New York Mercantile Exchange. The contract surged to a record $126.20 today. Prices are up 8.4 percent this week, the biggest weekly gain in more than a year. Futures are more than double from a year ago.

What happened to supply and demand?

Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” Murti first wrote of a “super spike” in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

“There’s been a paradox, prices have surged over the last week while we’ve had bearish headlines,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Clearly there’s been a lot of fund buying on the back of Goldman’s super-spike repot. They were right on the nose last time.”

There’s the truth, right there. The price runup is due to nothing more than the “fear of missing” the next rally, essentially the definition of a “speculative bubble.”

Sources:
U.S. March Trade Deficit Narrowed More Than Forecast
Bob Willis
Bloomberg

Oil Climbs Above $126 to Record as Dollar Weakens Against Euro
Mark Shenk
Bloomberg