Monday, May 11, 2009

Oil Prices Back to $100 a Barrel?

Not Likely, Many Traders Believe, according to

"Since the low of $33.55 in February, US light, sweet crude has followed stocks in rallying on hopes of economic recovery. The price retreated a bit on Monday, but on Friday traded up $1.92 to settle at $58.63 a barrel, another high for the year.

"Even so, traders don't see oil rising much beyond $70 a barrel. They argue that with the economy posting only tepid signs of recovery, the dollar holding fairly strong and demand remaining relatively low, there seems to be little impetus for a rise back towards last summer's record-breaking highs."

They believe oil price of $60-65 per barrel is attainable even if the economic fundamentals are weak, but not likely above $70, and decidedly not like last summer when...

"Speculators who were running from the stock market and chasing a falling dollar and surging demand during peak driving season helped push oil to its $147 record ..."

If I recall last summer, traders and analysts were talking about "fundamental" reasons why oil was $147 and set to go even higher. So now it was the speculators who caused the spike?

It's worth keeping in mind that some of these same people also said last year oil would never fall below $70.

Anyone willing to bet against the majority? (Have you heard about "inflation"?)


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