As oil reaches a two-year high, is $100 oil around the corner?
http://www.pennenergy.com/index/petroleum/display/7809296724/articles/pennenergy/petroleum/finance/2010/12/oil-reaches_a_two-year.html December 3, 2010
By Phaedra Friend Troy
Reaching two-year highs near $90 a barrel, the price of oil has rallied this week in trading.
While oil and the New York Mercantile Exchange reached above $89 a barrel Friday, oil climbed above the $90-mark for North Sea Brent crude futures, based largely on Arctic weather.
Friday morning, the price of oil bobbled a bit on the NYMEX due to less-then-stellar jobs news. Nonetheless, the plummeting value of the dollar has helped to buoy the price of oil, as traders look to invest in a hard commodity as an inflation hedge.
A Bearish Take on Oil Prices
Ignoring the typical fundamentals of supply and demand, the price of oil has been trading on economic factors, such as jobs, the housing market, the value of the dollar and manufacturing numbers, for some time.
Leading energy analyst Phil Flynn argues that quantitative easing is to blame for the high price of oil. He stresses that the US Federal Reserve has been protecting the price of oil to support the idea that the economy is improving.
“The market was still reeling from the biggest peak to valley demand drop in the history of the global oil market, and a major drop in prices could signal that the economy was going in the wrong direction,” he explained. “The Fed then had step in to stop the oil price drop or risk other markets getting caught up in a deflationary contagion.”
Is $100 Oil Coming?
Bearish in his beliefs, Flynn does does not think the market can bear $100 oil, despite others’ predictions.
“We heard from oil tycoon T. Boone Pickens in January predict a return to $100 a barrel, and Barclays prediction in April, and the perennial bulls Goldman Sachs with the latest call,” he said. “Yet despite strong rallies, oil has fallen short of $100; and in fact, we have risked on more than one occasion a major sell off in oil price.”
Because the fundamentals are not supporting it, Flynn argues that the current price of oil is too high. He sees oil getting close to $100 a barrel, but thinks the push will fall short.
“The price of oil should be lower, but the world’s central bankers are making it clear that they will do everything they can to make sure that that does not happen,” he said.
Reaching two-year highs near $90 a barrel, the price of oil has rallied this week in trading.
While oil and the New York Mercantile Exchange reached above $89 a barrel Friday, oil climbed above the $90-mark for North Sea Brent crude futures, based largely on Arctic weather.
Friday morning, the price of oil bobbled a bit on the NYMEX due to less-then-stellar jobs news. Nonetheless, the plummeting value of the dollar has helped to buoy the price of oil, as traders look to invest in a hard commodity as an inflation hedge.
A Bearish Take on Oil Prices
Ignoring the typical fundamentals of supply and demand, the price of oil has been trading on economic factors, such as jobs, the housing market, the value of the dollar and manufacturing numbers, for some time.
Leading energy analyst Phil Flynn argues that quantitative easing is to blame for the high price of oil. He stresses that the US Federal Reserve has been protecting the price of oil to support the idea that the economy is improving.
“The market was still reeling from the biggest peak to valley demand drop in the history of the global oil market, and a major drop in prices could signal that the economy was going in the wrong direction,” he explained. “The Fed then had step in to stop the oil price drop or risk other markets getting caught up in a deflationary contagion.”
Is $100 Oil Coming?
Bearish in his beliefs, Flynn does does not think the market can bear $100 oil, despite others’ predictions.
“We heard from oil tycoon T. Boone Pickens in January predict a return to $100 a barrel, and Barclays prediction in April, and the perennial bulls Goldman Sachs with the latest call,” he said. “Yet despite strong rallies, oil has fallen short of $100; and in fact, we have risked on more than one occasion a major sell off in oil price.”
Because the fundamentals are not supporting it, Flynn argues that the current price of oil is too high. He sees oil getting close to $100 a barrel, but thinks the push will fall short.
“The price of oil should be lower, but the world’s central bankers are making it clear that they will do everything they can to make sure that that does not happen,” he said.
