Crude Oil Prices Have Been on a Rollercoaster Ride, so Where to Next?
Monday, November 9th, 2009
Jayeshvasava asked:
After falling back from highs last year over $150 per barrel, oil prices have fallen down below $50 only to rise to $70 today. These shifts reflects changes in speculative practices as the trading markets changed with shifts in investment banking, while more certainty in the global economy has helped solidify prices in an intermediate area between the recent peaks and valleys.
The question remains what direction crude oil prices will head in the short run as a recovering global economy has increased demand, while continued production from OPEC has also stabilized supplies – the most likely result is that oil prices will continue to rise slightly, reflecting the falling value of the dollar (since global oil trades take place in US dollars) along with a fundamental long-term upward trend in demand for crude oil.
Most economics expect oil to trend upwards closer to $90 as international trade increases and demand for raw materials expands. Since oil is traded in dollars, the inflation of the currency may accelerate this trend, although the fundamentals point to an increase in crude oil prices in the near term. With a more stable market, speculation will relate more to the anticipated shifts in the global demand for oil as well as changes in production capacity from the OPEC cartel. A recovering Chinese economy, along with a resurgent India, leads market commentators to anticipate economic growth to return to near 10% levels, which will result in a wide increase in demand for crude oil products by both consumers and firms. Even as Western nations shift to more efficient energy sources, the overall increase in demand should place upward pressure on oil prices for the foreseeable future. Although oil prices will continue to fluctuate in the short term, it is highly likely that oil prices will shift within a relatively stable range around $75 per barrel.
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After falling back from highs last year over $150 per barrel, oil prices have fallen down below $50 only to rise to $70 today. These shifts reflects changes in speculative practices as the trading markets changed with shifts in investment banking, while more certainty in the global economy has helped solidify prices in an intermediate area between the recent peaks and valleys.
The question remains what direction crude oil prices will head in the short run as a recovering global economy has increased demand, while continued production from OPEC has also stabilized supplies – the most likely result is that oil prices will continue to rise slightly, reflecting the falling value of the dollar (since global oil trades take place in US dollars) along with a fundamental long-term upward trend in demand for crude oil.
Most economics expect oil to trend upwards closer to $90 as international trade increases and demand for raw materials expands. Since oil is traded in dollars, the inflation of the currency may accelerate this trend, although the fundamentals point to an increase in crude oil prices in the near term. With a more stable market, speculation will relate more to the anticipated shifts in the global demand for oil as well as changes in production capacity from the OPEC cartel. A recovering Chinese economy, along with a resurgent India, leads market commentators to anticipate economic growth to return to near 10% levels, which will result in a wide increase in demand for crude oil products by both consumers and firms. Even as Western nations shift to more efficient energy sources, the overall increase in demand should place upward pressure on oil prices for the foreseeable future. Although oil prices will continue to fluctuate in the short term, it is highly likely that oil prices will shift within a relatively stable range around $75 per barrel.
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