Saturday, August 22, 2009

Oil hits 2009 high above $74 - what's going on?

SHOOT: It's a price based on dollar weakness, not fundamentals like aggregate demand. The latter is still very weak and unlikely to recover anytime soon.
clipped from
A worker stands near the oil refinery Camilo Cienfuegos in Cienfuegos

Oil is on track for a 7.3 percent gain this week, and was last at this level on October 21, 2008 when it closed at $75.22 a barrel on its way down from a record peak above $147.

As yet, there were few signs of recovering U.S. fuel demand. Freight traffic across North America fell 17.9 percent in the week ended August 15 from the same 2008 week, a trade group said on Thursday in a weekly report.

Tighter regulation of the energy market may take the edge off high prices, Commerzbank said in note on Thursday.

"The significant rise in the oil price in the first half of the year is due in large part to a recovery in investment by financial investors," analyst Eugen Weinberg at Commerzbank wrote in their Commodities Spotlight Energy newsletter.

"If their influence is reduced by the (Commodity Futures Trading Commission's) actions and sanity prevails, the oil price will fall."

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