Wednesday, August 26, 2009

Oil is said to be overvalued at $75 by $20

SHOOT: Oil's 65% appreciation is based on the myth of 'recovery'. I see oil, over the medium term, staying where it is and slowly appreciating, but not due to demand or a 'recovery', due to increasing inputs, due to lower EROI and due to depletion. Over the long term it's going to go through the roof, crash, in a series of U's with very flat right-hand side arms.
clipped from
Steam and other emissions are seen coming from funnels at an oil refinery in Melbourne

U.S. crude oil dropped $3 to $71.37 a barrel, down from a peak of $75, in the biggest percentage loss since August 14. Brent crude dropped $2.87 to $71.39 a barrel.

"It looks like crude tested the $75 level and failed," said Tom Bentz, a trader with BNP Paribas.

Players said oil's more than 65 percent rally this year was being viewed as a good opportunity to lock in profits.

"There's been profit-taking in the energy markets ... there's a feeling that the markets are heavy and are sinking, with crude overvalued by around $20 a barrel," said Tim Evans, analyst at Citi Futures Perspective in New York.

Oil prices, which usually track equities markets closely, could hold around current levels next year, according to a Reuters survey of more than 30 analysts.

The analysts raised their consensus forecast for the fifth straight month on expectations higher fuel demand in an economic recovery would support prices.

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