Oil Producers have High Hopes that Oil has Hit Bottom; But Has It?
Posted on 09. Feb, 2009 by admin in Crude Oil
After a short-lived spike in the price of Crude Oil last Friday, the commodity has apparently returned to its previous holding pattern and now trades around the $40 price level. Traders may actually be seeing the price of Crude Oil reach a stable price level. For the first time in months, the price of Light Sweet Crude has remained relatively stable with no clear indication of direction. We now have analysts claiming that $40 may be the lowest price Crude Oil will hit for the year 2009.
Not to be tempted into the fallacy of relying on such predictions, it is more likely that OPEC’s production cuts, coupled with the recent weakening of the USD due to employment data, is the culprit behind the stable price of oil. Global energy demand remains low and the recession doesn’t appear to have an end in sight. As such, the price of Crude Oil should still be under a downward pressure. The recent events just outlined above, however, are helping to support the price of this commodity. If the USD makes a healthy rebound after Obama’s stimulus bill is passed in the Senate, and further oil production begins to arrive from Iraqi ports, traders are likely to see a continuation of the downtrend to the price of Crude Oil into the 2nd quarter of 2009 at the very least.
