Where exactly is the price of oil headed in the midst of all the global economic and demand reports?
Since late May crude prices have traded between $70-80 U.S./barrel amid mixed economic data and very little change in the overall supply and demand landscape. Last week began the kick-off of the 2nd quarter corporate earnings season and early results have suddenly dazzled the stock markets with renewed hope of promising economic growth. Alcoa, Intel and J. P. Morgan Chase last quarter results have exceeded market expectations. They are now making lots of money; therefore it must mean we are out of the Recession. The enthusiasm was accelerated with the announcement by the Paris-based IEA (global energy policy advisor); forecasting that global oil demand will increase by 1.3 million barrels per day in 2011. Even OPEC rubber stamped the IEA’s forecast.
Investors/speculators created short term demand by buying commodities, including oil. Oil was swept up in this stock market mania reaching a high of $77.15U.S./barrel and the rising Euro and sliding U.S. dollar were also contributing factors. Don’t be fooled because this optimistic bubble will burst and will bring oil back to a realistic price well below $80U.S./barrel for the foreseeable future.
So what do the good corporate earnings and all the enthusiastic media coverage mean for Canada’s economy, and where is the price of oil headed? And what do current gasoline inventories and distillates mean for the economy?
By: Roger McKnight, Senior Petroleum Advisor
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