What's Next for Oil Prices? - Real Time Insight
March 08 2013 - 9:37AM
Zacks
While broad stock markets are at or near all-time highs, oil is
still well below its peak price. The commodity is actually still
below $100/bbl. and it has lost almost 20%-- when looking at
USO—over the past one year period.
This is pretty surprising as the more robust economy usually
would signal modestly higher oil prices are not far behind. This is
especially true given the broad positive data which has stretched
across not only consumer figures, but employment and manufacturing
data releases as well.
What’s keeping it down?
Part of the trouble for oil is the strong dollar that we have
been seeing lately. The greenback has been quite firm in recent
trading, and this usually acts as a barrier against higher crude
oil prices.
Additionally, a bigger supply of crude is also helping to keep a
lid on oil prices as more is being discovered all the time in the
Northern U.S. and Central Canada. It also hasn’t hurt that Europe
has been shaky, and that some emerging markets are seeing less
aggressive growth rates.
Still, one has to imagine that this trend cannot go on forever
and that higher oil prices could be ahead if the economy continues
to surge. After all, crude oil and stocks tend to move in
lockstep—although oil does often exhibit greater volatility.
Consider the three month chart of USO, UUP and SPY below:
![](http://staticzacks.net/images/zacks/blogs/1362769731_scaled_425.jpg)
For the most part, oil and broad stocks have been moving
together, but something has clearly happened in the past few weeks.
Yes, we have seen additional dollar strength—largely due to
weakness in yen, pounds, and euros—but something else is definitely
at play.
Perhaps this is just some additional rotation out of
commodities, at least until the next leg of the equity rally gets
underway…
But what about you?
What do you think happened to oil and where is
it going next?
- $125/bbl.- higher prices are coming with the summer driving
season
- $75/bbl.- lower prices are ahead as the dollar continues to
strengthen
- $100/bbl.- flat trading is ahead for oil, I don’t see how it
breaks out one way or another.
Let us know in the comments section below!
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