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Impressive Surge for Oil Prices

Posted by: Stanley Reed on February 21

The recent oil price surge above $100 per barrel is no fluke. The important backend of the futures curve has moved well up into the $90s per barrel level with the 2016 contract above $94 per barrel. Hedge funds have been shorting oil as a bet on the souring of the U.S. economy, but this has proved a bad strategy. Oil demand is coming more from emerging markets than the U.S. “Shorting oil on account of a negative view of the U.S. economy is always dangerous and likely to backfire,” note analysts at Barclays Capital. The shorts had to cover their positions, and this helped drive prices upwards. While oil may not stay above $100 per barrel on a sustained basis, the recent events in the oil market— with the last downward move only reaching about $87 per barrel— are a sign that very high prices may persist.

Reader Comments

$200perbarrel

February 25, 2008 04:52 AM

Come on folks, let's bid up this oil to $200/barrel. We'll teach those amateur speculators what real futures "investment" is all about. There's only so much oil in the ground, and like "location, location, location," they ain't making any more of this stuff. Get in on the ground floor and then sell high, make a "killing" and move on. Let's give those suckers all they got cause I'm a learned master from Lehman/Merill/Stanley/Citi/Stearn/UBS/Suisse/Barclay so don't mess with me.

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