Fundamentals Don't Support Oil at $55-$60 a Barrel
The recent run up in oil prices to near $60 per barrel are both surprising and concerning to me. While oil pulled back some last week, it still trades in the $55-$60 range. It is dangerous to make a near term directional call on oil prices. Doing such is more speculation than investment. However, the latest report called the Short Term Energy Outlook (STEO) released last week by the U.S. Department of Energy (DOE) paints a picture of falling demand, stabilizing production, and building inventories. To me, the data compellingly supports a correction in oil prices in the coming months. Even $55/barrel oil is high in the presence of falling demand despite all the talk of “green shoots” in the economy.