After rising $3 in yesterday’s session following a larger-than-expected drop in U.S. crude and gasoline inventories, oil is continuing its climb today. Oil is up less than a dollar in early morning trading and is hovering around $116.
With crude inventories down, but US consumption indicators such as miles driven down and global economies weakening, traders are getting mixed signals.
How much more might oil prices fall? On the demand side, there’s a direct feedback loop: Every dollar drop in the price will reverse some of the conservation that has reduced demand and helped prices fall. Short of a global recession, it’s hard to see how oil drops back to, say, $70, because the euphoria about practically-free gas would just start Americans driving and buying SUVs again.
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