As the price of a barrel of oil slips slightly lower today, former bulls are thinking of running for the hills.
In March, when the Fed introduced its quantitative easing scheme, Phil Flynn, an energy analyst at Alaron predicted oil would climb to $74 a barrel. Now that oil is close to this number, Flynn is not sure if he should get out:
“Instead of losing momentum the market seems to [be] gaining steam leading to one of the hardest questions a trader has to ask,” Alaron energy analyst Phil Flynn said in his daily energy report. “We are seeing more bullish signs such as a dollar that continues to slip into oblivion. (The dollar has fallen as much as 1,129 points since March 4) No signs of fiscal responsibility in Washington and no exit strategy from the Fed on its policy of printing money.”
“We are getting reports of growing demand from China and news from International Energy Agency raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is abating,” Flynn added. “With the bull momentum raising, the million dollar question a trader has to ask and that is when I sell?”
Adding to the confusion for an oil trader is the global landscape. Iran is in a chaotic state, and rebels in Nigeria blew up oil wells and pipelines yesterday.
Since March the price of oil has doubled. That’s an incredible jump, one that seems unlikely to be sustained. Goldman anticipates oil trading at $85 by year end.
With the price of oil now closely correlated with the equity market, this could indicate that oil will similarly sputter along.
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