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Crude Oil Back at $60

Commodities / Crude Oil May 13, 2009 - 09:58 AM GMT

By: LiveCharts

Commodities

In the midst of rising global stock markets, and a falling dollar, oil prices have surged to sit near $60 per barrel, with a close Tuesday (May 12) at $59.59. The dollar has fallen to its lowest mark in nearly four months thanks to the rising global picture and continued concerns about the United State fiscal economy.


Oil continues to rise in unison with the stock market as well. The trend of correlated growth in stocks and oil has been obvious since the Dow touched down at 6,500 points earlier in the year. Several major oil companies recently posted smaller profits for the first part of 2009; though calling Exxon’s $5 billion profit disappointing seems a bit over the top. Oil has climbed with stocks in lieu of optimism about financial recovery. The assumption is that economic stabilization will increase consumer demand for energy and fuel for transportation, as well as more use of energy for business growth and travel.

Americans have started noticing the change in fuel prices again as well. Most pumps across the country have pushed back over the $2 level. However, interestingly, the message playing out in the media suggests that consumers should rejoice while they pay more. Economists are pointing out the fact that oil and gasoline prices increasing are a positive sign for the economy.

The general dollar weakness has also been seen against the Euro and Pound, which have risen to levels not seen for several months. The dollar had gain tremendously against these two currencies in particular during the period in which oil and gas prices fell.

Another reason for the rise in oil prices was a surprisingly low inventory report for last week from the American Petroleum Institute. With growing demand and a reduction in inventory demand, naturally prices will rise. This is a strong change from the nearly year-long trend of high inventory levels and waning demand for energy and fuel. Americans cut transportation usage significantly last year to account for higher fuel costs for the first half of 2009, and economic instability.

Some analysts have called for $75 per barrel for oil by year’s end. But, as investors are returning to less “safe” investments like equities, cash holdings are likely to diminish, further affecting the dollar. Gold has floundered of late as well because of this factor. It seems quite possible that the $75 mark could easily be reached well before year’s end.

Of course, it will be hard to sell Americans that the good news about economic recovery is that you can look forward to paying $3 or more per gallon for your fuel again. If more people find jobs to pay for their gasoline, though, the sales job would certainly be made easier.

Neil Kokemuller

LiveCharts.co.uk

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

Copyright © 2009 Live Charts

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

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