November 8, 2007

EVERYONE KNOWS... (via The Other Brother):

As Oil Nears $100, Look Out Below: Analysts say that if speculators flee the market en masse, prices could drop even more quickly than they've risen (Moira Herbst, 11/08/07, Business Week)

Oil prices are soaring. Having jumped 40% since August, crude prices hit another historic high on Nov. 6, rising to $96.70 a barrel. The factors sparking the $2.72 rally this time: bad weather in the North Sea that could force production cuts, the dollar's continued fall, more violence in the Middle East, and fears that U.S. crude supplies are low. The Energy Dept.'s Energy Information Administration will provide its weekly inventory report on Nov. 7.

But is there a sharp fall just ahead? Analysts say that the oil market looks overheated, and a number of factors could puncture the price bubble. Most important, speculators have played a key role in driving up crude prices this year, and if the trend reverses they'll get out fast. Certainly, global demand remains strong for now. But a number of factors—technical indicators, an economic slowdown, lower demand—could prompt investors to exit en masse.

"Oil prices are in uncharted territory," says Peter Fusaro, co-founder of the Energy Hedge Fund Center, which tracks commodities hedge funds. "My worry is that if the market tanks, everyone will want out at the same time. The market would collapse, and who knows what the bottom is."'s around $40 a barrel.

Posted by Orrin Judd at November 8, 2007 3:13 PM
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