Oil shouldn't have risen: analyst
As oil prices continued to tumble yesterday and headed to levels below the psychological $60 a barrel level, analysts said that the prices "should not have risen" beyond $70 a barrel level in the first place. The views come amid rising contention that the recent oil rally, like the one a year earlier had been driven by speculators.
The markets also refused to react to simultaneous reports from the Opec and US Energy Information Administration (EIA) that said oil demand could rise later this year and in 2010.
Considering speculators located in the US drive the markets, the largest market for trade of commodities, the Commodity Futures Trading Commission (CFTC) has decided to crackdown on speculators and is considering federal speculative limits on trade. "Crude oil prices are expected to fall further and move towards $59.3 to $60 level in coming trading sessions. Pressure will come from technical factors, a difficult economic environment, and pressure from the CFTC to increase commodity regulation," analysts at MF Global wrote in a report.
"It [the oil demand] should never have recovered so fast in the first place. The fundamentals remain undeniably bearish: stocks are at an all-time high, demand remains weak and Opec is sitting on a pile of shut-in capacity," said Richard Savage, Head of Energy Research at London based Mirabaud Securities.
He said the recent oil price rally could make business difficult for oil producers. "In addition, the rally in the oil price risked sowing the seeds of its own destruction, with higher prices undermining any fragile recovery in the economy and therefore oil demand, while on the supply side, it risked undermining Opecº discipline which up to now has been exemplary."
Yesterday, oil for September delivery was priced at $61.98 a barrel that was 1.51 percent lower than the previous day's trade.
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