Oil extends its pullback following today's inventory report

In its report, the Energy Department stated that overall consumption of oil and refined products fell by 3.2% over the past month as compared to the same four week period last year. Gasoline consumption is also lower over the same period, but by a smaller margin of 1%.

The past couple of months we have seen a huge jump in prices, and along the way many analysts have argued that the price run up was more a result of investors looking for protection against the weak dollar than anything based on fundamentals. Perhaps we have seen the end of the current price explosion as traders are becoming more concerned about actual demand, and the possibility of even lesser demand should the economy really fall apart this year. Those fears were stoked again this week after the Bear Stearns (NYSE: BSC) bail out.

Should the economy really fall apart then of course demand will fall, and also there is the fear that the recent record high oil prices will start to put a natural crimp on overall demand. Both are very valid arguments.

Will oil head back under $100? I doubt it, at least not just yet. Over the next week I would not be surprised to see the precious crude continue to hover right around the $105 level. What are your thoughts? Where do you see oil trading over the next couple of months?

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.