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Oil prices have once again hit new highs today, trading up all the way to $118.05, before cooling off slightly, and are currently sitting at $117.85.The main concern fueling today's move is over supplies from some of the world's major oil producing countries. Nigeria is on the list, as a joint venture of Royal Dutch Shell PLC (NYSE: RDS) stated that it would be reducing its output in April and May by around 169,000 barrels a day. This comes in response to a militant attack on one its pipelines last week.
This is really nothing new to Nigeria, which over the past two years has been the victim of multiple attacks on its oil infrastructure. The country is a major supplier to the the United States, and over the past 2 years the country has seen its oil output fall by a pretty hefty 25%. All the result of militant attacks.
Concerns are also mounting over oil production in America's southern neighbor, Mexico. The country has been forced to shut down four of its export terminals over the past two weeks, and during the first quarter production in the country dropped by 7.9% in the country.
The final piece to the puzzle continues to be the weak U.S. dollar. As long as the dollar remains weak it would be hard to imagine that oil prices will have much reason to come back down towards the $100 mark.
It is hard to believe that a few months ago we were sitting here each day wondering if we would ever break through the psychological $100 barrier, and now we are looking back at $100 oil as the "cheap oil". How things have changed in just a very short time.
Just how strong have oil prices been rising? Let's check out a current chart to give you a visual perspective on just how sharp the rise has been:
How long will this last? I wish I had that answer, but if I had to guess, I would imagine that oil will remain strong at least through the summer months. If America truly does fall into a recession, and the Federal Reserve is forced to slash interest rates two or three more times, there is no telling just how high prices could be headed. Will be sitting here this fall talking about $130 or $140 oil? How about $150 oil? I hope not, but it is definitely not out of the question at this time.
What are your thoughts? How high can we expect to see prices head before this current price run up is all said and done?
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.
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Reader Comments (Page 1 of 1)
4-22-2008 @ 9:44AM
Craigvolchko said...
All that I recall about oil prices is that Sadam Hussien of Iraq controls oil prices by contolling OPEC with a large intimidating military. You might think, if for no other reason than too look like you had accomplished something oil production could be increased in Iraq.