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It seems like everyday we are talking about the same news... rising oil prices. Today oil busted through the $135 mark and traded up as high as $135.09. Currently we are seeing oil at $133.91.There are three main factors at work today helping push prices higher; supply concerns, global demand estimates, and once again, the weak U.S. dollar. Of the three, the weak U.S. dollar has received most of the blame recently for the run up in oil prices.
As we have discussed many times before, any time the dollar shows weakness traders will rush into commodities as a natural way to hedge against the falling dollar. That is exactly what we have been seeing for most of this year, and that has continued into today, as the dollar has continued to drop.
The euro is actually lower today, down to $1.5765 from $1.5780 yesterday, but against the pound and the yen, the dollar is dropping. The British pound is at $1.9786, up from $1.9689, and the dollar bought 103.25 Japanese yen, down from 104.17 yen yesterday.
Also helping boost prices was a report from Goldman Sachs last week that raised its forecast for the second half of the year from $107 up to $141 a barrel. At the rate we are going we could see that much sooner than anyone had previously thought.
The final piece to the puzzle is the question of demand. For more information on this aspect, read up on Douglas McIntyre excellent piece on the problems with demand, and just why he thinks that $200 oil is in our future.
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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