Has oil bottomed? It may have, if one-year futures contracts are any indicator. The one-year futures curve for oil -- contracts that price oil to be delivered in December -- traded at $60.10 per barrel Monday, a price that's 28% higher than the current price, Bloomberg News reported Monday. Oil fell 44 cents early Monday to $45.90 per barrel.
Energy Trader Jim Dietz told BloggingStocks several factor are at play in the one-year oil futures price.
"First, you have a really beaten-down commodity, strange as that may seem to say about oil, but it really has taken a beating, down more than $100 in the past year. So you have some traders positioning themselves on the low price. Second, some buyers of oil are hedging their cost, arguing $60 in a year would be a pretty good price to lock in for a cost," Dietz said. "Then, you have other traders arguing the U.S. economic recovery will start by late 2009, which should boost demand, and oil's price." Dietz added that he was currently flat, or had no open energy trading positions.
Still, Dietz was careful to point out that a higher futures price one year out does not guarantee that oil will cost more by year's end than at the start. "Futures obviously can change, so those who hedged at $60 will look pretty dumb if economic conditions do not begin to improve and oil doesn't rise," Dietz said.
Oil / Economic Analysis: Dietz added that it's too soon in 2009 to tell where oil prices are headed, one year out: data on Q1 and Q2 U.S. GDP growth will say a lot about U.S. oil demand growth -- one key factor in predicting oil's price in the second half of the year.
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Reader Comments (Page 1 of 1)
1-05-2009 @ 1:33PM
Iridium said...
An economic and demand base case can't even be made for oil at $30. SO how can you make a case for $60 oil unless traders are just artificially propping up the price again.
Even with an economic recovery you still can't make the case for $60 oil based on demand.
If the demand models in 2006 could not even support $40 oil how can any demand model in 2009-10 support $60.
Hopefully the next time commodity traders decide to fool around with the economy the people won't take it. Hopefully this time they will be dragged out on the street and given the beating they deserve.