Why is there conflicting information coming out of the oil patch? One minute we hear that there's an oversupply of oil sitting in supertankers offshore. Now Saudi oil minister Ali Naimi says that higher consumption in China is driving up prices. He further states that the world economy has recovered enough to sustain $75 to $80 per barrel oil. Is some of this just hype ahead of tomorrow's OPEC meeting?
We should keep in mind, however, that markets do not always move on fundamentals. Very often "perception" plays a bigger role. Prices have recovered from $32.70 in February to $63 per barrel recently. Much of this increase, even Mr. Naimi concedes, is due to speculation.
Against this optimism, The International Energy Agency sees oil consumption falling this year by 2.6 million barrels per day, the sharpest drop since 1981.
All of this is a bit confusing but then the markets are always confusing to say the least. Which way the market goes is up for a coin toss at this point.
Will oil go up or down?
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