Expect Oil to Hit $150 in the Next Two Weeks
Jul 8th, 2008 | By Lee Lowell | Category: Oil Investment & Alternative EnergyOil prices may have dropped off their record highs in recent days, but don’t be fooled says Lee Lowell in The Smart Profits Report. The black goo wants to hit the $150 mark. The Iran situation is fragile, and dollar gains are likely to be short term…
Following last Thursday’s surge to a record $145.85 a barrel, oil prices have backed off a little, as the US dollar has gained strength from European Central Bank talk that suggests its interest rate hike last week will be the only one for a while. That’s because dollar strength reduces the need for investors to seek a hedge against inflation – a hedge that the oil market provides.
Oil is also benefiting from a perceived shift in Iran’s stance over its nuclear arms program. Iran, the world’s fourth-largest oil producer, has “shown signs of improved lines of communication,” according to Barclays Capital, with Iran pointing to a “new environment” for talks after its response to an incentive package from the West.
Iran has stated that it won’t be forced into abandoning its uranium enrichment program, but signs that it’s willing to be more flexible is a big reason for oil’s drop today.
As you can see from this chart, the front-month futures contract currently trades around $142.
But don’t be fooled… oil seems to have a mind of its own and keeps wanting to push towards the $150 mark. The Iran situation is still very fragile and dollar gains are likely to be short-term. Most economists are calling for that and it seems only a matter of time before it does. What odds on it happening before my next column here in two weeks?
