Have oil traders been spooked by Ben Bernake’s recent talk of “intensified” upside risk to the “inflation outlook”? Chuck Butler thinks so.

Will crude oil prices continue their slide? Today, crude oil futures rebounded from the biggest four-day decline in more than three years. Oil rose “on speculation that prices fell too far,” says Bloomberg.

Chuck doesn’t see oil prices dropping back down to $85 a dollar. Not with supply-and-demand as it is right now…

The price of oil dropped from the sky yesterday, dropping $8 from the $146 level it traded at yesterday morning. As far as I’m concerned, that’s a good thing!

But I wonder where that slide came from? Well, actually, I think oil traders were spooked by Big Ben’s thought that both growth and inflation have risks.

Will it continue to slide? Ahhh grasshopper, if I knew that for sure, I would be writing this from Fiji! Seriously though, I don’t see it sliding back to $85. The oil supply is still diminishing, while the demand, even with the U.S. battening down the hatches, still strong (see India and China)… And economics 101 tells us that when this scenario exists… The price will go up.

I’ve told you all this before, but for new readers… My dad used to have a saying that he shared with me during the oil embargo of the ’70s. He said, “Chuck, there’s no such thing as a supply problem, it’s merely in need of a price adjustment”… Smart man, my dad..

Source: Oil Price Slides!