OPEC Cutting Back
The recent uptick in production from the OPEC cartel was just a stopgap measure amid unrest in Libya, according to recent reports. The member states pitched in to help but clearly have no long-term interest in cranking out crude when prices remain at relatively depressed levels compared to $100-plus oil just a few months ago. You can bet that as oil prices continue to languish near one-year lows that the prospect of additional cuts will be weighing on OPEC's collective mind.
Middle East Unrest Persists
As the spike in oil prices this spring shows, a risk premium has been priced in to oil. Amid the so-called "Arab spring" is a boon for democracy in the Middle East, but you can bet that the push for a Palestinian state and widespread unrest in Libya, Syria, Yemen, Egypt and Tunisia (to name a few countries) is going to have a destabilizing effect on global energy markets. Higher uncertainty means higher crude oil prices.Also See:
Weaker Dollar is InevitableMost investors should be painfully aware of the inverse relationship between the greenback and oil prices. Simply put, as the dollar goes up in value, the price falls for commodities like crude (oil as well as corn and rolled steel and others). That's because a stronger dollar can buy "more" of a given commodity like crude at the same price. The strength of the dollar has been a big downward force on crude oil in 2011, but don't expect that trend to last. Given the free-spending ways and rock-bottom interest rates in America, the relative strength of the dollar will inevitably erode. Yes, the greenback has been desirable lately -- but only compared to the train wreck in the eurozone. Simply being the least worst currency is not a ringing endorsement, and a weaker greenback should hit the markets soon and once again drive up crude oil prices. Also See:
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