Oil is mounting a comeback, with the US price swelling 36% this year. This spawns dreams of a return to over $100 per barrel once again. But haven’t we seen this movie before?
Oil, now at $63 per barrel, is benefiting from the generally upbeat investment sentiment, which has seen other commodities and stocks rise since December’s lows. Helping oil is an agreement among the nations in the Organization of the Petroleum Exporting Countries (OPEC), plus Russia, to curtail production, in a bid to levitate prices.
But numerous analysts, such as those at asset manager BlackRock, are skeptical that there’s much more room for oil to ascend. A recent BlackRock research note called the oil price “range-bound.”
For one thing, US data, largely due to shale, show climbing oil output. What’s more, stockpiles have risen for the past month. The OPEC curbs expire in June, and this famously fractious bunch may well not renew them. That means more oil on the market and downward pressure on prices.
For a while now, oil prices globally have managed to shrug off the US shale boom. But the torrent of fresh shale oil seems relentless.
Commodities in general have surged back from a slump, although Goldman Sachs recently questioned the comeback’s staying power. Oil prices have bobbed up and down for year. Just when people expected one price level to prevail, it changed radically. Perhaps now’s the time to bob down.
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