This winter looks like primetime for the oil market
With oil at $62 a barrel at the close of the hurricane season and the winter slowdown, this winter appears like it will be the perfect time to move back into oil. Production cuts from OPEC have done little to stop the fall. Even after the cuts the US is showing huge inventory gains and gas has now reached the lower $2 per gallon region.
This is just the beginning of the total slowdown that we’ll likely see this winter. Summer driving is considered the number one reason why oil prices soar in the Summer and drop in the Winter. This time we’re in early fall and still have a number of months to go before oil should find its bottom.
OPEC is going to move vigorously to protect the $60 threshold and has stated in the past that it is hoping to stabilize somewhere at around $70 per barrel. $70 represents a greater than 50% drop since Oil peaked at $147 per barrel this July. Without any huge cuts from OPEC I expect the oil market to fall as low as $50 per barrel until the Spring swing in oil prices begins again and the bailout worries investors again. Inflation has been less of a talking point even though there is more of it now than prior to the fall in oil prices.
I think the second the attention turns back to inflation is when oil will run back up to $100 per barrel yet again. Unfortunately everything in this market is cyclical, after the finance industry loses its daily headlines the inflation game will be on again. Its hard to tally how much the Fed has inflated in just the past year. Economic stimulus of $155 Billion, as much as $700B a week through the Fed window since December, and $700 Billion to buy troubled assets. Go figure the 2009 Budget looks like a $2Trillion deficit.
