Why Oil is Up After the 4th of July
Oil prices continue to rise higher, trading at over $95 per barrel this morning on news that Barclay’s (NYSE:BCS) analysts raised their 2012 forecast for brent crude oil (NYSE:OIL) to $115 per barrel. This move represents a projected hike of $10 since the company’s last forecast, price estimates for oil in 2011 remained unchanged.
Barclay’s reps. explain, “The increase in 2012 is based on a further narrowing of global spare capacity … and by our view that the overall geopolitical context of the market is likely to become increasingly uncertain as 2012 progresses. The main sources of demand growth in 2012 are expected to be China (NYSE:FXI), India (NYSE:IFN), Saudi Arabia and Brazil (NYSE:EWZ).”
A strengthening dollar v. the euro is also contributing to higher domestic oil prices. The ‘uncertainty’ Barclay’s cites is thought to be turmoil in the Middle East, particularly the events unfolding in Libya, that is keeping investors nerves rattled over the production output in the region.Two weeks ago the International Energy Agency announced a decision by member nations to release 60 million barrels of strategic oil reserves to counteract the recent upswing in crude prices. Markets responded well at first, with brent crude (NYSE:USO) prices falling close to $90, though they have since rebounded and jumped back over pre-IEA decision prices.