Oil has Bottomed Out

Monday, October 12, 2009

Investors are laying the groundwork for another bull run on the energy and commodities markets, in spite of signs suggesting the overall economy is still deteriorating.

Analysts and economists are saying with some confidence that oil prices have bottomed out. And Wall Street is taking notice that spot and futures prices for West Texas Intermediate crude have risen by nearly 40 percent since hitting $33 in December.

The best data show U.S. demand for oil is still weak. On Tuesday, the American Petroleum Institute reported a 4.6-million-barrel buildup in U.S. crude stockpiles, pushing prices lower. Demand in China is off by at least 15 percent year-over-year, and other bearish economic indicators will likely keep prices volatile in the short term.

The impact of the down economy has been felt more on the supply side than on demand, as reflected in OPEC's response, but especially in the sharp fall-off of new exploration and production activity in non-OPEC states.

But oil market watchers say the Organization of Petroleum Exporting Countries, or OPEC, has conclusively dropped production faster than demand has fallen.

Oil Traders Blog is a website for active online oil futures traders. We provide research and relevant oil and energy related news for the oil trader or daytrader.

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