What, me worry? Never! Oil Prices close below $70 and now the price of oil seems to be headed back down. Was there ever a doubt? Ok fine! I admit it! When I predicted that oil prices had peaked for the year in early July, I admit I was sweating it. Oil prices seemed to get a new lease on life as a surge of economic optimism seemed to increase the odds that oil demand could somehow overcome a world awash in supply. Now the odds are increasing that the high for the year is still in and I can breathe a little easier. Yet yesterday it appears that oil had a sell off in a surge of what you can call pre-fed fodder.
Yesterday oil was disappointed with on economic news out of China which seemed to suggest that China's recent oil demand growth has been more government spending than economic growth inspired. In fact today US oil traders may find just how dependant the price of oil is on our Federal Reserve and fed policy. Will the Fed send the message that the days of printing money to prop up the economy is coming to an end? As I have said since the day the Fed announced its policy of quantitative easing, they would be the most significant factor that would drive oil prices higher. And now as it appears that the economy is seemingly getting better the Fed will now have to start laying the ground work for a reversal of those policies. Oh sure we can talk about the EIA and the API but the Fed and their statement will be the biggest factor that will drive the future of oil prices.
Republished with permission from Alaron's Energy Report Daily.