Consumer Energy Report is now Energy Trends Insider -- Read More »

By Robert Rapier on Nov 21, 2007 with no responses

Analysts Puzzled over Oil Prices

I have said many times that I think that oil prices have gotten ahead of themselves. Yes, supply is tight, and I figured $100 oil next year was a good bet as supply further tightened, but the recent run-up looks like it is due for a pullback. A story in USA Today quotes analysts who feel the same:

Oil’s record has analysts puzzled

The price of oil again set a record Tuesday, easily blowing through the previous high earlier this month, in a move some analysts said was absurd because there was no solid, supply-and-demand reason for it.

“Very overdone,” commented Mark Vitner, senior economist at Wachovia.

“Fundamental reasons? I don’t see any,” said James Williams, economist at WTRG Economics.

Hitting $100 a barrel either could erase a psychological barrier to even higher prices, or it could trigger a been-there, done-that mentality. “You know, ‘Now we’ve hit $100 and we’re done with that,’ and prices drop back $20 or $30 to something more consistent with supply and demand,” Williams said.

I can see them dropping back to the $80′s in the short-term, before climbing again next year. But these oil prices continue to defy gravity.