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Oil is back up to $60 and it does not show any signs of retreating. Most experts say that crude prices cannot hold their gains. The economy is too weak and supplies are abundant. OPEC’s attempts to cut supply may finally take hold because the lengthy period when oil prices were down cut into production and exploration. The return on those investments was not attractive against the modest profits that $40 crude brings to oil companies.
There are nagging doubts that the recession will keep demand down. The travel season is coming up in America and the demand for gas is likely to spike up. China’s economy does not appear to have slowed as much as was forecast. Its need for oil may not have abated much at all. If so, combined with slowing global production, its requirements for fossil fuel could keep prices high without much additional help.
The conventional wisdom is the oil can’t rise. All the indications in the market are that it will keep going up.
Douglas A. McIntyre
Buzz up!
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