Brent crude was not supposed to rise to $120 again. That was good news, because high oil prices has been viewed as a potential trigger of a global economic slowdown. And, there are already plenty of possible causes for that.
Brent has moved above $115 and WTI is above $95. Some analysts argue that traders believe the crisis in Europe will be resolved. It is hard to say why that would drive oil higher. The region has slipped into a recession. Austerity plans about to be implemented in many nations will deepen the throttle down of GDP.
There is also a belief among some that oil is up because the US economy has staggered its way back to an expansion. This, married with the economic prospects of Germany and China, will combine to move both consumer and industrial need for crude up.
What will happen if crude remains as high as it has been very recently? Some people will cut back on driving. Some companies will cut petrochemical use. It is just a question of how much demand falters.
Douglas A. McIntyre
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