Oil will post its largest one-month rise since 1999 in May. That does not seem possible given that it rocketed up to $147 in the middle of last year. The news is a sign that crude prices are on a march that may not end this month.
According to Bloomberg, much of the fuel for the increase is the desire to put money which has been on the sidelines for months to work. If so, crude is going up for one of the same reasons that the stock market is–speculation.
The speculation could expand as investors gamble that it will be a cold winter in the northern hemisphere and that GDP improvements in China and India will mean demand is already stepping up. An end to the US recession before the end of the year would pressure the need for oil even more.
Of course, oil prices may be the greatest enemy of the recovery. If consumers and businesses are forced to take whatever improving income they have and put it toward oil-based products or gasoline that may suck the life out of a rise in discretionary income.
If May is any indication, the recovery may be put on hold for some time.
Douglas A. McIntyre
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