As far as the direction of oil prices, going up seems to be the most likely direction.
According to the USA Today, oil prices could see a push upwards due to Eurozone growth. The European Union published a report on May 5 that shows a potential growth of 1.8 percent as opposed to the 1.7 percent projection listed in February. The leaders for this growth are listed as monetary stimulus and low oil prices. This is good news for a continent that has been at a recession’s doorstep for many years now.
The last few years have created a cloudy picture for the Eurozone community, including huge debt, a fragile banking system, high unemployment, and a cloudy future. The cause and effect may go hand in hand, however. Trends usually show that a robust European economy leads to higher oil prices worldwide. The reason oil prices were lower, thus pushing the Eurozone economy up, was for the first quarter of 2015, upstream gas and oil production was down due to downstream refining, which caused a revenue increase.
The bottom line is that with the decrease in oil production, an increase in oil prices are in the offing. However, there is another possibility that could keep oil prices low.
Fox Business News is reporting that there is still an abundance of oil already produced, holding oil prices below $60 per barrel. Oil prices rose early in the trading session after the United States Department of Laber announced that employers added an additional 223,000 after a seasonal adjustment, and unemployment dropped from 5.5 percent to 5.4 percent. That means that more oil and gas consumers will be on the roads soon, and oil demand should go up.
The oil market is keeping a close eye on the dollar, as well. Fluctuations in the dollar could mean higher oil prices. Oil is traded in dollars, and when the dollar gets weaker, other currencies could be used to buy barrels of oil, making oil prices cheaper.
Traders are mainly waiting for Baker Hughes, Inc. to release its weekly drilling data. The number of operating rigs have decreased since spending by the oil industry has decreased because of last year’s falling oil prices.
The decrease in number of operating rigs has increased oil prices, but some analysts feel that the number of rigs is reaching a major low. U.S. oil prices went above $60 per barrel this week, a price that could convince oil producers to rev up more rigs.
“If the rig count shows anything less than a 10 or 15 [rig] decline, then the market could see some additional selling,” said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates.
[Image courtesy of Hoover’s Bizology]