Tags: Oil | rally | sell | Isaac

Experts: Crude to Hit $100 a Barrel, But Sell the Rally

Monday, 27 Aug 2012 09:31 AM

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Crude prices will hit $100 from current levels of around $97, but investors should sell the rally, experts say.

Prices have risen high enough on supply issues that they will eventually work themselves out.

Crude is up today temporarily due to fears Tropical Storm Isaac will turn into a hurricane and disrupt production in Gulf of Mexico oil rigs and coastal refineries.

Editor's Note: The Final Turning Predicted for America. See Proof.

“This potential disruption is coming at a time where prices are already in the higher end. Unless we get a significant amount of oil capacity taken off the market, the chances are this sort of event won’t have a significant impact from a medium-term point of view,” Ric Spooner, chief market analyst at CMC Markets, tells CNBC.

Prices have risen lately due to maintenance issues on North Sea oil operations, as well as due to Middle East saber rattling.

An explosion at Venezuela’s biggest refinery that killed an estimated 41 people over the weekend is not expected to push prices higher as the country can use its existing fuel supply stocks to fulfill the domestic demand and maintain exports, Reuters reports.

Supplies are healthy around the world, so expect prices to top off around $102 a barrel before profit taking kicks in, Spooner adds.

The global economy is growing, but at a tepid pace and won’t ramp up demand for crude and fuels any time soon.

“The global demand outlook (for oil) is for moderate growth at best and is well covered by supply capacity ... I’m looking for opportunities to sell into the current strength anywhere from here on up to about $102 a barrel (for U.S. crude) and $120 a barrel for Brent,” Spooner says.

Other market observers agree the rally will be short-lived, so sell now.

Dominic Schnider, head of commodity research at UBS Wealth Management, says any price increases as a result of Tropical Storm Isaac will be “short term,” according to CNBC.

“I don’t expect a lot of real damage to infrastructure (in the oil fields) … things have been modernized, oil rigs have been replaced and the new ones will be able to withstand such storms,” says Schnider.

“The storm will have a temporary impact on prices. But everyone is waiting for the European Central Bank and U.S. Federal Reserve meetings ahead,” says Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo, according to Reuters.

The Kansas City Fed is holding its annual symposium in Jackson Hole, Wyo., this week, and the Federal Open Market Committee meets next on Sept. 12 and 13. The European Central Bank will hold its next meeting Sept. 6.

Editor's Note: The Final Turning Predicted for America. See Proof.

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