Oil Pares 8-Week High; Steadies above $81
Despite selling off the last session's gains, NYMEX crude oil futures maintained a bullish price tag above $81 a barrel Tuesday, as the dollar's safe-haven appeal was renewed and oil markets eyed forecasts for an additional build in crude stocks.
Arrows were down on the session for both the price of light sweet crude oil and gasoline futures to $81.49 a barrel and $2.26 a gallon, respectively. Natural gas spot prices at the Henry Hub also posted a slight loss to $4.52 Mcf.
"I think we're taking a pause in the rally," said Phil Flynn, vice president in charge of research for PFG Best in Chicago. "As we head into the summer driving season, we will return to more normal markets, but the market may be getting ahead of itself and traders are asking whether they really should be driving prices higher amid recent inventory builds."
Will Oil Stay Comfortable Near $80?
"The era of cheap energy is over," said Flynn, reiterating a proclamation Tuesday by the International Energy Agency's chief economist.
In a speech to the National Association for Business Economics, IEA economist Fatih Birol advised that oil prices will remain "on the high side" with oil supply unlikely to keep up with demand, Dow Jones reported. Birol sees China as the main driver of global oil demand, which he expects will increase by about 1.5 million barrels a day in 2010.
"This kind of pronouncement would have carried more weight 10 years ago," noted Flynn. "What Birol says is true, but it's not because of peak oil -- it's because investment is down somewhat," the analyst contended. "At some point, however, if China continues to grow unabated, we'll see oil prices continue to rise."
Additionally, the EIA raised its 2010 global oil demand forecast by 270,000 barrels per day (bpd) to 1.47 million bpd.