Oil prices rose today after five straight days of declines, but traders may finally be understanding that they have been inflating them for two months for no economic reason: the world is awash in oil, and the cost of drilling for more is lower than it has been in years.
Now, look for the following pattern, according to two big investment banks: continued fluctuation of oil prices, then a new dive that tests the breathtaking plunge early this year.
The US-traded benchmark, West Texas Intermediate (WTI), rose to $58.58 in European trading today, up 0.6% from yesterday’s close. But that follows a total price plunge of about 5% since last week. And, in a note to clients yesterday, Goldman Sachs predicted that WTI will fall to $45 a barrel by October, right around the February price, which was about 60% below the June 2014 peak.
It won’t get much better after…
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