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Where will oil go from here?
Sam Adelton
May 21, 2007
The energy market faces a bear market. The oil companies are trying to boost the price by any means. Every year, March-May represents top in gasoline price. A $3 gasoline price is what the economy can bear. The gas prices go down between June and September. Given that backdrop, expect oil and gasoline prices to go down.
International analysts suggest oil, gas, and Canadian dollar are forming some kind of a top. From June to December, the downward cycle will take oil prices lower.
But what is long-term prospect for oil? The bulls and bears are equally divided in the market place. But, the whole thing depends on demand in the rest of the year. The demand depends on the state of the economy. The economy is in serious trouble although private equity money from the tax cut for the rich and money from Iraq can fuel the stock market for a while creating absurd divergences in the indices. It just shows the disconnection between the economy and the equity market. This happens whenever a lot of money gets concentrated in the hands of less than average investors.
Hunt brothers tried to corner the silver market. The wealthy individuals, their participation in private equity groups and in hedge funds is trying to corner the stock market. You will get worried if you see the long-term silver chart after the Hunt brothers got wiped out. The stock market collapse can be permanent for the next forty years!
If economy collapses, oil will also collapse.
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