What Next For Oil?

What's next for oil – at Moneyweek.co.uk - the best of the week's international financial media.

So how did American indices manage their best weekly gains since the re-election of President George W Bush in November last year? Well, the surge came as the oil price dropped below $47 per barrel a first since February, says Scott Malone on Reuters.co.uk.

Moreover, should the price of crude oil remain below $50 a barrel, it's more than likely that stocks could continue to extend their gains. Oil "influences corporate profits" through high costs in shipping and plastics, says Malone, while the recent crude price rise has eaten into consumers' disposable income.

"If oil price continues to fall...that basically pulls back any cost pressures that might be building," says CIBC World Markets' Subodh Kumar on Reuters.co.uk.

Yet what are the chances that the oil price will ease for much longer? Not all that good, says Lex in the FT. Opec has done a good job "pumping flat out" in order to build-up crude inventories which recently hit a six-year high. Stocks are now however reaching levels that Opec would consider to be adequate, and the cartel may contemplate reining in its supply next month. What's more, net long speculative positions, which hit a record high in April, have since then been eliminated, says Lex. And with US refinery activity picking up again, the "pullback in crude prices" may be at an end.

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