Commodity Daily News

Crude Oil Hits $46.50 a Barrel

The biggest development last week was that Crude Oil rose to over $46.50 a barrel for the first time in nearly 2 months. There are two main factors that supported Oil prices last week. Firstly, OPEC recently announced that the current low prices of Oil may lead to a supply crunch by 2013, and thus rejecting some arguments made lately by analysts that the cheap Oil might help the global economies recover. Second, the slide in the Dollar's value last week largely contributed to the ascending Oil prices, as Crude Oil is valued in Dollars.

Traders should differentiate between the two reasons listed above. Whilst the first one is no more than an attempt made by OPEC to stop the decreasing Oil prices, and therefore could only affect the price of Crude Oil in the short-term, the second reason is much more crucial. For as long as the USD will continue to depreciate, it is very likely that Oil prices will rise in accordance. However, if the USD will not drop severely, Oil will probably continue to be valued at about $40 a barrel, which seems to be a reasonable price in helping the global economic recovery.