Oil may hit $100 a barrel by Q4 2011! This is what JP Morgan forecasts in a report published by Reuters. JP Morgan used 3 reasons for this increase: QE, China and France.
While QE (dollar devaluation) and China (increasing consumption) are easy to understand what’s up with France? Apparently a strike at France’s largest oil port Fos-Lavera since September 27 and industrial action at refineries reduced middle distillate inventories there by 8 million barrels in October. Rebuilding fuel stocks as soon as the strike ends might contribute to the price increase.
As much as my portfolio is oily, I am not ecstatic with the news if more dollars are spent on oil and less dollars are spent elsewhere in the economy. A $100 oil barrel might trigger demand destruction and limit or stop growth in many poorer nations who are relying on this cheap source of energy. It might also slow down any semblance of economic recovery in some countries.
I’ve always said, oil above $70 keeps everyone happy, around $80 a barrel is even better but I don’t find $100 a barrel justified just yet!
Further reading on the economy:
On to our weekly blog roundup:
Dividend Dollar: Don’t Let Your Emergency Fund Rot
Enjoy your weekend folks!