When oil prices rose to $73 a barrel last month, more than double the low of 2008, talk spread that a huge spike was coming.
Instead, prices have dropped 18 percent to $60 a barrel. And experts say oil could fall even further amid concern the global economy will remain mired in stagnation for some time.
“The bottom line is that it’s all about demand, and the lesson here is that the recovery is going to be a long and bumpy road, and not a smooth and straight line,” Michael Wittner, global head of oil research at Societe Generale, told The New York Times.
He says oil could slide to $50 soon.
It’s been a wild ride for oil over the last 18 months. It soared to a record high of $147 last July as part of a huge commodity rally. Then it plunged to $30 by December, thanks to the credit crisis and recession.
This year, oil rebounded until the last few days amid focus on “green shoots” in the economy. Now it’s not so clear the shoots are green, as the U.S. unemployment rate hit 9.5 percent in June.
And the Energy Department reported last week that oil inventories have reached their highest level since 1990.
So oil’s fortunes are waning.
"The market was way overvalued, and it's just coming closer to reality," analyst Tom Bentz of BNP Paribas tells The Wall Street Journal.
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