The Gulf of Mexico oil spill obviously represents a crisis, but it has pushed oil prices up to unjustified levels, says Oppenheimer energy analyst Fadel Gheit.
Crude shot up above $85 a barrel amid concern about the spill. It recently traded at about $75.90.
“I don’t think the economy really supports an $80 oil price,” Gheit told CNBC.
“It’s speculation that is putting oil prices up. I don’t see prices moving much higher on this situation. The fair oil price shouldn’t be much higher than $60.”
In addition to speculation, OPEC over-production is inflating the oil market too, Gheit says. “OPEC is cheating, overselling its quota.”
The price rise doesn’t reflect demand, he says.
“Demand is still very weak. Look at refining capacity utilization. It’s still very low. I don’t see the impact of this accident on oil prices going forward. The market is overreacting."
If traders get out of control and push oil to $100, the economy is in trouble, Gheit says. "It would bring down consumer confidence and spending, and the economy down with it," he said.
In terms of energy stocks, Gheit recommends Schlumberger, Smith International, Brigham Exploration and Pioneer Natural Resources.
He dislikes Transocean, Cameron International, Halliburton, BP and Anadarko Petroleum.
Already the oil market has started to move Gheit’s way with crude hitting $75.
“The oil market was overdue for a shakeout like this,” Addison Armstrong, director of market research at Tradition Energy, told Bloomberg.
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