Tags: Crude | Price | supply | oil

Crude Price to Continue Rising on Supply Scare — CNBC Survey

Tuesday, 21 February 2012 08:30 AM

Benchmark crude oil prices will continue rising on supply fears stemming from Middle East tensions as well as on news that Greece will likely avoid a messy default, a CNBC survey of experts shows.

Tensions between the West and Iran have heated to the point that Tehran has cut off supply to the U.K. and France to protest sanctions imposed the oil-rich Middle Eastern country for its nuclear ambitions.

Plus EU policymakers are increasingly likely to approve $171 billion in rescue funding for Greece to keep Athens from defaulting and throwing the European economy into further disarray.

A healthier European economy would demand more oil.

Meanwhile in the U.S., refineries have been closing due to consumers buying less fuel in response to the rising prices, which cuts off supply and keeps prices at the pump high as part of a vicious circle.

Peter Turville-Ince, founder of Compass Global Markets, sees $120 "very soon in the WTI space," which would bring it closer to the price of its European counterpart, known as Brent crude, which should hover around $125 per barrel.

U.S. crude, known as West Texas Intermediate (WTI) is trading around $105 a barrel.

While aid for Greece won't solve the economy's woes, it does end the fear that drove oil prices down, maybe a little too much, plus waning Greek fears would end currency-market drama that help push oil higher as a hedge.

"A lot of euro negativity priced in, so a Greece deal may give a one day spike in euro against dollar, which would mean we could see a strong short term move up by oil," says Tom James, chairman of Navitas Resources, CNBC adds.

"So if you have to be short oil for some reason you could be in pain sometime this week."

At $3.53 a gallon, nationwide prices are higher than ever this time of year, and experts say prices could hit a record $4.25 a gallon by late April, according to the Associated Press.

"You're going to see a lot more staycations this year," says Michael Lynch, president of Strategic Energy & Economic Research, the AP adds.

"When the price gets anywhere near $4, you really see people react."

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Tuesday, 21 February 2012 08:30 AM
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