U.S. oil prices have rebounded 22 percent from the 5 ½-year low they hit Jan. 28, but Dennis Gartman, publisher of the "Gartman Letter" doesn't think the rally will last.
"I actually doubt that we have [hit a bottom]," he told CNBC
. "What we've seen in the past two weeks is a substantive rally from the lows, but what is depressive to me is the fact that the carrying charge has not done what one would want to see the carrying charge do in a rally."
The carrying charge is the interest, insurance and storage costs for holding commodities for a long period.
"We've seen the market continue to have a large contango, and crude continues to bid for storage," Gartman said. Contango means the futures price of a commodity is higher than the expected future spot price is.
"It's very hard to think that this is anything more than a much-needed technical bounce, and any further $1 or $2 rally in crude oil probably should be sold. I think . . . $20 a barrel is still possible."
On the subject of oil-price forecasting, the Energy Department, just like private analysts, failed to predict the plunge since late June.
So what gives?
"We're making assumptions [about supply and demand], and those assumptions are imprecise. There's a wide range of possible outcomes," Tancred Lidderdale, a senior economist at the department's Energy Information Administration, told the International Business Times
Michael Loewen, a commodity strategist at TD Securities, told the news service that predicting oil prices is "both a science and an art." When it comes to science, analysts pore over data from many sources to calculate supply and demand.
"But you have to assign a probability to certain factors actually happening, and so that's the art side," Loewen said. "You have to have a very good handle on both sides to be worth your salt."
Unforeseen events, such as Russia's invasion of Ukraine, can put a crimp in any forecast, he noted.
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