Oil Prices Starting to Rebound


After an extended period of depressed prices, oil prices are finally starting to show some life again as gains on Thursday pushed prices once again above $50 a barrel.

Forecasters Predict Further Rises

The increases was first seen in Brent crude which has skyrocketed nearly 12 percent for the week so far, its biggest weekly gain in around six years, hitting a high of $54 a barrel. U.S. crude oil prices quickly followed with prices climbing to a high of $50.58 before retreating slightly to finish just above the $50 mark.

The sudden increases came as forecasters pointed to the traditional seasonal increase in demand as many heavily oil dependent countries move into the winter season, increasing demand. More optimistic forecasts point to a longer term sustained increase in prices which could lead to oil hitting $70 a barrel the end of next year. This would help to greatly relieve the financial pressures not only on oil companies globally, but also on economies such as Saudi Arabia, that have been struggling without strong oil revenues.

Pressure on the Fed

This potential change in the fortune of oil could also put additional pressure on the U.S. Federal Reserve to maintain its low interest rates as it does not want to extend the recent slump in commodity prices, particularly in the energy sector.

With the recently released minutes from the last Fed meeting citing the global economic slowdown as a key factor in its current fiscal policy, an increase in oil prices would be welcomed as it should boost the global economy. However, at this time the gains are too fragile to justify the Fed upsetting the applecart. This is prompting many analysts to push back their anticipated timeline on a rate increase to late this year, rather than next month, which had been the consensus until now.


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