Oil: At a crossroad

By Money Matters Editors

Oil is at a crossroads, of sorts.

The oil bulls will argue that ramping demand in emerging markets, plus stabilization in the developed world, combined with the desire by selected institutional investors (IIs) to hold oil as an asset, will send the world's most important commodity closet to $80, then $90 per barrel.


Conversely, the oil bears argue that crude is way overpriced given brimming inventories and flattish global demand, and that a substantial price correction is overdue. These analysts also say cheaper alternate fuels, such as natural gas, will weigh on oil's price in the year ahead.

Which camp is correct? A lot will depend on U.S./global GDP growth in Q3, Q4 and in Q1 2010. Below-expectations GDP growth would send oil's price tumbling; above-expectations, and oil could trend toward $90 by mid-2010.