Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

… The question is then: why is oil trading over $53 today when the supply/demand picture is so bearish?

No doubt part of the reason is a jubilant market response to the fiscal policies unveiled by the Obama administration recently. That said, printing money to reflate the economy has its drawbacks. The US dollar index has dropped from 89 to 83.3 in two weeks (6.4%) and this supports oil and most other commodity prices.


Underpinning the rally in crude oil (which could falter as short covering abates) are memories of 2008. The fundamentals of peak oil are still in place. While unemployment, housing, and consumer spending will remain a problem as the US works through the recession, one must remember that OPEC is cutting production while worldwide E&P budgets are down as well. The next oil price spike could make 2008 look like child