Supply up, demand down, but oil prices rise

Recessions usually bring cheap oil and gasoline.

But not now. And that has analysts worried that another fuel-price spike could be on the way.

Crude oil, the lifeblood of the global economy, costs $61.67, even as the world struggles through the worst recession since World War II. And prices are rising, climbing 26 percent in the last month.
Compared with last year’s record oil price of $145.29 per barrel, for oil sold on the New York Mercantile Exchange, $61 may not sound like much. But it’s twice the historic average for petroleum, which used to trade from $20 to $30. Prices briefly fell below $34 in December and February, but they’ve rebounded with a vengeance.

The economy hasn’t. But oil traders are betting that the recession is at or near its worst, meaning a recovery could start later this year and drive up global demand for oil again. They’re trading on the possibility of a recovery, rather than a recovery itself.

To many analysts, the current high price is a bad sign.

The worldwide oil market is awash in petroleum, because countries stuck in recession don’t need as much to fuel their cars, factories and power plants. So if oil costs this much now, when demand is low and supplies are high, what happens when the economy improves?

San Francisco Chronicle