Article Link: Why you shouldn’t trust the oil rebound: Strategist
Oil has surged since its mid-February low, but one widely followed energy analyst says the rally will be fleeting.
“We’re going to have relapses, and it’s really going to be difficult to get up above $45,” Oil Price Information Service’s Tom Kloza said Thursday on CNBC’s “Futures Now.”
On Friday, WTI futures crossed back above $42 for the first time since early December. But Kloza said investors shouldn’t bank on a long-term rally for the commodity anytime soon.
“We may get two weeks where it looks as though we’re starting to rebalance — we’re not,” he said. “I think the second quarter looks still very, very sloppy. We could see prices anywhere from $30 to just short of $45 — I don’t think we’re going to close above $45.”
This week’s jump comes after the Federal Reserve diminished rate-hiking expectations, weakening the U.S. dollar and thus improving the prospects for oil, which tends to move inversely to the value of the greenback.
“Cheap money is the steroid right now for crude oil prices,” said Kloza.
But when it comes to the traditional fundamental supply-and-demand factors, the outlook for oil is not so bright, he contends.
“There will be global growth and consumption, but just not yet. It’s going to take a while to work off this glut.”
The global imbalance between supply and demand “took 18-24 months to build it up — it’s not going to disappear in 18-24 days,” Kloza said.
Source: CNN Investing