The price of oil per barrel rallied today (Friday), ending an extremely volatile week.
Oil prices have been U-shaped this week. They hit a high of $54 midday Monday and a low of $48 midday Wednesday.
Today, WTI oil jumped 3.18% to $52.84 a barrel. Brent oil rose above the $60 mark for the first time this year, up 3.78% to $61.52.
Energy has been the third-best performing sector on the S&P 500 this week, behind consumer discretionary and consumer staples. It's up 1.57% through Friday morning. It has risen 3.7% in the last two days alone.
Even as the current price of oil per barrel is rising, Wall Street firms keep releasing bearish outlooks. In a forecast Monday, Citigroup Inc.'s (NYSE: C) Global Head of Commodity Research Ed Morse reported the recent surge in oil prices is nothing but a "head-fake." He said oil may plummet another 60% to $20 a barrel.
Citi reduced its annual Brent crude forecast for the second time this year. According to Morse's report and Bloomberg, oil prices in the $45 to $55 range are unsustainable and will cause a "disinvestment from oil." He says prices will average $54 a barrel in 2015.
But as our energy expert Dr. Kent Moors explains, here's what these analysts misunderstand about oil…
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Why Citi Is Wrong About the Price of Oil Per Barrel
Oil demand continues to climb at a steady pace. The International Energy Agency (IEA) projects global oil demand will jump from 910,000 barrels per day this year to 1.13 million in 2016. That massive 24% increase will keep the price of oil per barrel steady.
Bearish experts have done nothing but talk about the United States drowning in oil. But the number of rigs has fallen to the lowest in over a decade.
Oil companies are also delaying expensive projects and cutting capital expenses however they can.
"Yet the doomsayers respond that there is still considerable volume available from ongoing existing projects," Moors noted. "But, as usual, they miss the governing factor. The continuing volume from existing projects is already factored into a market where demand is not collapsing."
That means stockpiles in places like Cushing, Okla., won't be a factor moving forward. In the months ahead, arbitrage will bring the market back to its right state of balance.
"Yes, this is a "brave new world" of oil," said Moors. "Yes, the factors colliding are operating in new ways. But it's still the trade in oil that determines the price.:
That's why the price of oil per barrel is steadying.
"The trajectory now clearly indicates a new medium-term floor in the mid $50s in New York and about $60 in London," Moors said Tuesday. "By the fourth quarter of this year, oil prices will likely trade even higher, somewhere in the $70s."
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