Disclaimer: this post is completely based on my opinion.

While I could jokingly say $76 dollars of today's oil price of $77 is speculation, that wouldn't be quite accurate. No one knows- myself included- what that value may be. However, I'll try to break down the influences behind $77 oil. It would be difficult for me to endorse today's prices as being legitimate, but perhaps I can help you understand what is pressuring oil prices higher, and what is pressuring oil prices lower.


Real issues that have pressured oil prices higher in the last few weeks have included geopolitical concerns (most notably Iran and their nuclear ambitions), (READ MORE!) a strong Euro, and a weak Dollar, to name a few. Factors not proven that are pushing prices higher include a possible U.S. economic recovery, a possible recovery in jobs, and a possible recovery in oil demand. In my opinion, these "wildcards" are currently influencing prices nearly as much as real issues. There is a danger that if one of these "wildcards" fizzles, there could be a correction in crude prices.

Real issues pressuring oil prices lower include high spare capacity in OPEC, high spare capacity at U.S. refiners, high inventories of crude, gasoline, and distillates, low daily oil demand from the U.S., steep jobless rates the last few months, a slow down in global economies, etc.

Right now it would seem that oil prices can be broken down as 40% "wildcards" a.k.a. speculation, 40% upward pressure, and 20% lower pressure. If even one of the "wildcards" is removed, there would be much more pressure for oil prices to reflect the change.

Speculators have been pouring money back into oil since it reached a low last Winter, and have been much more careful not to overload or predict record oil prices. However, there are more notable players this time around, with more traditional banks getting involved.

It'll be interesting to see what happens if a wildcard turns into a downward pressure issue, such as an increasing jobless rate, or a drop in GDP. Either way, I believe oil prices remain near a ceiling. There is so much propping prices up that any positive news about a recovery is already factored it. It'll be an interesting Winter, for sure.