Analysts say oil is the new dotcom bubble
http://www.guardian.co.uk/business/2008/ma...ed=networkfront

Oil has reached "unsustainable" levels and is heading for a sharp correction, according to analysts at Lehman Brothers, who liken the spiralling price to the dotcom boom and bust of 2001.

In the report, "Oil dotcom," Lehman's Michael Waldron says the correction could come as early as September: "We think that the crude oil market should turn and we think it will happen by the end of the year."

The report predicts that Brent, which currently stands at $126.40 a barrel, could fall to $90 a barrel by the first quarter of 2009.

However, Walden believes that the price, which hit a peak of $135 last week, will go up again before it goes down, partly because of "bullish headlines". Other factors likely to drive the price higher this summer include the hurricane season and increased demand from China as it rebuilds following the devastating earthquake.

"As in the dotcom period, when 'new economy' stocks became popular, a growing number of Wall Street analysts have been repeatedly raising their forecasts as oil prices have risen. These revised forecasts have been partially responsible for new investor flows, driving prompt and forward prices to perhaps unsustainable levels," the report said.

Today oil fell for a second day in a row, as soaring prices reduced demand for petrol and a stronger dollar lowered the attraction of commodities as a currency hedge.

US crude fell 77 cents to $125.85 a barrel and London Brent dipped 49 cents to $126.40.

The Energy Information Administration said this week that demand in the US for oil in March fell to its lowest level for that month in five years, the latest signal that consumers are struggling to cope with high oil prices.

A stronger US dollar offset the impact of a big drop in US crude stocks and a regulatory probe by the Commodity Futures Trading Commission into possible price manipulation added to trader caution.

"A rebound in the dollar, speculation about US interest rate hikes and the announcement by the CFTC of measures to enhance the oversight of energy futures markets may be seen as potentially stemming future investment flows into energy and other commodities," said Antoine Halff of Newedge USA.

"Good news seems to come in twos," said a spokesman for the AA.

"Not only are oil prices falling, but the two refineries that had problems are coming back into action very soon," he said, referring to Grangemouth and Porvoo in Finland.

"The fall will not register at the pumps immediately but we're keeping our fingers crossed that increased production will hopefully bring down prices," he added.

It was announced yesterday that Finnish refiner Neste Oil's diesel line at its Porvoo refinery should be in production from early June after a fire.

Lets hope they are right.

i think it is a price fixing conspiracy by the Saudi's.

Except that the Saudis dont control Opec.. and Opec doesnt control Brazil..and Brazil doesnt control Venezuela and Venezuela doesnt control Texas...