The price of oil has been sliding lately, and its behavior this week will depend largely on how the market interprets the results of this past weekend’s G8 summit.
Greece’s forthcoming election, Spain’s banking system, and questions about the future of the euro zone, have been dragging down the price of crude. Europe’s problems were not magically solved this weekend, and analysts, economists, and investors are now sifting through the leaders’ comments.
“All eyes are turning to the worries in Europe,” said Derek Burleton, deputy chief economist at TD Bank Group. “This is what could lead to further weakness into the days ahead.”
Ralph Glass, director of energy valuations and operations at AJM Deloitte, expects oil to stick around $90 (U.S.) per barrel, as world leaders try to settle shaky political and financial situations across the Atlantic.
“It is going to be there for a while until we see some kind of economic stability in Europe,” he said.
The benchmark price for oil in North America closed at $91.33 per barrel Friday. It averaged $102.95 in the first quarter, according to Suncor Energy Inc. Despite pessimism in the market, some energy companies recently increased their 2012 forecast price for the commodity. For example, Suncor, Canada’s largest oil and gas firm, thinks oil will average $95 per barrel in 2012, up from its previous prediction of $90. Canadian Oil Sands , which holds the largest stake in Syncrude Canada Ltd., jacked up its outlook to $100 per barrel from $90.
Earl Sweet, an economist at Bank of Montreal, believes oil would trade between $80 and $90 per barrel in a “perfect world” – one in which global supply and demand was balanced, and geopolitical and economic risks were eliminated.
Despite the G8 leaders’ efforts, the world remains rocky. Indeed, Mr. Sweet believes oil will be worth an average of $95 per barrel in 2012-2013, down from his original calculation of $100 per barrel.