Oil Inches Lower, More Downside Remains
Oil is seeing a pull back today after kissing $100 per barrel overnight. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $37.92, -0.29 (-0.76%). This is a minor drop after a huge run up. In the last six weeks the USO ran from $29.10 to its current level, a whopping 30% move. This run has occurred for a few different reasons. First, troubles with Iran over nuclear ambitions are fueling prices in a minor way. The other factors are based on the outlook of Europe and the global economy along with the fall in the Dollar. As Europe tries to get a handle on its debt issues, the future outlook begins to look brighter.
Overall, oil should not be up at these current levels. The higher oil rises, especially above $100, the bigger the drag on the U.S. economy as consumers must spend more to travel. Today, Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) and ConocoPhillips (NYSE:COP) are all lower on the small drop in oil. Oil should continue lower in the coming weeks as reality over Europe is seen. A short term target on oil of $85 per barrel is likely.