"Energy price forecasts are highly uncertain", reads the EIA Short Term Energy Outlook, and this statement is as close as EIA, or for that matter anybody else, can get to accuracy. The oil prices expectedly took a dip following S&Ps downgrading of US debt rating. The knee-jerk reaction took the crude oil price to its 10-month low, causing concerns in a few circles of a possible repeat of 2008-like fall. A few hours after the Fed announced that it would keep the interest rates near zero till 2013, oil price broke the shackles and rebounded. This shows that the situation is not as grim as it was in 2008. Going by EIA forecasts, oil prices are bound to rebound to $95/bbl in the ongoing quarter, as demand is not expected to weaken drastically in the short run. The recent slump to $79/bbl was indicative of a major weakness on technical grounds based on moving averages, yet the chartists believe there is strong enough support in the band of $80-87/bbl. Other than Feds assurance of lower rates, what has also caused oil to rebound is the recent report by the International Energy Agency that points out sharp slump in US oil inventories. The EIA had predicted the inventories to fall dramatically even after the relative ease in MENA region as spare capacities were exhausted. "Confusion is what will keep oil prices in a tight band of $80-90/bbl for much of the remaining fiscal year", said a research note issued by the Energy Watch, a US-based institute. And there is enough confusion out there as the IEA has warned investors that a threat to global economic recovery may cut oil demeaned growth by more than 60 percent. There is not much confidence amongst investors as regards the sustainability of global economic recovery, which is why the oil price might not run away with the inventory concerns alone. It appears there are balancing factors on both sides, strengthening the likelihood of oil remaining in a tight range rather than skyrocketing or nose diving - anytime soon.
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