Monday Oil Prices Surpass $85 a Barrel
Oil prices jumped beyond $85 a barrel on Monday morning as investors anticipate a growing demand for crude as a result of improving numbers in the U.S. job market.
The numbers are exciting for many investors, especially when prices were down to $69 a barrel in February. Monday’s positive prices were driven by a U.S. Labor Department report issued the previous Friday that announced that employers had added approximately 162,000 jobs in March. Though the overall unemployment rate remained stuck at 9.7 percent for a third consecutive month, the numbers mark the largest job gain in more than three years.
In Europe, benchmark crude for May delivery had increased by 56 cents reaching $85.43 a barrel on the New York mercantile Exchange. Earlier in the trading session, the price per barrel had peaked at $85.89.
Global oil trading was closed last Friday in honor of the Good Friday holiday.
Many analysts strongly believe that there is a strong correlation between employment rates and crude prices, but still, most market watchers have also warned that speculative investments could have adverse effects on the global economic recovery.
“The last time we had oil prices at current levels, what followed was the worse recession ever and we will worry about what the combination of what is still high unemployment and higher fuel expenditure does to the economic recovery,” said an employee from the independent oil market analysis company, PetroMatrix. “On a fundamental basis we still do not see the indicators that would justify crude oil to trade at $90 a barrel.”
The positive numbers coming out of the commodities market have not been confined to just the prices of oil in recent trading sessions. A senior commodity analyst from MF Global stated that the high price of oil is only one element of a collective surge in the value of commodities. The analyst said that the positive numbers are a result of speculation that a global recovery will have a strong impact on commodity prices, but positive numbers as a result of global recovery may have actually reached a premature peak.
“The flip side to this argument is that the rally has already discounted a recovery, and that continued gains, particularly in energy, could potentially slow growth down, increase inflation and interest rates, and in a worst case, short-circuit the very recovery markets have been banking on.”
For now, investors are holding on tight and banking on speculation that a global economic recovery will remain strong.