“That appears to be a big question on traders’ minds since late February when oil futures prices on the New York Mercantile Exchange neared $110, which has so far marked the peak for the year.
And despite ongoing Middle East threats to global supplies and a complicated background comprised of market manipulation talk, government oversight proposals and pipeline changes and expansions, many analysts don’t believe prices are where they should be — simply because there’s too much oil in the market.
“The economic price for (West Texas Intermediate) oil is in the $80-$85 range,” said Mickey Cargile, managing partner at Cargile Investments, basing his estimate on where he sees supplies locally and in Cushing, Okla., the delivery hub for Nymex oil.
“Our range valuation suggests a 15%-20% risk premium priced for potential supply disruption from Iran,” he said.
On Thursday, crude futures CLK2 +1.80% settled at $102.27 a barrel. It’s up 3% year to date, but down nearly 7% from a peak close of $109.77 on Feb. 24, according to data from FactSet Research.
“If it were not for some of the Iranian oil off the market because of sanctions and the fear of supply interruptions, the price could be lower,” said James Williams, an energy economist at WTRG Economics….”
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