We have been targeting $108 to $110 in oil and we could see $108 today. It is possible that we may see a pullback from that $108 level especially if the market is convinced that the Fed may really be serious about tightening monetary policy. Yet with gas prices at record highs and the price of oil getting overbought we may see a quick correction next week and then on to perhaps the $110 area.
In an interview with the Wall Street Journal, “The president of the Minneapolis Federal Reserve Bank said Thursday the Fed may need to increase short-term interest rates by year’s end if underlying inflation rises as he anticipates.” The Journal goes on to say, "Narayana Kocherlakota said he expected "a big upward movement" in core inflation —inflation excluding volatile food and energy prices — from about 0.8% late last year to about 1.3% by yearend. As a result, he said, it's "certainly possible" the Fed's target for short-term interest rates, now near zero, would be lifted by more than half a percentage point late this year." He also said that, “Mr. Kocherlakota, a former academic, also said that the Fed's second-round of bond buying — known as QE2, short for quantitative easing — had a bigger impact on the economy than he thought it would when it was launched last year.” He should have called me or read my energy report and I could have told him.
Gas prices hitting record highs for this time of year and are going higher. April is a very bullish month and with the switchover to summertime blends, it should raise the national average to near the $3.75 area. By Memorial Day if oil isn’t broken down by the Fed and unrest spreads we might see $4.00. That is no joke.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.