August 20, 2005

Oil Price hike is being seen very likely by hedge funds.

Global demand supply gap is experiencing a historic low. The ever increasing demand for oil is chasing the oil prices to go up around the world with current oil prices hovering around $66 per barrel and moving upwards. This upwards movement is being hastened by the hedge funds who feel that the oil prices are way out of sync from their fundamentals. This provides ample opportunities to the fund managers to invest and make profits from the market discrepancies. Analysts feel that the fundamental driver of the oil price is demand determined by strong global growth. Some estimates reveal that if the global economic growth of 4% persists, the demand for crude oil would increase by 2-3 million barrels per day. The current excess capacity is only around 2 million barrels per day. The future global economic growth is being pegged at 4.3% in 2005 and 4.4% in 2006 by The International Monetary Fund (IMF). As such Hedge funds see oil price surge is inevitable. Today.reuters.com reports:

"But Ashok Shah, chief investment officer at London & Capital, expects demand for crude oil to rise by 2 to 3 million barrels per day each year if global economic growth continues at around 4 percent a year."

Read More: Hedge funds see oil price surge inevitable

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