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June 5th, 2009

Oil Prices Predicted to Keep Rising

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Oil futures rose this morning on the news of an improving job report and a strengthening dollar. Oil prices topped out at $70.32 a barrel, the highest level recorded in six months. Futures quickly receded back to between about $67 and $69 a barrel:

Also supporting oil prices, Goldman Sachs (GS, Fortune 500) released a research report Thursday raising its 3-month price target for crude oil to $75 a barrel from $52 a barrel. By the end of 2009, the report predicts oil will reach $85 a barrel, up from $65 a barrel. And by the end of 2010, Goldman forecasts that crude will hit $95 a barrel.

“When Goldman Sachs starts to talk bullish the market seems to move like it just got an offer that it just can’t refuse,” said Phil Flynn, senior market analyst at Alaron Trading, in his daily research note.

Oil prices have nearly doubled since the end of the year. The price of gasoline has been pulled higher, as well.

Just as the unemployment rate is a lagging indicator, so is oil prices. There is a significant lag from when a barrel of oil is sold until the time it is refined to gasoline. The more oil prices keep rising, the longer we can expect to be paying higher gas prices:

The national average price for a gallon of regular unleaded gasoline increased to $2.592, up 2 cents from the previous day’s price of $2.572 according to motorist group AAA.

In the last 38 days, the average price of gas has increased 54.4 cents per gallon.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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