$100 oil: It's not dead yet

Prices have eased from the key triple-digit level, but a weak dollar, approaching winter and strong demand look likely to keep crude prices afloat.

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By Steve Hargreaves, CNNMoney.com staff writer

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Oil prices may have eased from near $100 a barrel, but the reprive could be short-lived.

NEW YORK (CNNMoney.com) -- While it seems like oil's recent attempt to break $100 a barrel has come to a end, experts say a steep fall in price is unlikely, and another shot at $100 could be just around the corner.

"The only thing that can kill this rally is an economic slowdown," said John Kilduff, an energy analyst at MF Global in New York.

But Kilduff's optimism about the resilience of high oil prices runs counter to the falling prices which the market has seen in the last few days.

Several analysts thought it would be inevitable for the price of a barrel of NYMEX crude to top $100 last week.

It got close - $98.68 a barrel - but since last Wednesday crude has pulled back and currently trades around $94 a barrel. With the planned options and contract expirations later this week, it is beginning to look less likely that oil will return to record-breaking levels in the immediate future.

"Unless we touch $100 by tomorrow, it's going to become increasingly difficult" to get there, said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. "The momentum is going to change very quickly."

Tuesday is when options on the December contract expire. Options allow traders who buy them the opportunity to buy or sell oil at a predetermined price at a predetermined time, but don't require them to do so.

Barakat said a few days ago there were 60,000 options that would have let traders buy oil if it reached $100 a barrel. Now there are just 40,000 options, a sign that traders are betting on lower prices.

Plus, the December contract itself expires on Friday. Prices usually fluctuate widely the day a contract expires, as those people who do not want to take physical delivery of oil sell and commercial users - like refineries and airlines - take the opportunity to buy.

Also pulling prices lower are comments that indicated OPEC may raise production, a stabilizing dollar, and the stock market declines of the last few days and associated fears of a slowing economy.

With all these factors taken together, Barakat said oil could trade in the low $90s by the end of the week.

Phil Flynn, a senior market analyst at Alaron Trading in Chicago, agreed prices could fall significantly over the next few days.

"We could see the high $80s by the end of the week," said Flynn, noting the contract expirations and the fact that traders may begin pricing in a foreseen drop in demand caused by the high prices.

Still, it's not like the high $80s is exactly a bargain price for crude, considering it traded at $79 just a month ago, under $50 at the start of the year, and under $20 in 2002.

Most analysts said that while a fall to the $80s may be possible, it's likely crude will stay fairly high for the foreseeable future.

Flynn said another run at $100 could happen as early as January, when cold weather increases the demand for heating oil worldwide. He also said the rise to near $100 a barrel was justified by the fundamentals - strong demand and limited supply - rather than speculative investing.

If $100 isn't reached this winter, there's always the runnup to the summer driving season in the spring, or fears of hurricanes in late summer.

Some analysts say oil prices could even top $100 this week. They question OPEC's ability to lower prices and don't think the expiring contracts will pull prices lower and say the dollar is likely to remain weak.

"It doesn't look like the dollar has bottomed out yet," said MF Global's Kilduff. "That and geopolitics will keep us going." To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.