Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

$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.

Subscribe to Markets
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Steve Hargreaves, CNNMoney.com staff writer

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

Photo Galleries
Top luxurious hotel suites for business travelers For many people, you can't put a price on comfort. More
Million-dollar startups: These firms scored big sales their first year Their first year in business, these companies generated $1 million in sales. More
The 10 best states for retirees It might be worth moving to a new place to find your dream retirement home. Check out these 10 states. More