Analysis: Oil Prices $80 and Higher Befitting Current Market

Barclays reports that oil prices are currently below where they should be given the supply-demand dynamic, particularly as it relates to production in the Gulf of Mexico:

According to Barclays, the fundamentals of restricted supply and economic recovery, which supports higher demand, are in place to support higher oil prices than levels currently seen. Barclays noted that the U.S. Energy Information Administration (EIA) had revised higher its estimate for production lost from the Gulf of Mexico oil spill, noting that U.S. oil production in 2011 could be reduced by 82,000 b/d. EIA also revised its global demand estimates upward for 2010 and 2011, while data from the U.S. Department of Energy continue to showcase robust demand indications for the U.S.

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