Stephen Schork, president of the Schork Group, said oil prices could decline by $20 a barrel if tensions in Libya and the Middle East cool off. Schork made the comments during an interview with Bloomberg Television on Tuesday morning and noted that speculators are over-extended in their bullish bets on oil prices.
''Speculators on Wall Street now own more barrels of sweet oil than are actually sitting in the Strategic Petroleum Reserves. They own twice as many futures contracts in gasoline than there are at the Nymex delivery hub in New York Harbor,'' Schork said in the Bloomberg interview.
Oil futures were trading around $90 a barrel when violence erupted in Libya on Feb. 15 and closed today at $108.27. Libya is Africa's third-largest oil producer and home to the continent's largest oil reserves. The country was producing nearly 1.6 million barrels of oil per day prior to the start of the conflict there, but some estimates say that output has dwindled by 1 million barrels or more.
In the Bloomberg interview, Schork noted that gas prices are already so high that consumers cannot absorb more price hikes at the pump and if they are faced with that scenario, consumption habits could be altered.