At the beginning of this week, the price of oil looked set to shoot past the $100 per barrel psychological benchmark and most traders were saying that Wednesday, when US crude inventories data was due to come out, would be the day.
But inventories data came in mixed, and oil ebbed from its all-time high of $99.29. It didn't retreat too far though, and traders say the benchmark will be tested again, maybe as early as next week.
"I think we're still looking in the short-term to get to $100 a barrel," Simon Wardell, senior oil analyst at Global Insight told CNBC Europe.
"But in the very immediate term, with the Thanksgiving holiday in the US, (and) not having reached it (on Wednesday) on back of a fairly bullish EIA report, I think we might be into next week at some point before we make another run," Wardell added.
Oil has been rising inversely to the dollar over the past months, amid feverish speculative trading and tightening oil supplies ahead of the winter. Fears of a slowing global economy have somewhat tempered its advance.
The falling dollar is causing great concern for oil producers and investors alike. The greenback has depreciated significantly over the past months, falling to record lows against the euro, the Swiss franc and a basket of other currencies.
And as the greenback sinks, oil skyrockets, virtually providing the markets with a one-way bet.
"The main concern at the moment, and what seems to be the main driver … is the dollar, and of course, the more it continues to depreciate, the more concern it generates among producing countries because it affects their purchasing power," Alejandro Barbajosa, oil correspondent from Argus Media, told "Power Lunch Europe."
Blessing and Curse for Oil Firms
Energy stocks have enjoyed the benefits of high crude prices, with investors also fleeing to safety into commodities because of the turmoil in the financial markets.
But oil companies are not always able to take full advantage of the higher oil prices drifting into their profits.
StatoilHydro, the recently merged Norwegian company, had very good third-quarter earnings results, helped by currency fluctuations, but production remained to be slipping.
"Right now, I think we see a lot of complexity in the industry: Costs are going up, (and) there are capacity issues in most of the markets that we are working in," Helge Lund, CEO of Statoil, told CNBC Europe. "We also have to face the new issues driven by climate change and how to tackle the carbon challenge."
Another big risk to oil producers and refiners is oil services inflation. The cost of bringing new fields and new production into the market is increasing, and making people nervous without the security of demand.
"In the 80s and the early 90s when we had that huge decrease in oil prices, a lot of oil service companies got rid of drilling rigs, and now, we can't find enough, we can't build them (rigs) quickly enough," Wardell said.
"There aren't enough schooled engineers out there, there aren't enough geophysicists, so there's a long-term issue for the oil industry to start adding that capacity, which of course we now need," he added.
The International Energy Association (IEA) on Nov. 13 lowered its estimate for global demand for 2008, on the basis of the credit market crisis leading to a slowdown in the global economy, and because no major draw-downs were experienced during the summer, leading to more winter supplies.
"The outlook is coming down for demand, but we've still got a really tight supply and we've still got the financial speculation in the market, which is really pushing us to $100," Wardell said.
He said the tight supply conditions will not change dramatically in a year, as OPEC could not increase output by too much because there was need for new production capacity.
"A lot depends on what happens in the winter, that's the big unknowable, and you can have as much as a 5,000-barrel-a-day swing in demand," Wardell added.
With snow falling in early November in some parts of Europe and the U.S., it looks like the $100 oil is right around the corner. And it may come to stay.