Oil Rally Over, Likely to Settle Around $60: Gartman

As gasoline prices get closer to the point where consumers will stop buying, the corresponding rally in oil is probably over, commodities analyst Dennis Gartman told CNBC.

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Gartman, editor of the Gartman Letter, said "egregious levels" of inventory also will pressure oil prices lower and they probably will settle in the $60 range, though there could be a short-lived spike to $80.

US light, sweet crude has rebounded as part of a seesaw journey over the past year. Prices hit an historic peak of $147 a barrel last summer, only to drop below $35 in January.

"I guess you could get crude back to $55 to $60 a barrel — $55 probably cuts off exploration, $80 probably brings into consideration a continued decline in usage, a curtailment on the part of U.S. consumers for driving," he said.

The dollar, which has been under extreme pressure in recent weeks over inflation fears, is rebounding, said Gartman. Dollar-denominated commodities benefit from a weaker greenback.

But Gartman dismisses speculation that the Federal Reserve will tighten monetary policy soon.

"The Fed has never tightened monetary policy during a period of rising unemployment," he said. "It's going to continue to rise for a longer period of time."

But continued consumer weakness will work against a rise in oil.

The average national price for a gallon regular unleaded is $2.619, far below the $4 a gallon that hit a year ago today but well above the $2.195 of just a month ago.

"For the consumer, it's probably the only price that he actually sees on a daily basis is what he or she pays for gasoline," Gartman said. "When you see gasoline prices getting to $2.75, $3 (a gallon) it works against you psychologically, and your propensity to go out and buy other goods obviously gets diminished."

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