May is turning out to be a volatile month for the oil markets. After U.S. oil futures hit a 19-month high at $87.15 on May 3, escalating worries about Europe's debt problems and high oil inventories pushed crude futures as low as $69.27 at the beginning of this week, a 20.5 percent drop from that May 3 peak and their weakest since December 14, 2009.
This week, five out of 12 participants in CNBC's weekly survey forecast prices will continue their fall, four are calling for prices to be little changed and three expect gains.
"The global markets are not optimistic about the Euro Zone staying together," said Mike Sander of Sander Capital Advisors. "They have shown this by pushing commodities and equities markets lower over the past two days after a one trillion dollar bailout from the EU and the IMF."
Oil may fall towards $65 if the euro breaks $1.20 and the "Dow Jones continues its fall from grace," Sander added. "If I didn't own dollars already, I would now."
China Growth Concerns
Societe Generale analysts Michael Wittner and Stephanie Aymes said concern about additional tightening measures in China, the world's second largest energy consumer, may also hit confidence in the oil market.
"Inflation edged up to an 18-month high in April and bank lending continued to surge," the analysts said in a research note. "Combined with an overheating property market, at least in the major cities, there appears to be plenty to fuel the concerns that the government will react by over-tightening, which would slow down the economy and oil demand growth."
A gauge measuring China's economy showed that growth may have already peaked. The Conference Board said its leading economic index for China, released for the first time on Monday, rose to 144.5 in March, up 1.1 percent from February.
Improvements in the macro-economic picture in the U.S., however, should limit the losses, said Gavin Wendt, Senior Resource Analyst at Mine Life Pty.
"We really haven't seen oil trade below $80 for any extended period of time so I would expect prices to rebound quite strongly," he said.
"Adding to confidence is data that showed retail sales and industrial production in the U.S. climbed more than forecast during April, indicating the economic recovery gained momentum at the start of the second quarter."
JPMorgan's Global Commodities Research team led by Lawrence Eagles, agreed: "While the rise in risk aversion has obviously hurt oil prices our core view remains that although the risks to economic growth may have increased, the self-reinforcing nature of the economic recovery currently underway suggests that prices should recover in the coming weeks."
Stockpiles, Oil Spill
Crude stockpiles reached a record in Cushing, Oklahoma - the delivery point for the benchmark U.S. crude futures contract - suggesting demand remains slack. But despite the supply pressure, JPMorgan recommended staying long oil on expectations of "tightening fundamentals driven by robust economic growth and the seasonal uptick in Atlantic Basin gasoline."