9:34 a.m. EST, CNBC: OPEC says it can't do much to bring oil prices down.
Hmmm.
WTI oil is now up another 20 cents on already record prices. And the market in general is up quite nicely.
10:02 a.m. EST, I missed it, but CNBC said WTI oil went over $109 for a moment; it's back under $109 right now. Again, President Obama has reassured Americans. When oil was at $107, he said during his energy security speech that another $10 in the price of oil/bbl translates to only 25 cents/gallon for gasoline. When gasoline is at $3.50, another $25 cents is manageable, at least according to the president.
Opec can increase supply. And what I understood the UAE oil minister to say was that there is not a supply/demand imbalance. If what he said is a fact or not , I dont know. Supply/demand is important but not the only pricing factor.
ReplyDeleteFud is also important.
I have a long post on this very subject.
ReplyDeleteThe Libyan situation showed us a couple new things (those who followed the oil industry knew it, of course, but it was an eye opener to the rest of us):
a. The Saudis have a heavier oil that US refineries don't want, and European refineries have adjusted to (thus the Brent vs WTI difference, among many other grades of oil).
b. The Saudis can't respond quickly politically; they need to "discuss" things.
c. The Saudis can't respond quickly logistically; in fact I think they are still behind the curve with respect to replacing Libyan oil.
d. It is pretty much agreed that Saudi does not have the spare capacity it once did. How much spare capacity it has is up to debate.
And thus, the argument, that OPEC (Saudi) can increase the price of oil; they won't/can't bring it down. Not everyone agrees but I feel my argument is pretty solid.
The point that the UAE minister (not
ReplyDeleteSaudi but I assume Saudi says the same thing) was attempting to make is that supply / demand (which you keep referencing as the "problem" that opec cannot control) is not the cause of the price run up.
Rather UAE says the price reflects fear/uncertainty/doubt (FUD)in the market and not any supply/demand imbalance (i.e not enough supply to meet demand).
OPEC (all of them) want the highest price they can get that doesnt throw the world economy (demand) into a tailspin which would cause oil prices to CREATOR. OPEC just doesnt know (and no one does ) what the tipping point for a demand cliff is.
We all saw what happened in 08 abd yes, there were other factors in the mix.
To me, there is no doubt that adequate supply and more is on/in the market. And more is coming on line every day. Dont you read your own posts???????
One or both will happen. The mideast uncertainty will calm down, or demand will collapse. Either way oil is headed down. How high it will get before either or both happen and what price will be sustainbed is a question. But I think the answer is not much higher.
That's an easy bet. I agree. Oil isn't going to get much higher this year.
ReplyDeleteWell, maybe we spoke too soon. WTI oil is now up over $110, rising $1.45 in the last couple of hours (Thursday morning, April 7, 2011).
ReplyDelete