Bold call. I can definitely see the "glut" he does, building, too, but $20 is a long way down. http://www.bloomberg.com/apps/news?pid=20601109&sid=aQBXqFcd5gJo Verleger Sees $20 Oil This Year on âDevastatingâ Glut (Update1) By Grant Smith July 16 (Bloomberg) -- Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger. A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said. âThe economic situation is not getting better,â Verleger, 64, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a telephone interview yesterday. âGlobal refinery runs are going to be much lower in the fall. If the recession continues and itâs a warm winter, itâs going to be devastating.â Crude oil last traded at $20 a barrel in February 2002. Futures were at $61.18 today in New York, having recovered 89 percent from a four-year low reached last December. The Organization of Petroleum Exporting Countries is implementing record supply cuts announced last year in response to plunging consumption. âOPEC donât realize the magnitude of the cuts they need to make,â which would total about a further 2 million barrels a day, Verleger added. âStorage is going to become tight. Itâs not clear if thereâs going to be enough storage available.â China, Inflation Oil will average $63.91 in the fourth quarter, according to the median of analyst forecasts compiled by Bloomberg. Crude for December delivery traded at $65.61 today in New York. Prices have rebounded on expectations of a demand recovery, led by China and other developing economies, and concern expansionary monetary policy would stoke inflation and weaken the dollar. At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011. âChina is in a real desperate situation,â said Verleger, who publishes the Petroleum Economics Monthly. âWeâre in a situation where U.S. consumers arenât consuming and Chinese manufacturers get hurt. Economists are looking for growth in all the wrong places.â Forward contracts for oil have been higher than prices for immediate delivery this year, a situation known as contango, creating incentives to buy crude now and store it. That may end as growing stockpiles make storage more expensive. âPrices would be much lower today, but for the very large incentive to build inventories,â Verleger said. âYou need forward buyers, which we had when people were fearing inflation, but as concerns turn toward deflationâ that will no longer be the case. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net Last Updated: July 16, 2009 07:49 EDT
This is just a BS. Oil is not like gas, there are so many ways people can store it. Also, Asian countries have been buying all petro products for long-term, many years...
opec... tends to have a .... for lack of a better term does not have " 100% control" to maintain the price of oil. yeah supply cuts and whatnot. yada yada yada however it seems speculation will keep the market up temporaily
News today was China car sales passed US for first time, sales soar. They need gasoline, right? http://www.bloomberg.com/apps/news?pid=20601087&sid=aqqspSwPwMRo Some OPEC minister said "everyone likes oil price right here", the other day, whatever that means.