The current price of crude reflects pure greed + over leveraged hedge-fund stupidity + oil man president. Many think there is a risk premium of at least $30, however if a few non-opec nations shut down completely, there would only be a marginal disruption. So there goes the risk premium notion. world is more than awash with crude. There is so much oil inside the earth, that it literally floats on it. There is a few more thousand years worth of supply, enough for humanity to choke itself to death on the pollution it spews. Production is not flat. Where did you get that notion? Production has been out pacing demand. The russians, azeris, angola and quite a number of nations have recently begun to pump out substantial amounts of crude. Unless you're referring to light sweet crude?
The OPEC ministers just received their copy of "An Inconveniant Truth" from Al Gore. ... translated into various languages of course. B
You must be one of the A-biotic oil origin believers. If so I ask you why major oil is found in a arc from Turkey thru Iraq and Iran, across the North of India and into Burma (and even further into the Tonkin gulf)? - I will tell why I think this so by quoting from wiki: "... The Tethyan Trench extended at its greatest during Late Cretaceous to Paleocene, from what is now Greece to the Western Pacific Ocean. Subduction at the Tethyan Trench probably caused the continents Africa and India to move towards Eurasia, which resulted in the opening of Indian Ocean. When the Arabian and Indian plates collided with Eurasia, the Tethys Ocean and the trench closed. Remnants of the Tethyan Trench can still be found today in Southeastern Europe and southwest of Southeast Asia. ..." I also note that Petrobras, Brazil's oil company gets none from the land mass of Brazil. That land mass is rich in large crystals that slowing cooled and grew deep inside the Earth, but is now up lifted to near or at the surface. If oil came from deep inside the Earth (a-biotic theory POV) then it should be seeping from every hill side in Brazil, not totally absent as is the case. Note than all oil is found where there is now or was once a great ocean and that never was that the case for Brazil's land mass. The rush to stake claims in the Artic ocean, now that the ice is melting, is due to general agreement with the oil comes mainly for organ life dropping into mud of ocean floor with little oxygen to destroy it before subduction in ocean trenches takes it deeper and transforms it into oil. In the Artic ocean case the 4 degree C (densest state of water) also helps avoid oxidation of the falling organic matter. - Why many think that is where the next big oil field will be found and used after Artic is open water. Pertrobras will be drilling there as they are world leader in ocean drilling (only thing they do as Brazil has none, contrary to the prediction of the a-biotic oil origin postulates.) I bet you believe in the "tooth fairy" also - and every other thing that promisses and easy energy based life. Get real. Face facts. Oil is limited and getting hard to replace with new discoveries, despite the great new technology now available to the searchers.
That's exactly the problem with the oil futures market, it's not "physically settled" in the sense you're assuming, like e.g. gold or copper etc are. The Light Sweet Crude types eligible for delivery are in shortage (one might say on purpose), which is why the market is so easy to corner. As a result, one one had you have $90 oil and on the other hand the producers assuring us they have no requests for real "wet barrel" of oil. Since 2005, OPEC was calling the oil market "oversupplied and overpriced". Ofcourse, once they realised that customers can cope higher prices, they raised their price target. The last time there was any shortage in the "real" oil market was for some months in 2004. As I wrote before (search my post history), the scandal of the oil price is much bigger than SIV...
Oil could rise to 150 and there would be no prblems. Remember that adjusted for inflation oil hasn't gone up that much.
Market says otherwise. <a href="http://imageshack.us"><img src="http://img85.imageshack.us/img85/8986/pic1bk2.gif" border="0" alt="Image Hosted by ImageShack.us"/></a><br/>
have you looked at when production peaked? have you looked at demand? have you looked at the USD - stop thinking about how much oil a USD can buy, start yhinking aboput how many USDs you can demand for a bbl of crude. where are you living these days? caribe or PSN?
actually, they are marginally increasing supply with record prices, but not necessarily OPEC. they rigged their reserves when prices were low so they could increase production based upon % of reserves - wanna double your quota - just double your reserves w/o leaving the office! Mexico is projected to be a net IMPORTER soon with Canntrell's production reportedly decreasing by 500,000 bbls. Ghawar probably pumps more water than oil - hence the huge water separation plants. water increases the depletion rates for fields - healthy robust fields dont need water. Kuwait's big field is already DOA. and if you wanna pump more oil in Alberta, you better save some to grease-up the gov't's prick in your ass (taxes). Hugo grabbed the fields, now infrastructure investment and output suck! there has been an increase of oil piped down from up north into at least one market i know. this has increased well-head discounts for lower quality oil in surrounding US fields. so WTIC oil might increase by $15/bbl, but as a producer you only see $5/bbl of it (gross) with the lower-grade crude. yes, higher prices tend to increase supply and mute demand - its called price equilibrium. but LT, the supply/demand equation should lead to higher prices. all you jokers claiming that its hedgies are doing "it" should consider that something like 50% of US oil supply comes from producers of 100/bbl per day or less, which aint crap! BTW, if they are using sump pumps to get the oil uip from reserve, they are getting KILLED with utility costs! yeah, oil might be 88 in June, so BFD? the easy oil has been probably been found - if not, then why are deep-water rig rates skyrocketing in recent past? if oil prices were gonna collapse, OPEC would be forward selling like a MOFO! wouldnt you? yeah, the emerging Indian middle class wont want cars and urban Chinese will go back to peddling bicycles. i mean, get real. the coming recession is gonna make all the deflationist chicken-littles run out and buy Hhummers, which soon thereafter will be too expensive to drive. read "Twilight in the Desert" and do some research. this one was a no-brainer a long time ago.