Although I refuse to trade Crude from the long side, it is going to test $70. I was not impressed with today's follow through or lack of, to the downside. I also think PPT Texas is holding oil above $60!
And at US$ 70.80 today it's not that far away ... The market seems to have a funny way of keeping a lid on some markets, while other markets in some parts of the world take a obvious tumble.
Forbes Expects Oil Price to Dip to $35 Steve Forbes, the American publishing executive, said Tuesday he expects the price of oil to fall as low as US$35 a barrel within a year, blaming the current price spike largely on speculation. Forbes, in Sydney for a conference of global business leaders sponsored by his organization, said that U.S. inflation was helping fuel the rise "and the rest of it is a sheer bubble of speculation." "I think in 12 months we are going to see oil down to US$35, US$40 a barrel," he said. As Hurricane Katrina lashed the U.S. Gulf Coast on Monday, oil hit US$70.80 a barrel, before retreating. "It is a huge bubble, I don't know what's going to pop, but eventually it will pop," Forbes said of the oil price. ------------- We'll see.
Steve Forbes may be seeing pigs flying next year too, but crude closed at US$ 69. It seems like a supply-demand problem to me, but I guess Mr. Forbes find that naïve. Labelling the (rather well known) larger cut of China, India etc. as "speculation" is pitiful at best. On the other hand, stretching higher always has a way of snapping back.
Gringinho, there's strong evidence that the oil price nowadays is set by speculative capital. IMO the single biggest factor was US role: not for increasing its consumption, but bec of its insistence to keep stockpiling oil; filling the SPR to 100% capacity (and commercial stockpiles, now at 5yr highs, TWICE the 5yr avg) at the same time that the supply-demand equilibrium was so tight. The US could have waited a couple of years for the new oil projects started in 2001-2002 to start producing, to fill SPR. Especially after invading Iraq in 2003, which has large reserves. Market tightness allowed specs to effectively control the oil market "at the margin" and drive its price skyhigh. PS: I've written a few more detailed posts here on this subject during the past weekend, although I was maybe a bit too outspoken I try to stay objective and open to others' points of view, but sometimes sentiment kicks-in.
Perhaps SPR/commercial capacity, Gulf Coast production disruptions, and what Forbes, Buffett, and Bush all say have less effect on the long term trend of oil, which is simply responding to a widening gap between global supply and new demand.