Last I read, Oil was up on news that OPEC did not agree to cut supplies, but they may do so in February. Just wanted to say that the fact that oil is up makes no sense to me. If OPEC could not get the support among its members to raise prices now, while demand is less, how can we really believe they will cut back on oil production during the winter? My thought is that their statement that oil supplies may be cut during winter is just "jaw boning" to keep prices up. If they won't cut supplies now, they likely won't cut it in the middle of the winter when prices are higher considering how angry and oil averse that would make people. Am I wrong? SM
Dont try and rationalize the markets, its just going to drive yourself crazy. I never have cnbc or any other news provider on. Just trade what you see and worry about why it moved later(if you still care). Now thats not to say that I dont know when economic releases are, because I do. All that is important is the market's interpretation, not yours.
if your a believer in a major slowdown/recession in 2007 as i am, opec will have a hard time keeping prices propped up. a us slowdown will lead to an asian slowdown........blah blah blah. point is the fundamentals are bearish in oil for at least the next 6-12 months. once we get through the next couple of weeks crude inventory drawdowns (the annual tax game) the stocks will come back hard in jan at the same time the consumer is closing his checkbook. i see a low $40's price sometime in 2007.
Dec. 14 (Bloomberg) -- OPEC, the producer of 40 percent of the world's oil, approved a 1.9 percent production cut and accepted Angola as its first new member in 31 years to gain greater control over global crude supplies. Output will be reduced by 500,000 barrels a day as of Feb. 1, OPEC President Edmund Daukoru said today in Abuja, Nigeria. The cut is in addition to the 1.2 million barrel-a-day reduction agreed upon by the Organization of Petroleum Exporting Countries on Oct. 20 in Doha, Qatar.
Oil is going higher in the long term. Consuming oil isnt just a matter of driving around in an SUV. Even if you dont own a car, you still consume oil in everything you do. Recession or no recession, as long as more people are born on the earth, oil will be consumed.
I don't disagree with the long term. However, a recession over here leads to a global slowdown which is a huge impact on daily demand. For instance, the US consumes over 20 million barrels of oil per day. The daily gasoline demand is around 9.5 million barrels per day. Like you said, we consume oil in so many other products including all that plastic shit that we buy our kids at walmart that piles up at the house. A recession will lead to a pullback in consumer spending globally which will impact all these other "oil" products incrementally to combine for a several million barrel per day oversupply at the same time that most global reserves/storage facilities are brimming with storage. The steep contango curve has paid big $$ to store crude and keep rolling the hedge.