Bloomberg reports that crude oil could return to $50 a barrel as OPEC cuts production. Now I have to mention they were not cranking up production when oil was at $147 a barrel, but they are good at cust on the other end of the spectrum.
Nonetheless, I just read last week that inventories are at almost peak capacities, oil tankers are full and sitting at docks and the glut in the market is incredible. Even with cuts the price should not go up any time soon. It is truly amazing that the prices are as high as they are, but me thinks something stinks. There are various links in the pipeline between the oil coming out of the ground to getting into your car and I suspect there are several places where the pipeline is getting squeezed, like at refineries.
Overall, there seems to be plenty of oil out there at the moment, so why would cuts by OPEC make a big difference anytime soon? If you know, you tell me.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP2gWI8POYac&refer=home
Disclosures: None.
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there are several reasons for oil to go up next week (March 9/09)
1- Iran testing missiles there
2- US, britain and UN almost getting in to Sudan
3- Big tensions in Korea (war call warnings etc... related with a satellite launch)
4- OPEC meeting March 15, big cuts expected
Appart from the above:
- Goverment makes a very good deal taxing oil at the pump, that's one of the biggest causes of the prices differences.
- The new goverment have invested a lot in alternative energy and that lobby will be there for at least 4 years. --> Nobody will put a dime short term in any alternative energy investment unless oil goes up in price, if goverment force measures for alternative energy killing oil then we will not be able to compete internationally for more than 10 years, because everybody overseas will continue using cheap oil.
- The inflation part of the game. With trillions and trillions and trillions out there it wouldn't take much for commodities prices to adjust to inflation.
- There are been big unemployment numbers in US, they are already hitting refineries in PA. Same in britain.
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