The Organization of Petroleum Exporting Countries cut its forecast for Q1 2008 global oil demand by 130,000 barrels per day to 87.19 million barrels per day on the threat of a U.S. recession, the cartel announced Friday, in its latest monthly report."A sharp economic slowdown, especially in the U.S., may further undermine demand growth in the coming months," OPEC said. It added that current OPEC output near 32 million barrels per day could help ease market fundamentals.
Crude oil was virtually unchanged on the news Friday afternoon, rising 1 cent to $95.47 per barrel. Heating oil fell about 3 cents to $2.63 per gallon, wholesale unleaded gasoline declined about 1 cent to $2.47, and natural gas dropped about 6 cents to $8.71 per million BTUs.
OPEC: market is well-supplied
OPEC ministers have repeatedly said the market is well-supplied, arguing that oil's rally to near-record $100 highs is primarily due to an influx of speculative money and political tensions in the Middle East.
Jim Dietz, independent energy trader, said OPEC is correct, to a degree.
"True there is a geopolitical risk premium of about $10-$15 built into oil's price, and speculation also is boosting prices, probably by about another $10 or so, but those aren't the only factors," Dietz told BloggingStocks Friday. "OPEC is contributing to it as well. OPEC could increase production by 750,000 barrel per day very quickly and the price of oil would drop like a rock. The reason they don't is they don't want oil to drop like a rock because they like the rich revenue stream they're getting from oil's high price. They're used it to it."
Price affects U.S. growth
Dietz added that, once again, OPEC has demonstrated that it favors "pushing the oil price envelope," even if it risks harming global economic growth.
"They did this in 1973-74 and in 1979-1980, and both times U.S. recessions followed," Dietz said. "Economic systems are more-energy-efficient now, so we'll see how the world fares this time. Hopefully, we can avoid one." Dietz said he is short oil with a monthly contract. He has no open daily contracts.
Dietz said most research he has reviewed argues that the global economy has slowed due to the slowing U.S. economy, and he expects oil prices to trend lower heading into the spring.
Dietz said sees oil testing $75-$80 per barrel and retail unleaded gasoline testing $2.75 to $2.80 per gallon by early spring.
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Reader Comments (Page 1 of 1)
2-16-2008 @ 9:30AM
David said...
Dietz, It's traders like yourself and greedy Wall Street insider trading that is driving the price of crude up, When you state that $10-$15 is built into the price for "geopolitical" reasons and another $10 for speculation , then you point your fat greedy finger at OPEC give me a break. Wall Steet is nothing more than a legalize Maffia organization that is causing the recession in Amercia.
2-16-2008 @ 11:21AM
John said...
Gee, where is there any evidence current barrel prices have done anything at all to thwart economic growth? Are oil workers potted plants? Is the oil business left out of GDP.
The real estate and financial industries have pooped in the world's growth soup, and nobody from the oil industry made them do it.