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Very often you can get a sense of the way a market is reacting by what is not happening. OPEC is meeting next Sunday to review their strategy in light of the current financial crisis. There is an indication that OPEC may not cut production this time around. Why is this?
Here are several reasons why we may see things stay as they are. First and foremost is that OPEC members "talk the talk" but they all do not "walk the walk." For example, Saudi Arabia has cut production by 16% since September but Iran cut its production only 4.3% and Venezuela cut its production by 8.3%. So as usual OPEC has difficulty holding each of its members to an agreed upon reduction.
Secondly, the price of oil has rebounded to about $45 per barrel, up about 30% since hitting bottom last December. The April Crude Oil contract closed at $47.29 +.29 on Monday.
Thirdly, the cuts recently enacted are impacting the economies of the member states of OPEC. Less oil sold means less income and less profit.
Finally, demand for gasoline in the US has begun to rebound, up 2.2% over the past month. So its a good bet that we'll see the status quo in oil output.
Do you believe that gas prices will go up?
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Reader Comments (Page 1 of 1)
3-10-2009 @ 4:33PM
Iridium said...
Even though we have vast stockpiles of oil and nowhere to store it the price is going up. Why? well the oil manipulators have stockpiled cheap oil they bought at $35 a barrel in order to profit immensely when they drive the price up.
After the OPEC announcement we may get a huge buying spree that will lift the price to $60 or so then get a massive selloff where the excess inventory stored all over the country is sold. This will of course drive the price way down again. This time the oil manipulators will be ready to sell contracts short and make a killing on the down cycle.
This whole deal is so transparent its killing me that people aren't saying this on the news. The oil conspiracy continues unabated.
Again if we start killing oil manipulators we won't have a problem. Let them be and we'll have price shock II. The price shocks in the 60s and 70s pale to last year. I mean at least those shocks were caused by a shortage. This time its just caused by total greed on wallstreet. The moron we have in the White House isn't going to do a thing.
The true market fundamentals put oil at $20 a barrel. I love how Iraq says that oil below $50 isn't profitable. People actually listen to these morons. So they weren't turing a profit 5, 10, 20, 30 years ago.
If we don't walk into Goldman Sachs and burn it to the ground we will have a collapse that makes the Great Depression look like the 1990's.