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Ever imagined Crude Oil would be $ 100?
By Edward Tapamor
PARIS (ResourceInvestor): Who would have thought it? Oil at $9 per barrel. You could never have imagined the price would fall so low.
But just nine years ago in 1998, that is exactly where oil was: $9 per barrel. It is now trading at around 10 times that amount, and all bets are off as to where it will end up. We have had two quarters of draw-downs in stockpiles in the U.S. and around the globe. What is worse, there are no signs of any builds in crude stocks for the next four to five months. That is what the market is betting on, at least.
Alongside this continued level of consumption in the U.S., barely slackening in 2007, OPEC has stubbornly refused to add any extra production to the market. Partly because they cannot add any without risking damaging wells, partly because the oil they can add - maybe around 500,000 barrels per day, maybe around 1 million barrels per day - is the kind of heavy sulphurous oil no one really wants.
But let us remember that this time last year, and briefly in January this year, oil traded at just under $50 per barrel intraday. So it took around eight years to travel from a $9 floor to a $50 floor. Since that time the price of a barrel of crude on the Nymex has shunted past the $60-, $70- and $80-range, almost without trying. Where the floor is now is anyone’s guess. Certainly it seems hard to see a price below $55 per barrel under any circumstance barring a huge recession.
It is true, as Sheik Yamani, the former Saudi oil minister, said this week that there are no real reasons why oil prices should have done this. People who want to buy oil, can buy oil. But his decision to blame the problem on casino-like behaviour in trading houses (was there a time when it was not a casino?) is wide of the mark.
What we have seen over the past four years or so, as oil moved out of OPEC’s $22-$28 per barrel price range, is a slow cranking up of pressure. Although the figures from China are often confusing, the emerging giant is consuming more and more energy. It may not be as immediately impacting as people often state, but slowly the rubber band is being stretched. Likewise the figures from India.
The result of the breakout in price means that this time next year, we could easily see $100 oil. In fact, we could see well over $100 oil. There is no reason why $100 is more important than any other price; it is only a reflection of what people will pay, psychology aside.
We said a week ago that with the current state of geopolitics, there was little reason to see an end to the upside - this despite our forecast of $66.60 at Christmas. Now we have the added attraction of a double bombing in Pakistan to welcome back the corrupt oligarch Benazir Bhutto that killed 130 of her supporters. She has already moved to calm the situation by openly blaming the Pakistani army, of which another oligarch General Musharraf is commander and current president.
We also have the statements from Massoud Barzani, the leader of the Kurdish area of Iraq, that his region will fight any incursion into their territory by the Turkish army. This is hardly unexpected but definitely a new wildcard into the American and British jihad in the region.
Although the idea that the U.S. and UK wanted to spread democracy in the region is wholly false - after all, it is they who prop up all the military juntas in the region and the nuclear bandits in Israel - the prospect of a NATO ally in Turkey invading parts of northern Iraq can hardly be welcome.
What is more prescient is the question of what news is there now that can bring the price down? What can move crude oil back to the levels where ordinary folk can feel comfortable and secure? The answer at the moment is nothing.
By Edward Tapamor
PARIS (ResourceInvestor): Who would have thought it? Oil at $9 per barrel. You could never have imagined the price would fall so low.
But just nine years ago in 1998, that is exactly where oil was: $9 per barrel. It is now trading at around 10 times that amount, and all bets are off as to where it will end up. We have had two quarters of draw-downs in stockpiles in the U.S. and around the globe. What is worse, there are no signs of any builds in crude stocks for the next four to five months. That is what the market is betting on, at least.
Alongside this continued level of consumption in the U.S., barely slackening in 2007, OPEC has stubbornly refused to add any extra production to the market. Partly because they cannot add any without risking damaging wells, partly because the oil they can add - maybe around 500,000 barrels per day, maybe around 1 million barrels per day - is the kind of heavy sulphurous oil no one really wants.
But let us remember that this time last year, and briefly in January this year, oil traded at just under $50 per barrel intraday. So it took around eight years to travel from a $9 floor to a $50 floor. Since that time the price of a barrel of crude on the Nymex has shunted past the $60-, $70- and $80-range, almost without trying. Where the floor is now is anyone’s guess. Certainly it seems hard to see a price below $55 per barrel under any circumstance barring a huge recession.
It is true, as Sheik Yamani, the former Saudi oil minister, said this week that there are no real reasons why oil prices should have done this. People who want to buy oil, can buy oil. But his decision to blame the problem on casino-like behaviour in trading houses (was there a time when it was not a casino?) is wide of the mark.
What we have seen over the past four years or so, as oil moved out of OPEC’s $22-$28 per barrel price range, is a slow cranking up of pressure. Although the figures from China are often confusing, the emerging giant is consuming more and more energy. It may not be as immediately impacting as people often state, but slowly the rubber band is being stretched. Likewise the figures from India.
The result of the breakout in price means that this time next year, we could easily see $100 oil. In fact, we could see well over $100 oil. There is no reason why $100 is more important than any other price; it is only a reflection of what people will pay, psychology aside.
We said a week ago that with the current state of geopolitics, there was little reason to see an end to the upside - this despite our forecast of $66.60 at Christmas. Now we have the added attraction of a double bombing in Pakistan to welcome back the corrupt oligarch Benazir Bhutto that killed 130 of her supporters. She has already moved to calm the situation by openly blaming the Pakistani army, of which another oligarch General Musharraf is commander and current president.
We also have the statements from Massoud Barzani, the leader of the Kurdish area of Iraq, that his region will fight any incursion into their territory by the Turkish army. This is hardly unexpected but definitely a new wildcard into the American and British jihad in the region.
Although the idea that the U.S. and UK wanted to spread democracy in the region is wholly false - after all, it is they who prop up all the military juntas in the region and the nuclear bandits in Israel - the prospect of a NATO ally in Turkey invading parts of northern Iraq can hardly be welcome.
What is more prescient is the question of what news is there now that can bring the price down? What can move crude oil back to the levels where ordinary folk can feel comfortable and secure? The answer at the moment is nothing.
