The perfect storm that has swept oil prices to $132 a barrel may subside over the coming months as rising crude supply from unexpected corners of the world finally comes on stream, just as the global economic downturn begins to bite.
The forces behind the meteoric price rise this spring are slowly receding. Nigeria has boosted output by 200,000 barrels a day (BPD) this month, making up most of the shortfall caused by rebel attacks on pipelines in April.
The perfect storm that has swept oil prices to $132 a barrel may subside over the coming months as rising crude supply from unexpected corners of the world finally comes on stream, just as the global economic downturn begins to bite.
The forces behind the meteoric price rise this spring are slowly receding. Nigeria has boosted output by 200,000 barrels a day (BPD) this month, making up most of the shortfall caused by rebel attacks on pipelines in April.
| Keep the motors running: increased oil production from countries such as Brazil, Sudan and Azerbaijan is helping satisfy rising global demand for the fossil fuel |
The Geneva consultancy PetroLogistics says Iraq has added 300,000 bpd to a total of 2.57m as security is beefed up in the northern Kirkuk region.
"There is a strong rebound in supply," said the group's president Conrad Gerber.
Saudi Arabia is adding 300,000 bpd to the market in response to a personal plea from President George Bush, and to placate angry Democrats on Capitol Hill - even though Riyadh insists that there are abundant supplies for sale.
Like the rest of Opec, the Saudis blame "speculators" for running amok, pushing paper contracts into the stratosphere.
The ever-diminishing reserves of oil in the earth's crust will doubtless drive crude prices to much higher levels over time - provided no new technology such as nuclear fusion abruptly changes the picture - but that will not stop cyclical ups and downs along the way.
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I agree Steve, and even posted a similar blog a few weeks ago. The run up has been purely speculative. Soon the forces of supply and demand will take over, like they always do, and oil will return to about $70 a barrell. However, how much do you want to bet that gasoline prices will not fall below $3 a gallon. Now that the oil companies have gotten us accustomed to $3 you can bet that will be the new floor for gas. Much like after Katrina gasoline never returned back below $2 a gallon again.
jerry: I think a trading Bubble has been created in oil,,,and somebody huge is going to get burned.
I hope you are right but never the less we need to find other sources of energy other than foreign oil
According to an interview on CNBC yesterday, they expect the bubble to build to $150 or more, possibly as high as $200 before it bursts. The people that are going to get burned are the retiree's whose pension funds are buying up any kind of oil industry stock, as well as oil futures, as quickly as they can. I do hope that the bubble breaks well before that, though.
mike: never underestimate the next man's greed.
Steve, my husband and I were talking about this yesterday, and he was in agreement with you. He is on the a public employee retirement board at work and one of the fund managers was expressing the same opinion. By the way, that fund manager said they are out of all energy stocks except nuclear. Great post.
This reminds me of the Y2K SCARE of 2000
The media had everyone believing if they didnt have up-to-date software, that the sky was going to fall! Its all greed. different industy. Too bad the American public cannot be protected or even guarded against these manipulative oil companies by our government.
After all, the bureau of Alcohol, Tabacco, and firearms works well for the public...WHY NOT FOR OIL?
Bureau of Oil Management and Pricing. - Hey! That sounds pretty good!!!