Wednesday, July 2, 2008

Oil Market

Speculation seems definitely to be going out of fashion as a reason for high oil prices.

The IEA has just released a medium term oil market report that is far too expensive for me to purchase. In press releases and talks supporting the release they seem to be trying to damp down talk about speculation by noting the current contraction in oil stocks. The Executive Director comments:

Speaking at a press conference at the World Petroleum Congress, Mr. Tanaka emphasized that market fundamentals were the main underlying factor behind high oil prices. “OPEC production is at record highs and non-OPEC producers are working at full throttle, but stocks show no unusual build. These factors demonstrate that it is mainly fundamentals pushing up the price,” he added.

1 comment:

Truth Seeker said...

One story is that Governments and other oil buyers have been moving to secure supplies through off-market contracts with secret prices and terms. A growing amount of oil is disappearing down this "black hole".....leaving less oil on the open market. Some producers are also claimed to be sitting on reserves, speculating on better prices in the future if they preserve their oil assets.

If you think about it, no one from oil pump to petrol pump has any incentive to take any action that would reduce price. Oil ins an example of what happens when critical "infrastructure" is operated for profit in a market where supplies are tight.