October 20, 2008
Futures contracts on oil were selling for 50 $ at a much increased price this morning as options traders were trying to guage where the oil market is heading in the coming months. This $50 price is about where spot market prices for oil were in 2006 and hence in the light of recent global events it is not an unrealistic price. To prevent it from happening OPEC is planning to cut production but not even the cartel can halt a plunging global economy and a global public fed up with being ripped off by excessive gasoline prices and determined to economize on their fuel consumption.
So in the coming months we shall see who prevails.
I would still bet on lower oil prices than the current $73 a barrel price. The per gallon gas price at our neighbourhood filling stations still read well over C$1.04 a litre after being as high as C$1.47 a litre for a number of weeks but I expect to see the price to fall under a dollar fairly soon which will be welcome relief for hard pressed consumers. As I have argued for some time now the global trend was not apart from OPEC inflationary. Quite the opposite. The recent crash and financial crisis has only amplified that trend to disinflation and possible deflation.
Wednesday October 22, 2008
Nymex oil is trading this morning at $67.88 a barrel.Brent oil at $66 a barrel. So in the current bearish market with commodities still falling in price , oil prices short of OPEC cuts which would only anger western consumers further and thus prove counter-productive from OPEC's perspective are likely to stay low for some time until the real economy begins the recovery phase likely in several quarters from now.
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