Friday, May 29, 2009

Why Are Gas Prices Going Up?

Oil Is Plentiful, Demand Weak. Despite the dangers, investors and oil producers are betting that global demand will roar back, apparently hoping that the recession has already hit bottom.

SHOOT: I admit to be one of these 'investors' betting that global demand will roar back. Not because I believe the recession has reached the bottom, nor because oil supplies are plentiful. I believe the market wants to believe that the recession has reached the bottom, and this might spark a temporary pseudo-recovery. If that happens there may be a little money to be made. All of the rallies that follow now are ultimately sucker's rallies, because the overall picture is permanent contraction. Good luck.
clipped from
High gas prices posted at a Shell gas station outside of Yosemite National Park

Oil analysts believe OPEC's decisions on Thursday could help push oil prices even higher; oil futures on the New York Mercantile Exchange have risen 36% in just two months, to about $63.46 a barrel on Thursday. And that appears to be on track to achieve targets set by OPEC leaders. Saudi Oil Minister Ali al-Naimi - OPEC's key power player - said Wednesday that oil prices ought to rise to between $75 and $80 a barrel by the end of the year. "Demand is picking up, especially in Asia," he told reporters puffing alongside him as he jogged through the streets of Vienna. "The price rise is a function of optimism that better things are coming in the future."

"If we run out of storage it could prompt a collapse in the price," says Wardell. Oil producers might then choose to dramatically cut output in order to run down the surplus. (See pictures from Azerbaijan's oil boom.)
 blog it

No comments: