Crude back near $90 a barrel after oil cartel dashes hopes for increased production, saying market fundamentals are unchanged and supply is sufficient. [Despite the fact that demand has now outpaced supply]
December 5 2007
Global Oil Production Has Peaked
NEW YORK (CNNMoney.com) — OPEC dashed hopes that it would step up production at its meeting Wednesday, news that sent oil prices shooting back towards the $90 a barrel mark in early trading.
Up until a few days ago, investors had been hoping that the cartel made up of 13 of the world’s leading oil producers would increase production by least 500,000 barrels, news that had helped send oil prices tumbling from a record high near $100 a barrel to under $90.
But the statement of the group’s oil ministers released after their meeting in Abu Dhabi, United Arab Emirates, said that “market fundamentals have essentially remained unchanged, with the market continuing to be well supplied and commercial crude/product stocks remaining at comfortable levels.”
The news sent oil prices sharply higher in early trading Wednesday. The price of a barrel of light sweet crude shot up $1.58 to $89.90 in early electronic trading.
$100 oil and the “S” word
Trading in oil prices will likely be affected by the weekly report on U.S. fuel inventories, due at 10:30 a.m. ET. The report is expected to show crude stockpiles fell by 800,000 barrels, while gasoline supplies grew by 900,000 barrels, according to forecasts of analysts surveyed by Dow Jones Newswires.
The OPEC statement blamed geopolitical issues and speculation in the markets for the rise in oil prices, rather than the group’s production levels. But it said that it will keep an eye on prices, and announced another extra meeting set for Feb. 1, ahead of its next regularly-scheduled meeting March 5.
“The conference again emphasized the Organization’s determination to take every measure deemed necessary to keep market stability through the maintenance of supply and demand in balance,” the group’s statement said.
Economic worries, particularly about a slowdown in the United States, the world’s largest oil consumer, is one reason the cartel may have agreed [can use as a cover excuse for holding] to hold output steady. A slowdown in the economy tends to cut back on oil use. In October, OPEC supplied 31 million barrels of the world’s 86 million barrel daily oil consumption. That went down to 30.7 million barrels a day in November. [then as now, their wells are dwindling, past the ‘peak’, and water is being pumped into the wells to enable maintaining as nearly as possible, the volume of previous production and maintain a cover image, as long as possible, that all is “ok”]The Saudis, who produce roughly a quarter of the oil coming out of OPEC, are the only cartel member [who once had] the capacity to significantly increase production.