Oil: The perfect hedge for just about any occasion
Energy Report
by Phil Flynn
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2008-07-02
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If you did not want to put your money in a bank because of a lack of confidence or you had no confidence in paper money might you buy oil even if the market did not exist?
If you were a big user of oil and you were concerned that a war might break out in the Middle East and the futures markets did not exist might you buy oil and hoard it just in case there might be a supply disruption? Or if you saw a storm coming barreling into the Gulf and you were afraid that you might not get supply might you buy oil and store it away for that rainy and windy day?
What if the markets did not exist and all of a sudden you thought the world was running out of oil. Might you try to buy every barrel you could get your hands on?
Do you how to get OPEC mad? Question their ability to produce oil. That is what the International Energy Agency did and OPEC President Chakib Khelil did not like it. The OPEC president said that the IEA was playing politics. The IEA said the world oil market supply would tighten over the next 5 years. And what really angered Khelil was that the IEA reported OPEC spare capacity would be negligible by 2013. OPEC took offense because it's like the IEA told them they did not matter. I think Khelil's feelings were hurt. No on likes to be told that they do not matter. The IEA said that they see no sign of recovery in world oil supplies in the medium term and that on-OPEC oil supply growth will be minimal through 2013. They say supply growth will drop below 1 million barrels a day by 2013 and 3.5 million barrels of new production will be needed to offsets declines. (So tell me again why we are not drilling more domestically?) Demand growth cut to 1.6 % vs. 2.2%. The IEA also says that the weak dollar has had a strong upward influence on energy prices.
Most of the demand growth will come from cars. The IEA says the world vehicle fleet in 2013 seen up 35% to 1.2 billion cars and trucks by 2013.
Yet the OPEC Secretary General Abdalla Salem el-Badri says that the oil price is driven by speculation and that there is more supply than demand. He is calling for tighter regulations on speculators. Of course could not OPEC regulate how much they would accept for a barrel of oil? They do not have to accept the market price?
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Phil Flynn
Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets.
Energy Report has contributed 212 issues.Our users give the newsletter an average rank of 8.4/10 (24 votes)
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