All of a sudden there’s talk that the price of oil could fall back to earth again.
It’s a jigsaw puzzle, but put all the pieces together- and who knows for sure, but maybe oil could head down south.
First of all, there’s the news from Saudi Arabia that the extra 2 million barrels of oil per day it has released are not being used. There’s no real surprise here; commentators, including this publication, warned that Gordon Brown was using OPEC as a scapegoat for the high price of oil.
In fact the recent surge in the price of oil was due to a shortage of refining capacity, caused by hurricane damage, and when that is fixed, the combination of full refining capacity at a time when political expediency means that there is plenty of surplus oil out there, could mean
And on the subject of wind damage, the latest news suggests that in terms of damage to oil rigs, Rita was the most costly storm ever, with rigs used for exploration particularly badly damaged.
Then comes news from the world’s largest oil company Exxon Mobil that there’s a lot more oil left to be uncovered than previously thought. In fact the company’s president Rex Tillerson said yesterday that there could be as much as 7 trillion barrels of oil still waiting to be found, and even on a conservative estimate said: “Thereâ€™s still 3 trillion barrels out there” and that said Mr Tillerson is “more than twice all the oil recovered up to now in all of human history.”
Finally, in the US, Peter Beutel, president of Cameron Hanover was reported as saying: “It does appear we’ve turned the corner here in this market. I don’t think we’ll see prices at these levels again anytime in the next five years.” He predicts oil falling to $25 to $35 a barrel within two years.
But before you go out and buy put options in oil,- we know that’s what you were thinking, there’s another side to the coin.
Other analysts are not so bullish. For example, banker Matthew Simmons says there have been no major oil finds recently, Saudi productions is declining, and we are near peak oil – that’s the point at which oil production globally starts to fall as there are less and less oil fields to exploit.
© Investment & Business News 2013