Monday, March 7, 2011

World Watch -- Comment & Interpretation on Today's News [Oil Prices]

by Peter Kemp, London, EI
The ebb and flow of protests across North Africa and the Middle East is being mirrored in oil markets, with WTI following Brent north of $100 per barrel this past week. A mix of geopolitical risks and technical explanations is driving price forecasts even higher as predictions of a bumpy ride towards $200/bbl gain credibility. Financial analysts are driving these frothy predictions, while market fundamentalists fret that the oil balances still show sluggish demand outside of Asia, ample supply and enough spare capacity for almost any eventuality. But with Libya offline and jumpiness about potential disruptions elsewhere, a period of higher prices is inevitable. This makes Saudi Arabia’s effort to calm the market with extra barrels for which there was no obvious demand all the more understandable. A runaway rise in oil prices is an immediate threat to the fragile global recovery from recession, and an even bigger threat to long-term demand for oil.

(Please see also my recent blog posts under the categories/labels "Libya," "Saudi Arabia" and "Oil Fundamentals." -- D.R.)

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