Tuesday, June 9, 2009
Today the oil market (NYMEX WTI crude) traded above US$70 per barrel and closed at a high for 2009. If you read this blog you will have been aware of the reasons for this trend since the turn at US$35 per barrel oil. Fundamental oil bulls have been lonely. Total global inventories are falling. OPEC members have removed more oil supplied than demand has fallen.
US$70-US$80 is the sweet spot at which OPEC and the consumer have declared they would both be comfortable for now given the nascent state of economic recovery. OPEC (read: Saudis) know that they can't open the spigot yet. They need to get prices up to US$90 to allow for some slippage. OPEC members know that consumers haven't got the cash to pay the high prices from 2008 and so members are unlikely to allow prices back above US$100 without finding themselves on the receiving end of some serious net consuming country political pressure.