Goodbye To Cheap Oil Forever  

Posted by Big Gav

The Guardian takes a look at the oil markets. I thought the comment about Chinese buying was interesting.

t was a question of when not if for oil traders yesterday as the price of a barrel of crude threatened to burst through the $60 a barrel barrier for the first time.

News last night that the North Sea Forties oil field had been shut because of technical problems pushed an already jittery market that has jumped 11% in the last week alone, to a new record high of $59.55 for US light crude. Although BP, which operates the pipeline to the field, said the problems would be fixed by today, dealers are jumpy about any supply disruption in the face of strong global demand and in spite of promises of further output from the Opec producers' cartel.

"The market is so close to $60 it is almost bound to touch it," said analysts at consultancy Refco. "Prices look too high fundamentally, but we have to recognise even a minor supply glitch or hint of one will drive them higher."

...

Graham Turner, from the consultancy GFC Economics, said there had not been many indications of a slowdown in either China or the US this year. The Chinese, he said, had been particularly astute, tending to build up crude stocks each time the price dipped.

"None of the concerns from last year have really gone away. There are supply constraints and the two biggest economies are growing fast. That means you are going to have a problem with oil prices. The price of crude could go to $65-70 a barrel the way things are going."

Earlier this year, analysts at Goldman Sachs predicted that oil prices could climb above $100 a barrel if supply problems continued to interact with strong demand. That may happen, but there is an old adage in the oil business: high prices lead eventually to low prices.

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