Tuesday, May 18, 2010

OPEC Scrambling To Jaw Bone Prices

From guest blogger Vincent Fernando.....

Light sweet crude broke $72 just recently, then bounced off of $70 a few times. It has rebounded back a bit, but could easily head lower.European economic growth is looking fragile, and more importantly China's economic growth is starting to look like it peaked based on leading indicators. Thus while we can potentially bailout the European periphery nations, and it could stabilize the world economy, it's not so clear if it will save commodities. Especially as the China growth engine slows.

OPEC's scrambling to jawbone oil prices as a result of price softness:

Forex Yard:
Investment in new energy capacity worldwide must be maintained to avoid a supply crunch in the future, Attiyah told an industry event, but deep water drilling and other high-cost operations would be unprofitable at a price of less than $70.

OPEC member Qatar supported Saudi Arabia's price aspirations for oil, Attiyah said. Saudi King Abdullah, ruler of the world's top oil exporter, said in December that a price of around $75 to $80 was fair. The kingdom has pegged that level as fair for both consumers and producers.

"I support fully what King Abdullah says," Attiyah said.

We can envision a potential 'new normal' boring growth scenario where China slows, Europe stagnates into a bailout coma, and the U.S. grows but underwhelms. Industrial commodities will be anemic to such a situation and we'll be unsurprised to see oil go below $70 in the near future given the China/Europe situation.


Vincent Fernando writes for The Business Insider


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