With crude oil prices dropping on lower demand there seems to be crude bulls coming out of the woodwork. Why? There are plenty of reasons.....
Reason One.....
It appears that the recent OPEC production cuts are starting to be effective.
Reason Two.....
With Hamas rocket attacks on Israel finally being responded to, natural gas controversy in Europe and civil war in Nigeria the geopolitical front is having an obvious effect.
Reason Three....
The Bush administration and the current Energy Department has begun scheduling the purchase of crude oil over the next few months to replace oil drawn from the Strategic Petroleum Reserves during last years hurricane season. This could add up to 25 million barrels this year alone.
Reason Four...
The Chinese government has announced that it will be buying another 19 million barrels for the own reserves over the next few months. They will also complete the next phase of construction on storage facilities adding another 170 million barrels of storage capacity.
For now the trend has shifted sideways to higher for crude oil. But ultimately, regardless of all of these reasons to be bullish, the U.S. and now the Chinese consumer remains in the driver seat, literally.
2 comments:
What do you expect to happen after the next extraordinary OPEC meeting?Another drop in prices?Could there be another heavy oil selling if we see massive redemptions from hedge funds?
I do believe we have those redemption's coming, but it is anyone's guess since during the last sell off the large cap oil companies held up surprisingly well. That is the dynamic part of trading crude, is it trading along side equities [stocks]? Is it trading opposite the dollar? Is demand the biggest influence? Probably the least significant factor is OPEC. I personally think it's all about demand and the Wednesday inventory numbers. Just look at today.
Thanks for your comment, they are always welcome here.
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