The crude market has been through enough wild swings in the last two years to last a lifetime. The market is now embroiled in a debate about whether most of the movement was due to classic supply-and-demand or whether prices were influenced considerable by speculators hoping to make money.
OPEC does not expect much to happen in the crude markets for the next few quarters and has left its forecast for production unchanged.
According to MarketWatch, the cartel “left its global oil demand forecast unchanged for this year, projecting a fall of 1.65 million barrels a day compared to last year. World oil demand is expected to show an increase of 500,000 barrels a day in 2010.”
The energy markets are volatile enough that OPEC could easily be wrong. The price of crude could be influenced by a number of factors, first and foremost among them the extent of the rebounds in the US and Chinese economies. There is a great deal of evidence, especially from China’s July numbers on business activity, that the nation’s stimulus package is working. Ocean-shipped oil deliveries to the mainland are up sharply.
The US economy may be healing faster than expected as well. Most critical sign of business activity including unemployment numbers are coming in better than expected.
If oil supply is light for the balance of the year, real demand could push prices up sharply.
Douglas A. McIntyre
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