Waiting on OPEC...
Waiting on OPEC (Organization of Pertroleum Exporting Countries) to make a decision on increasing/decreasing the supply of oil is a lot like waiting on the Fed to make an interest rate decision.
You generally know what the decision is going to be BEFORE the decision is actually announced. Except that OPEC is more unpredictable. All of the delegates make speeches at various conferences and meetings that they attend. These meetings almost always have reporters and news cameras. The delegates take advantage of this to "spill" a little of their thoughts on the upcoming decision to be made. Voila! The market has the opening to start trading over a decision that may not actually be made for another month or so...opportunity to make money calling!
Oil ministers from the various OPEC nations have been indicating that they would vote for increased production for some time now. The next OPEC meeting is tomorrow! The law of supply states that as supply goes up, price goes down. Well, oil has come of off it's highs of 99 and change to 87.74 over the course of a few weeks because of these indications. Traders have used this news as an excuse to take some profits off the table.
Some analysts are looking at the charts and saying that this "correction" could continue down to $70/barrel. While this would be nice and I would like to see it happen, I am not banking on it.
Remember, China and India are still growing near double digits, our own demand for the black stuff keeps going up and up much to the chagrin of environmentalists. And while the former chairman of Exxon says that oil should be price at $40/barrel, he is not the one in charge of making that decision.
A bunch of shiekhs, princes, and despots are.
So, back to the law of supply...when supply increases, price decreases. Combine this with the law of demand...when demand increases, price increases, especially when supply is not increased, or it is not increased enough to meet increased demand. Now combine this with people in control of that decision who either A) don't like us are looking to make as much money as possible or C) Both.
What will happen is that supply will be increased to a level that satisfies consumers for a time...but inevitably demand will increase again and will outstrip the new supply level, leading to...higher oil prices.
Notes From The Underground:
Dow - 13,248.73 -6.84
Oil - 87.74 -1.57
Gold - 803.80 +5.70
Silver - 14.30 +0.03
To Your Investing Success,
Patrick
You generally know what the decision is going to be BEFORE the decision is actually announced. Except that OPEC is more unpredictable. All of the delegates make speeches at various conferences and meetings that they attend. These meetings almost always have reporters and news cameras. The delegates take advantage of this to "spill" a little of their thoughts on the upcoming decision to be made. Voila! The market has the opening to start trading over a decision that may not actually be made for another month or so...opportunity to make money calling!
Oil ministers from the various OPEC nations have been indicating that they would vote for increased production for some time now. The next OPEC meeting is tomorrow! The law of supply states that as supply goes up, price goes down. Well, oil has come of off it's highs of 99 and change to 87.74 over the course of a few weeks because of these indications. Traders have used this news as an excuse to take some profits off the table.
Some analysts are looking at the charts and saying that this "correction" could continue down to $70/barrel. While this would be nice and I would like to see it happen, I am not banking on it.
Remember, China and India are still growing near double digits, our own demand for the black stuff keeps going up and up much to the chagrin of environmentalists. And while the former chairman of Exxon says that oil should be price at $40/barrel, he is not the one in charge of making that decision.
A bunch of shiekhs, princes, and despots are.
So, back to the law of supply...when supply increases, price decreases. Combine this with the law of demand...when demand increases, price increases, especially when supply is not increased, or it is not increased enough to meet increased demand. Now combine this with people in control of that decision who either A) don't like us are looking to make as much money as possible or C) Both.
What will happen is that supply will be increased to a level that satisfies consumers for a time...but inevitably demand will increase again and will outstrip the new supply level, leading to...higher oil prices.
Notes From The Underground:
Dow - 13,248.73 -6.84
Oil - 87.74 -1.57
Gold - 803.80 +5.70
Silver - 14.30 +0.03
To Your Investing Success,
Patrick
posted by Patrick Clark at
7:00 AM
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