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Another St. Patrick’s Day has come and gone
Last week was St. Patrick’s Day… a day for all our Irish friends to celebrate their culture and heritage by holding parades around the world and having an excuse to quaff Guinness and green beer! This emerald hued holiday was also enjoyed by the OPEC fraternity that met in Vienna to discuss production quotas. From the markets’ point of view, this was a non-event on oil prices with no changes announced in their production quotas. The recent crude market rally has rubbed some Irish luck on OPEC with crude prices now trading over $82 U.S. per barrel. When crude prices are high the incentive to work together crumbles and it is too tempting to cheat and profit.
As of last month, OPEC was exceeding their questionable production quotas by the equivalent of a supertanker of crude a day (2.0 Million barrels). The artificially high $80 plus barrel of oil is equivalent to them finding a pot of gold under the rainbow to boost their fleet of BMW’s and Mercedes. If prices remain above $80 U.S./barrel, this dysfunctional monopoly will continue their cheating ways that could help lower crude prices. Presently there is about 4.5 million barrels of spare global crude supply. As the economy improves spurring demand and eventually reducing spare crude capacity below 2.0 million barrels per day, energy prices will rise. Their next meeting is schedule in October in Vienna and the irrelevant production quotas of 24.5 million barrels per day will probably remain the same and the production throttle will be fully engaged.
The oil markets are battling between momentum and resistance and this will continue at least through the rest of 2010. But there’s good news on the horizon.
So what exactly is the good news? And what is happening in the natural gas and electricity markets? Find out in this week’s Energy Report. Send your email to info@en-pro.com.