Weekly Focus
0
0
OPEC draws a line in the sand at $100
Mon, Sep 15 2008, 08:09 GMT
by Danske Research Team
OPEC surprised the oil market in the past week by an- nouncing a cutback in oil production of roughly half a million barrels a day. Indirectly, OPEC made it clear that the cartel would not accept a price below $100/bbl. However, there has been a shift of senti- ment in the oil market in recent months. The slowdown in the global economy is clearly affecting oil consump- tion negatively, especially in the US, where oil con- sumption has been much weaker than the market ex- pected in the spring. At the same time, OPEC, following the lead of Saudi Arabia, has produced more oil than expected. Saudi Arabia had announced in May that it would increase production and exceed its OPEC quota by quite some way. While many doubted this would ac- tually happen, the Saudis did indeed boost production considerably in July in the middle of a period when US demand, in particular, was weak.
Hence the main reason for the lower oil prices lately is excessive production at OPEC combined with disap- pointing demand, especially in the US. The question now is whether OPEC is capable of keeping oil at $100/bbl. The global economy continues to slide, and just as speculative interest presumably contributed to pushing oil prices too high, speculation could just as easily pull in the other direction. Meanwhile, it is a fun- damental sign of weakness for oil that OPEC feels the need to lower production, and anyway the cartel has been notoriously bad at cutting back. On the other hand, winter is fast approaching, and with it an increas- ing demand for heating oil. Furthermore, boosting pro- duction outside OPEC is still proving problematic. We therefore expect that oil will trade in the $90-120/bbl range over the coming six months.
Published on Mon, Sep 15 2008, 08:14 GMT
Archive
- Uncertainty ahead of Flex auctions
Published On Fri, Nov 28 2008, 15:13 GMT - Time for another rescue package
Published On Fri, Nov 21 2008, 15:42 GMT - Historical decline in bond yields
Published On Fri, Nov 14 2008, 15:49 GMT - US presidential election
Published On Fri, Oct 31 2008, 15:57 GMT - Denmark's central bank hikes again
Published On Fri, Oct 24 2008, 15:51 GMT
Danske Bank
| Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com
Legal disclaimer and risk disclosure
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.Interested in forex trading? forex brokerage firms!
FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)
[Read Premium full description]
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
©2008 "FXstreet.com. The Forex Market" All Rights Reserved.