Oil drops well below US$100/barrel

Oil drops well below US$100/barrel

This will be getting OPEC members worried, probably to the point to seriously considering supply cutbacks. I’ve been saying it for a year that oil shouldn’t really be much more than US$70/barrel and now it looks like we’ll have a serious recession because of the fallout in the banking industry, which means lower demand for fuel. That’s why the price of oil is plummeting.

If you’re an oil producer your only weapon to keep prices up is to restrict supply. Many OPEC countries wanted to do this if oil dropped below US$100. Saudi Arabia, the most powerful, stated it was comfortable with anything above US$80. This in itself should serve to indicate to people that I’m not a complete nonce telling you that oil at US$120+ is ridiculous. Saudi Arabia came right out and, well, implied, that oil wasn’t worth that much more than US$80 to it – i.e. it could still happily make a profit at the level and would be comfortable with demand.

With futures today at around US$91, It’s a pity that the New Zealand dollar is doing so woefully, or we’d have petrol prices well under $2/litre again as opposed to in the dollar 90s, which is where it’s at right now.

This will be getting OPEC members worried, probably to the point to seriously considering supply cutbacks. I’ve been saying it for a year that oil shouldn’t really be much more than US$70/barrel and now it looks like we’ll have a serious recession because of the fallout in the banking industry, which means lower demand for fuel. That’s why the price of oil is plummeting.

If you’re an oil producer your only weapon to keep prices up is to restrict supply. Many OPEC countries wanted to do this if oil dropped below US$100. Saudi Arabia, the most powerful, stated it was comfortable with anything above US$80. This in itself should serve to indicate to people that I’m not a complete nonce telling you that oil at US$120+ is ridiculous. Saudi Arabia came right out and, well, implied, that oil wasn’t worth that much more than US$80 to it – i.e. it could still happily make a profit at the level and would be comfortable with demand.

With futures today at around US$91, It’s a pity that the New Zealand dollar is doing so woefully, or we’d have petrol prices well under $2/litre again as opposed to in the dollar 90s, which is where it’s at right now.

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