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$60.00 a barrel?
And this is not surprising as the oil industry pretends to think-
Date: 6/18/2005 8:13:08 AM ( 19 y ) ... viewed 1450 times Rumors Put Oil Traders on Edge
By SIMON ROMERO
Published: June 18, 2005
HOUSTON, June 17 - A hint of a terrorist threat in Nigeria, a major supplier of crude oil to the United States, and worries about a lack of refining capacity drove energy markets into a frenzy on Friday, pushing oil over $58 a barrel, a record.
Crude oil for July delivery climbed to $58.60 a barrel before settling at $58.47, up $1.89. Some traders said oil might reach $70 a barrel, driven primarily by demand in China and the United States. Fears over what might affect the supply, rather than what is actually affecting it, appeared to inject anxiety into the market.
"In this environment, we cannot afford to have any disruptions," said Thomas Bentz, senior energy analyst at BNP Paribas Commodity Futures. "We are still in the uptrend." The closing on Friday of the consulates of the United States, Britain and Germany in Lagos, Nigeria's largest city, because of reports of threats from Islamic militants put traders on edge. Nigeria supplied the United States with more than 1.1 million barrels of oil a day in April.
The possibility of a terrorist attack in Nigeria was enough to tap the oil market's fear that demand-driven pressure on prices might evolve into a full-blown supply-driven crisis.
A sudden restriction of supplies led to the oil shocks of the 1970's, and the lack of spare production capacity, particularly of the types of crude oil easy to refine into gasoline, has made the markets vulnerable to whispers of any potential disruption.
So do the opinions that oil is still relatively cheap. Adjusted for inflation, oil is less expensive than it was in 1981, when Iran choked off oil exports. The average cost of oil used by American refineries at that time was $35.24 a barrel, or $75.44 in current dollars, according to Bloomberg.
One of OPEC's concerns is that oil prices will quickly climb to a level where many car owners decide to switch from sport utility vehicles to compact cars, or possibly, to public transportation or carpooling. Such a change in driving habits, while still considered unlikely, might produce a scary outcome for oil-producing countries: a crash in oil prices.
"When I go to neighborhood parties, people are always asking me when gasoline prices are coming down," said David Pursell, a principal with Pickering Energy Partners, an energy investment firm in Houston. "Well, I always reply, 'When are you going to start riding the bus?' There's lots of angst, but not enough to keep us from $60 oil."
Not everyone is convinced oil prices will continue to soar. Andy Xie, the greater China economist for Morgan Stanley in Hong Kong, predicted a sharp decline in prices, citing signs of softer demand in China, the second-largest petroleum consumer after America; Chinese oil imports fell 1.2 percent in the first five months of this year.
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