The market contango is also extraordinarily wide, also provoking covering here,” referring to the March NYMEX contract’s $6 premium over February. Contango is a state of the market when further months out are higher than current moves. In short most believe that they price will rise as time goes on but will it?
World oil demand will contract sharply in 2009 as the global economic slowdown further erodes consumption, the International Energy Agency (IEA) said on Friday.
The Paris-based agency joined the ranks of forecasters predicting a fall in global oil demand this year, revising its previous 2009 estimate by 940,000 barrels per day (bpd) to 85.3 million bpd — a 500,000 bpd year-on-year fall.
The price of a barrel of oil could slump toward $25 and even lower as the economy continues to falter, Phil Roberts, technical analyst from Barclays Capital, told CNBC Friday.
“We’re still getting bearish signals, the implication is – this moves not over,” Roberts said. Roberts’ near-term view for the oil price is $29, but his “slightly longer-term” outlook is for $25 a barrel or lower.
“In the first quarter of 2009, you’re in to the final phase of the down leg in the business cycle. So what we’re looking for is this to slow, the downtrend to slow. Where it’s going to stop – best guess would be maybe between $17 and $25 a barrel,” he said. Roberts said he would even be wary of buying at $17 a barrel.
Ok, so predictions are World Oil demand is going to go down. The technical analyst believes short term $29 (which we already, see earlier blogs) but $17 and wary at buying at that, we don’t think so. You might be saying I hear crude is going down but why is gas and diesel going up at the pump? We are over supplied with crude oil; plenty of it in storage so much so several ship that hold millions of barrels of crude are parked out at sea. Oil refiners to help keep the price higher so they can make a profit have been trying to make less gas and diesel. Short term solution to their problem, as crude continues to build because you just can’t turn off the barrels being reduced, we will see gas and diesel make a reverse to a downward trend like we had during the last several weeks of 2008. Diesel the world’s most popular product will continue to see at a premium to gas but we believe that we should see $1.75 to $2.00 a gallon. This is a far cry from the $5.00 diesel customer were paying just 7 months ago.
That leaves me to being over confident. How can anyone that over the last year has seen economies make dramatic turns, oil prices go from record highs to loosing over $110 a barrel fee so sure about what the future long term is going to be. No, I never liked the number 17 much (even growing up as a child, old enough to drive but not old enough to vote) and I certainly would not bet that a barrel of oil will get to $17. Everyone can guess and you can be sure the crazier the guess the more attention the press will give someone.
For all you fuel management and fuel consulting help, reach out to the Sokolis. www.sokolisgroup.com.
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