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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Tulvio Durand who wrote (23796)6/11/1998 1:27:00 AM
From: Czechsinthemail  Read Replies (1) of 95453
 
Maybe a better analogy is a bathtub with the tap on and the drain open. If you are draining faster than you fill, the volume in the bathtub drops. If you are filling faster than you drain, the volume increases. You can only do that so long until you hit the holding capacity of the bathtub.
OPEC's production cuts effectively reduce the input into the oil market while consumption continues. Given the reduced demand forecasts, it will take bigger cuts to bring a balancing of supply and demand let alone a drawdown of world stocks. But the lower oil prices can be expected to accelerate the rate of oil consumption (increases demand) and the OPEC cutbacks can only help (reduces supply). What is hard to tell at this point is how fast Asian economies will snap back and how fast their actual consumption will grow and whether demand in Europe and North America will increase sufficiently to reduce some of the surplus.

Baird
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