Island Mutt--
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If it takes out this 78 level that is my level which I have drawn after looking at Oil, we can hit as high as 90 on OSX if Oil takes out 19.50$. That event will have other impact on markets.. present oil prices will help the commodity index which was hiting lows raising fears of deflation that over capacity and asean contagion fear and Russan default issue is slightly helped by oil at present level, however the negatives arrayed against htis move up need to be appreciated.
Your observation is very valid..<<If the price of crude stays anywhere
close to what it is, that should get the drillers and their suppliers
back into action. It's not beneficial for any new drilling if the price of crude is lower
than production costs. The only thing that
will get them back in action is crude pricing high enough to make
drilling and exploration worthwhile.>>
The question is can the price stay here? and next question is Does the drillers and suppliers control the demand or supply? The answer to the two questions is most likely no..
The way it will work is that at 18 plus $ lot of cash strapped countries like Indonesia, Russia, Mexico will sell extra supply to the market, that additional supply will put pressure on the prices, at 18 $ plus lot of uneconomical production becomes profitable and that is what my worry is, can this price of 18 $ plus be sustained, as summer approaches demand will reduce and with higher price more will be pumped out from most uneconomical fields or fileds that are capped, that will ead oil back to 13-14$ band, but temporary low inventory problems can lead oil higher but above 19.50 and 20$ new kind of fears that is commodity pricing pressure and inflationary pressure will play on the back of many investors, so it is going to be a tough move from here, although ASEAN and emerging markets will be helped a lot.. |
