Fascinating piece of research from Louis Vincent Gave lends credence to the possibility of an imminent fall in the price of oil. As he observes the spread between light sweet crude used in US refineries and the heavy sour crude used in Chinese refineries has increased from 3 to 11 dollars this year. This leads to the conclusion that most of the rise in the price of oil this year has been caused by US, not Chinese, demand. On the one hand this may be because of the US is growing faster than the figures suggest, but more likely, most of the demand was driven by refineries buying reserves as a precaution against disruptions in Russia, Venezuela and the Middle East and, perhaps, also as a hedge against the widely anticipated fall in the dollar. However the dollar is unlikely to fall much further, the US winter has been mild to date and, the Middle East aside, the rest of the oil producing world appears more stable, meaning that this stock building demand is likely to evaporate sometime soon. Any evidence from the market? Well it looks like some suppliers are already looking to cut production:-
Al-Qaeda tells fighters to strike Saudi oil targets
Posted by wardx107 at December 19, 2004 03:31 PM