OIl raced up to $45 dollars a barrel today. Is this day one of a run to $80 in the next few months? And if so, why? Wall Street Journal’s Environmental Capital:
In a word: supply. Or as Catfish Hunter might have said in a cleaner moment, “The sun don’t shine on the same dog every day.” After months of market focus on the outlook for oil demand, especially in the U.S., attention is turning back to the supply-side picture. That mostly means OPEC, which provides about 40% of the world’s crude.
OPEC genuinely seems to be complying with its pledged output cuts, Conrad Gerber, head of Geneva-based oil-intelligence firm Petro-Logistics SA, told us. And that means crude oil’s recent upward march might just be the start of bigger things: “The floor has been reached,” Mr. Gerber says.
…Taken together, the supply-side reductions appear to be a lot bigger than the 1.5 million barrels or so that have disappeared from the global demand side of the ledger. “They’ve really mopped up the excess,” Mr. Gerber says.
And that means that OPEC might just be able to nudge oil prices toward its comfort zone between $60 and $80 a barrel sometime this year, he says.