Decisions lie ahead
NATO Ministers gathered at Brussels HQ on Tuesday for tough talking – more than ten days after Russian tanks rolled into Ossetia
A statement released hours later said its members were ‘considering seriously’ the implications of Russia’s actions for the NATO-Russia relationship.
“We have determined that we cannot continue with business as usual,” the Ministers concluded. The Russians responded angrily the next day, complaining about the missile shield agreement between Poland and America.
As oil prices rose above $120 a barrel analysts claimed, quite reasonably, that unpredictable ‘geo-political tensions’ were driving a renewed surge back towards the all time high of $147.27 on July 11, 2008.
Almost none chose to refer to the American Energy Information Administration’s forecast the previous day that oil would trade at about $120 for the rest of the year. Make your own choice about who had most impact on the market: the American energy officials or the Russians. The most important question concerns where oil goes from here: up or down?
The broker Goldman Sachs helped sound a bullish note (on Tuesday August 19) by reiterating its forecast for prices to reach $149 by December. I have my doubts.
The biggest oil producers have already seen share price reductions.
This could suggest long term prices below, rather than above, $100 because of fundamental changes in how the market is starting to view the only two things that matter - supply and demand.
The scale of the recent 30 percent price drop gives some credibility to OPEC’s claim that the summer spike was largely due to speculative trading rather than supply problems.
Concerns over the finite nature of oil as a commodity are much exaggerated in terms of time-scale. Vast untapped fields in the world’s most remote and inaccessible locations are soon to be opened up by new technologies.
The US Geological Survey estimates that there could be 90 billion barrels of undiscovered oil in the Arctic alone.
Iceland is among the countries looking to attract investment and expertise from the world's biggest companies, although there is much concern from environmentalists about the regional impact.
The National Energy Authority of Iceland will publish its own survey at an investor conference, in Reykjavik, on September 4 and 5.
Firms will be offered the opportunity to bid in January for more than 100 exploration licences.
Several OPEC members have already voiced concern about over-supply and intend to propose a reduction in output. Dwindling demand will be discussed at the meeting of its members, in Vienna, on September 9, when a closer look at struggling Western economies will reveal previous growth rates cannot be maintained. It’s tough at the top.
Although emerging nations such as China and India remain a key factor, lower GDP levels are anticipated in these regions too. Certainly estimates that daily global consumption will rise one percent to 86.3 million barrels per day look slightly ambitious.
With the banking sector showing no signs of recovery, and day-to-day speculation that one of America’s big institutions is about to fold, this could be the time for a bold punt.
Go short on oil.
