More innovations … below I’m trying out a new “black-letter” format, mixing up the “black” D2Ds (summaries of official texts) with “blue” (my summaries of current issues).
Communique of the 130th OPEC conference – D2 Digest
High oil price levels are a consequence of long futures positions held by speculators …
Note in this context that, from the point of view of OPEC, the US Government�s Strategic Petroleum Reserve would be considered a “speculator” as it buys oil in order to affect the price rather than to use it. This is an important point; “it’s because of the SPR” and “it’s because of hedge funds” are not two independent explanations. If there’s a single, large, forced buyer acquiring large quantities of oil out of practically unlimited financial resources, then of course the hedge funds are going to be buying futures. It would be crazy of them not to.
… and uncertainties arising from prevailing geopolitical concerns.
I remember the good old days when you fought a war in the Middle East and the oil price went down. Note that, contra a couple of warbloggers, the fact that the oil price is rising does not prove that this was not a war for oil. It proves that either the war was not about oil or the war was at least partly about oil, but the oil part was badly managed.
Notwithstanding prevailing high prices, the crude oil market remains more than well-supplied, and crude stocks have been increasing going into the spring.
Here it comes …
Therefore OPEC reaffirmed the new production ceiling of 23.5mb/d, which will allow for normal seasonal stockbuilding.
Opec to world economy: Does this hurt? How about this?
DD sez: This is all rather nasty. I suspect that the OPEC guys are assuming, probably correctly, that there is no sense in negotiating with the current US administration in the mood it’s in, so why not just try to make hay while the sun shines. I’d also note that with OPEC cutting back and oil heading upward in an election year, I wouldn’t give a tupenny bun for Hugo Chavez’ chances of seeing the year out without a US-backed coup.