Light sweet crude prices on the July contract continued barrel through price records hitting $59.87 and then closing at $59.37 in trades on Monday. $60 oil seems likely for tomorrow’s trading, as U.S. consumers show no signs of decreasing consumption.
OPEC says they will consider increasing production by another 500,000 barrels but that’s it. Saudi will be officially at full production levels then and all the other OPEC countries run at capacity already. OPEC blames the state of affairs on lack of refining capacity and maintains there is plenty of oil on the market but it’s bottlenecked. They’ve been calling for new refining capacity for sometime.
The problem the world runs into right now is production is stretched so tight any slight misstep or problem or even a nasty storm coming through the Gulf of Mexico could change the dynamic dramatically.
China is experiencing power issues this summer and continues to buy diesel so consumers can keep their generators going. The U.S. remains the surprise. Even though prices continue to climb, demand goes up unabated. According the EIA figures, the U.S. consumer more gas now than they did a year ago even as gas prices have nearly doubled.
Gasoline prices remained stable today closing down a penny to $1.65 a gallon but as oil prices continue to climb, gasoline will close behind it. Inventories for both crude and gasoline dropped for the last two weeks in a row as distillates inventories rose. Both crude and gasoline inventories are still up dramatically from the same time last year.
Where the prices go from here is anybodies bet as the oil market approaches seemingly uncharted territory. Prices have run high before, certainly quite high back during crisis of 1980 but people didn’t drive as much or as far then as they do now. OPEC has lost a great deal of control over the world oil market too.
Traditionally, they’ve been able to control the price of oil by adjusting production levels. All bets are off though because OPEC is producing at full capacity and prices continue to climb. Since oil has climbed over $10 a barrel in the last month, one must look for the possibility of $70 oil sometime in the future, maybe even July or August.
John Stith is a staff writer for Murdok covering technology and business.
