The Unwinding Spring of the Oil Market

The oil market is still swinging bear. Last summer a low wasta Saudi sheik could have farted and the price of oil would have reacted upwards by 5% and now OPEC announces cuts of 2 megabarrels/day and the price drops by more than 10%! Wow, last summer really went beyond rational (no matter the cause and this is no call for any sort of regulation change) and all the tension built into the market with the high prices is pushing the price far to the bear side.

I visit the US Energy Information Administration website regularly and this is what it is telling me of late. Petroleum stocks dipped slightly in the last week, but remain at the upper end of the five year moving average range. However, the most interesting tidbit is a story about an oil field coming into production in the coming year and the US EIA estimates by 2010 Thunder Horse will be pumping over one-half million barrels/day that would make up for a quarter of the "promised" OPEC production cut.

However, the current low prices are most likely shutting down exploration projects in the Bakken play. We can get back to that when the price of oil reverses itself.