As WTI crude oil prices nudged $110/bbl last week, they were pushing against the levels that have destroyed demand and stalled growth before
As WTI crude oil prices nudged $110/bbl last week, they were pushing against the levels that have destroyed demand and stalled growth before. A premium for a widening conflict in Syria is pushing price higher but global oil demand has also been rising enough to slightly outstrip supply increases through the year. OPEC would be pushed to make a judgement about prices if last week's pressures persisted. A 3% drop in consumption (from higher prices) would be equivalent to an annual loss of $35-40 billion for OPEC at current prices. Adding up to 1 mb/d in production might cause up to a 10% cut in prices putting as much as $90 billion in annualised revenue at risk for the OPEC countries. Countries with rising fiscal demands might be increasingly likely to let the higher prices run for the time being.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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