Thu, Jun 23, 2011 - 10:42am
There is one thing the Fed. and all other highly indebted and leveraged countries can't let get away from, and that is the price of crude. I see the release or promise to release that much oil as a sign that things are getting tight in the supply side of the market inventory and they realize if such a shortage were discovered that the price would balloon because of it. Two weeks ago oil dropped due to a IEA announced oil inventory surplus if I'm not mistaken. That was the main MSM reason crude prices fell.
Last week I read that supplies are actually down 1.5 million barrels from the previous week and that's the reason oil started to creep up a bit. And now this IEA release is due to a shortage they know exists in the market after all. What happened to that surplus two weeks ago? It's all fiction and part of the daily MOPE in oil and the supply forecasts. There is always a contradiction regarding the supply and the consumption forecasts and the guesses never seem to really materialize. The IEA numbers are probably nowhere close to the actual available oil supply and their forecasts always seem to run counter to the oil price trend at the moment when they announce these things.
It's a balancing act for them to not let crude get out of control but not too low to curtail and profit making from big oil. Keeping the price high enough for the Saudi's is also a big part of the equation. They need the revenue while the POSX falls. They need to maintain or increase their profit margins as the USD drops for their increased domestic/military spending. Everyone reading this knows the MENA situation and how the Saudi's and Iranian's have hate each other. OPEC just came out two weeks ago and said they are comfortable with oil between $95-115 crude when they announced no new production increases. This IEA decision stems from that OPEC announcement. They have to increase supply and the Saudi's didn't play along last time. The Saudi's/OPEC want higher prices. They will win this oil price skirmish.
I believe this sharp correction today in crude will be made up slowly and surely in the coming days and weeks and we'll find ourselves at $95-$100 crude soon enough for some other given reason or supply/consumption statistic.
Any hope they have of a economic recovery or stabilization is to keep a lid on crude prices and the effect that has on other industries and the ultimate consumer prices. The whole MOPE about low inflation and stable prices of consumer goods hinges on crude (gold also) staying as low as reasonably possible. If crude explodes in price or remains high (above $110 consistently)the economies of highly indebted nations implodes from it eventually.
Edited by: ¤ on Nov 8, 2014 - 5:18am