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Oil futures have moved higher in today's trading following today's weekly inventory report from the U.S. Energy Information Administration that showed inventories shrank much more than analysts had been expecting. After trading up as high as $77.43, prices have cooled off a bit, but are still trading up 15 cents on the day to $75.88.Analysts had been looking to see a drop in oil inventories of around 2.2 million barrels for the week ended August 31, but the actual figures showed that inventories fell by almost twice that amount, dropping 3.9 million barrels.
After falling sharply during the first three months in August, prices have been strong over the last couple of weeks and are once again on their way to testing its record high of $78.77 set on the first of last month.
The oil market is definitely a volatile beast, and any such unexpected decline like the one that we see today is bound to bring the bulls out in full force. Last month's sell off was mainly due to the fact that traders were concerned that the subprime meltdown would start to impact economic growth, but now traders have started to look past this concern and focus once again on supplies.
Supply concerns are always in the back of the minds of oil traders, and today's shocking news comes less than week ahead of OPEC's next meeting, which is scheduled for next Tuesday. OPEC has already come out and told the market not to expect to see any sort of production adjustments.
Another facet of the oil market is the ever present geopolitical tensions that surround the oil rich Middle East. Any signs of trouble in that region of the world will result in a price spike, and the world got another wake-up call this morning on the supply threats of the area when Syria announced that it had taken military action against Israeli warplanes. Syria claims that the warplanes entered its air space and dropped munitions before the country's air defenses opened fire on the planes. Apparently there were no casualties in today's conflict. No other information is available on exactly what (if anything) was dropped, Syria has stated that it is considering what response to take in retaliation for today's aggressive act from Israel.
Is $80 oil in our foreseeable future? I for one would not be too surprised to see last month's record broken over the next week. What do you think? Are we going to be looking at a new record soon for oil?
(photos: Clinton Steeds , A. www.viajar24h.com)
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
9-07-2007 @ 8:04AM
Michael Schneider said...
Nigeria was also a big factor yesterday with the terrorist threats there.
Oil is also higher this morning despite an improved refinery situation.
In the US gasoline demand continued strong too. There had been some mixed reports earlier in the summer with some commentators saying demand was slowing or set to slow. It rose by .5% in the latest time frame despite high prices.
Dr. Michael Schneider is Web master of several Web sites including http://www.Barrelomoney.com which has an Oil Alerts section (left side, light blue label) covering oil and other forms of energy.