I just talked to the always-excellent Bill Caiaccio on CNN Radio. I made some notes for the interview, but of course, once we got talking we went off where his questions led us. Here are my notes ...
Geopolitical events are driving oil prices. Russia blocked the entrance to Georgia’s main oil port, and Russia is showing that it can control Europe’s natural gas supply. The neocons in Washington seem to be hoping for a new cold war with Russia, and they just might get it. Unfortunately, fear of such a cold war add to the price of oil.
Supply and demand is also in play.
Drawdown of gasoline stockpiles in US was more than twice expectations -- 6.3 million barrels. Demand destruction may have been short-term. Since prices have pulled back, people may be driving again.
Chinese demand dipped during the Olympics as they shut down factories and took cars off the road. It will probably increase again after the Olympics.
On the supply side, Mexico, Nigeria, Norway, Britain and Russia are all seeing production go down year over year. Nigeria’s shortfall is due to civil war, everyone else may be hitting production peaks.
Labels: crude oil