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Durudarshan - Investment Analysis

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Oil price seems far too high to sustain Recovery

Posted on July 10, 2013 at 12:51 PM
The price of the West Texas Intermediate and the Brent crude, traded on the International Commodities Exchange (hence ICE) seems to be spiking upwards and will probably match any time soon.
 
The situation in Egypt may have caused that spiking, but since Egypt is not a major oil exporter, there can be no logical reason for the price of oil to be so affected.  However, perhaps the excuse is good that both prices move together in tandem, to create a global parity.
 
The Fitch downgrading of Italy's rating today may be contested; however, it indicates the weak state of the Recovery in Europe.  Similarly, the news from China that their boom is not so strong as figures had previously indicated (due to numbers which had been inflated) shows there is euphoria amongst the traders.   This brings a reality check, especially for the Oil price bulls, who perhaps will ignore the plentiful supply that currently prevails and the strategic oil reserves that are always there and have not been utilised for a long, long time. 
 
Why Oil price should be up under the circumstances can only be explained by some traders and commentators, whose kudos will be to make a fast buck or get some furthering of controversy on the grades and quality of oil.  Great talking points, but not anything to help the worldwide economic Recovery, which would suggest the Oil price ought to be lower.  I imagine the OPEC economists and Ministers would agree, to sustain their own economies on a growth phase.  If the rest of the world stalls, the reduction in their GDPs will automatically have an effect on the OPEC nations as well.  The world is a joined-whole, where development and prosperity moves hand in hand for all together. 
 
I have previously suggested that the Oil price needs to be under $85 a barrel for the worldwide economic Recovery to be sustained.  At that price, most of the infrastructure development in the OPEC nations can be viable, according to several Ministers comments that I have noted previously.  The current spike I hope will be only temporary, until the price starts to  trundle down once again.  Market forces and the situations worldwide will hopefully prove favourable.
 
Sometimes the numbers of contracts traded at higher prices are so thin; perhaps the reporting price ought to be based on a wider number of actual sales, from a reliable source. 
 
I will be pleased to receive your comments on this issue.
 
Kind regards,
Duru-darshan.
 
 
 
  

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