OPEC decided to hold output unchanged at its meeting in Vienna amid signs that the global economy is near a bottom and demand may stabilize. The decision comes as no surprise to analysts since crude prices have rebounded to $65 per barrel, and the dark clouds that had been hanging over oil-producing nations have lifted.
Oil prices collapsed late last year following the seizure of credit markets in September and the implosion of industrial demand around the world. Faced with receding demand for oil and a liquidation of positions by speculators, the world’s oil cartel began slashing quotas in what turned into a desperate bid to staunch the steep drop in prices.
Crude prices bottomed around $33 per barrel in the US before beginning an impressive climb that appears partly tied to data showing China’s economy is growing modestly.
Moreover, signs that the US economy will start to recover later in the year have put a solid floor under crude prices, at least for now.
The fundamentals don’t fully favor OPEC at this time as consumption continues to recede, the world is awash in crude and industrial production remains under pressure, but producing nations once again have something to cheer about as consumers fret over the rising price of gasoline.
If the US economy begins to show signs of life early in the summer as some expect, crude prices could drift toward $70 per barrel. Stay tuned.
Charles Sherry
http://economytodaytomorrow.blogspot.com
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
