Oil has climbed on the back of speculation that North Sea Oil supplies will tighten. The market is backing the price on the theory that US oil supplies for winter will be short as a result of high levels of gas refining during the summer.
According to the International Energy Agency predicts that demand for oil will increase in 2008, but production capacity has also improved. A somewhat more cynical appraisal of the market move would be that the market likes to back high prices for anything, and oil has often been self sustaining as a commodity. In the initial surge in oil prices the hedge funds were blamed for inflating the price with their oil futures investments, driving the price up $20 to $40 US a barrel.
Overall, commodities trade in ranges supported by either speculation or spot prices. Speculation tends to win as a profit base, because spot prices are tethered to commercial realities. See link on current state of trading below.
It is not anticipated that the health of the planet will play any role in market analyses.
Congress’ view of speculative energy trading
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