Oil Traders Raise Bets on $80 Crude on Supply Concern

The Organization of Petroleum Exporting Countries, the producer of about 40 percent of the world's oil, is pumping almost as much crude oil as it can to increase inventories before consumption peaks in the fourth quarter.

Published: 06-Jul-2005

Record oil prices may increase to $80 a barrel this year, options contracts on the New York Mercantile Exchange show. Investors are speculating OPEC won't produce enough oil to compensate for any disruption to supplies.

New York Mercantile Exchange data show 6,900 options contracts outstanding that allow buyers to purchase oil for December delivery at $80 a barrel, compared with an average of 77 contracts in January. The probability that oil will top $75 a barrel when the December crude contract expires is 21 percent, according to Adam Sieminski and Michael Lewis, strategists at Deutsche Bank AG, up from 5 percent at the start of the year.

Oil has surged partly on concern that a dispute over Iran's nuclear program to generate electricity may lead to conflict with the U.S. and disrupt supplies from the Middle East. The cushion between output capacity and demand is narrowing as producers including most OPEC members pump at maximum.


Visits to China, India, Malaysia and Pakistan are significant because the trip spells out the Saudi Kingdom's Look East policy, representing a new reorientation in its foreign policy that was heavily tilted toward the West.

The worst two scenarios suggest a drastic decline in output to 875,000 barrels a day by the end of 2007 and to just 520,000 a day by the end of 2008.

Bush said he envisioned a future in which a plug-in hybrid car could drive 40 miles on a lithium-ion battery, then stop at a filling station for ethanol, a fuel usually made from corn, similar to HyMotion Prius pictured below.


blog comments powered by Disqus