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OPEC decides to curb overall output

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September 10, 2008 – Comments (10) | RELATED TICKERS: USO

Man oh man, what a day yesterday.  That one is going to leave a mark.  Oil is now sitting at just above $100/barrel.  This is a level that the world seems to have indicated that it can absorb, and one that I have a feeling OPEC will move swiftly to defend.  While OPEC is essentially powerless to increase production on the upside to fight high prices, it can easily turn off the spigots to protect the price of oil on the down side if it wants to. 

After a series of scheduled meetings yesterday the Organization of Petroleum Exporting Countries announced that it has decided to trim its overall output by 520,000 barrels per day.  This decision was a compromise between our "friend" Saudi Arabia and the countries that hate us, like Venezuela and Iran.  It will be interesting to see whether OPEC actually sticks to its new production target, or if it continues to overproduce.  Regardless of what happens, this was clearly a warning shot by OPEC essentially intended to say "Guys, we're watching...and we don't want oil to fall significantly below $100/barrel." 

It is very possible that oil will fall below that psychological level in the next couple of months, but if it does look for OPEC to announce additional production cuts at its meeting in December to limit the slide.  This is why in the great debate about whether oil will hit $75 or $150 first, I said neither...but that it will never sit at $75 for any extended period of time.

OPEC decides to curb overall output; prices rise

Deej 

10 Comments – Post Your Own

#1) On September 10, 2008 at 7:25 AM, SqwiiToN (< 20) wrote:

As I said2 months ago when oil was at 140s...

 

Oil will go down near 100 but NOT under 100 and that is for sure as I always said.

 

Oil will go back in end of September to 109 a barrel so in this month we will see oil surge a bit.

 Let me tell you about oils future.

In September oil : 109 barrel

October : 111 a barrel

November 110 a barrel

December 105 a barrel

January 2009 : 100 a barrel

Feb : 101 a barrel

March 114 a barrel

April 122 a barrel

 So buy now and get some short profit from oil surging.. and then oil will be stabile from 100-110 in 3 months or something like that and then make a big rebound and surge !

 

As I was right that oil would fall in these months I am quite sure about this also :)

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#2) On September 10, 2008 at 7:30 AM, SqwiiToN (< 20) wrote:

Lets make a forecast about the general market:

 

In the next 6 months we will see that Nasdaq will fall near 1.700 level..(NASDAQ now: 2.200)

Dow Jones industrials in next 6 months: Will fall down make a bottom in February 2009 near 10.890 and then make a rebound to 12.350 in April 2009.

 

S&P 500 in next 6 month will  go down to 1.182 right now 1.224..

So thats for now then you know that we will still be bearish in the market general...

 

GDP growth will still descline

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#3) On September 10, 2008 at 7:39 AM, lquadland10 (< 20) wrote:

Oh I don't know GS said $80.00. So I think 85.00 to 90.00.We will see who is correct. You or GS.

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#4) On September 10, 2008 at 9:48 AM, TMFDeej (99.40) wrote:

lquadland10, where did you see that Goldman is calling for $80 oil?  Goldman's oil analyst reaffirmed their call for oil to average $130 during Q4 just a few days ago.  I think that you are misinfromed.

Deej

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#5) On September 10, 2008 at 9:50 AM, TMFDeej (99.40) wrote:

lquadland10, where did you see that Goldman is calling for $80 oil?  Goldman's oil analyst reaffirmed their call for oil to average $130 during Q4 just a few days ago.  I think that you are misinfromed.

Deej

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#6) On September 10, 2008 at 9:50 AM, TMFDeej (99.40) wrote:

lquadland10, where did you see that Goldman is calling for $80 oil?  Goldman's oil analyst reaffirmed their call for oil to average $130 during Q4 just a few days ago.  I think that you are misinfromed.

Deej

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#7) On September 10, 2008 at 9:55 AM, TMFDeej (99.40) wrote:

Hmmmmm, annoying.  Why does this thing keep posting multiple comments?  Anyhoe, here's the article:

"The forecast, prepared by Murti and other analysts at Goldman, left their price forecast for U.S. West Texas Intermediate crude in the fourth quarter 2008 unchanged at $130 a barrel and its full-year 2009 forecast at $140." 

Goldman's Murti leaves oil price forecast unchanged Report this comment
#8) On September 10, 2008 at 9:56 AM, TMFDeej (99.40) wrote:

Hmmmmm, annoying.  Why does this thing keep posting multiple comments?  Anyhoe, here's the article:

"The forecast, prepared by Murti and other analysts at Goldman, left their price forecast for U.S. West Texas Intermediate crude in the fourth quarter 2008 unchanged at $130 a barrel and its full-year 2009 forecast at $140." 

Goldman's Murti leaves oil price forecast unchanged Report this comment
#9) On September 10, 2008 at 10:01 AM, TDRH (99.68) wrote:

The OPEC production quotas seem to be more window dressing than anything.   As the price rises the minor players look for ways to cheat because they need the cash.

As for the price of oil, one factor is the relative strength of the dollar.  The dollar has been strengthening of late for no apparent reason. 

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#10) On September 10, 2008 at 7:46 PM, DemonDoug (82.77) wrote:

Deej, did you see COP?  Dropped below 70 for a short time!  Too bad I didn't have any dry powder ready to shoot that bird down, hopefully I'll get another shot at it.  I am just loving the buying opportunity this short-term downturn in oil prices has given us.

"As for the price of oil, one factor is the relative strength of the dollar"

TD - you keep forgetting my man.  Dollars are priced in oil, not the other way around.  It's like Chuck Norris.  When Chuck Norris jumps in a pool, he doesn't get wet - the water gets Chuck Norrised.  When oil jumps into a pool of money, it doesn't get dollared - the dollars get oiled.

I'm not sure if that made any sense but the point is that oil is the world's reserve currency, not the dollar.  People are selling their oil plays which is why the dollar is going up.  Not the other way around, although the effects of dollar manipulation have an effect.

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