US EIA crude report for 2/4/2009
Although the financials are still turbulent, I believe the energy stocks will leads us up and out of the morass.
It was reported that OPEC adhered to 67% of it's planned cuts and crude has held above the $40 mark in recent weeks, buoyed partly by OPEC's pact to remove more than 4 million barrels per day of output since September to force world markets to draw down bloated inventories. Also by the contango players, that have leased ships, and taken posession of 60 - 80 milliion bbls of crude that would certainly driven crude prices lower. The risk due to falling demand, it's impossible to tell WHEN the cuts will catch up, likely causing OPEC to overreact wih downside cuts. The reduction in global inventories will tell us that the cuts have caught up with demand, rising crude prices will take the energy sector with them. However, If OPEC has overdone the cuts then crude pricing will continue to rise possibly killing the global recovery that's being sought.
The problem, as I see it, OPEC having been burned, from $147 down to < $40/bbl , will be extremely reluctant to increase supply. The shorts, stupidly appear to be ignoring the OPEC cuts, and the contango players, focusing only on demand info, and expecting $25 crude, if forced to cover could drive crude, spike crude, back to $75 - $100/bbl. Given the global meltdown, do we really need the meltdown prolonged by commodities speculative "players?"
I define a speculative player as anyone who has no intention of EVER taking posession of the commodity he (or she) is speculating in.