Wy haven't Oil price gone up?

[hornpharmd]

Question about those familiar with the markets. Seems to me that with this giant oil spill that this would have been an easy excuse for them to jack up oil prices. If anything, oil prices have actually gone down slightly.

And do we expect them to eventually go up b/c of this?

 

[HURRICANE]

Crude is priced in US dollars which have been rallying due to the debt crisis in Euro-land. Stronger US currency reduces the number of dollars needed to buy a barrell of crude.

Gasoline supplies are building and ample at this time. Also, prices usually peak just after Memorial Day. So seasonally speaking, we are due for some weakness soon. The estimated loss from the spill is, 6k barrels a day which is equal to the amount of gasoline sold by 60 convenience stores a day. There are over 115,000 stores across the US.

 

[dalhorn1]

crude has become more inversely tied to the value of the dollar, recent value of the euro, and gold.

also, the main storage hub for pricing (Cushing, OK) is at historically high capacity. When this occurs, a steepening in the futures is set, called a contango. The wider the spread from front month trading to future sales means that more crude is being stored, refineries don't run as much capacity, and holding on to as much production as possible becomes a routine play for the future of the commodity.

It eventually trickles down to the end user, but outside of events like 911, immediate changes in price aren't usually seen. The GOM oil spill may inflate prices, but only nominally in my opinion. Until demand begins to show long-term stability across more than just gasoline products, the price of a barrel won't show much movement, at least upward.

 

[l00p]

smart mofo's

 

[HoustonHorn93]

Also keep in mind that the well was not a completed and actively producing well. Thus, it was not yet contributing to the oil supply. Unlike when a hurricane rolls through the gulf and knocks out producing wells for a time being.

 

[texaszete]

I think the biggest driver right now is what's going on in Greece, but not because of the simple dollar is strengthening argument.

Asia is one of the biggest oil consumers right now, and a big portion of their produced goods go to Europe. With the Euro weakening, their demand for Asian produced goods go down because now they are more expensive. So now people are expecting oil demand to be a little soft in Asia because of a lack of demand for their goods in Europe, thus oil prices have gone down.

 

[washparkhorn]

War is the wildcard.

At this point, apart from the other reasons already given, this is a fragile recovery (with some doubting whether there has been any recovery at all). With 1 in 10 mortgages behind, a high unemployment rate, Europe not looking like that great of a market for our "iPad economy," China sputtering and not looking like it will revalue its currency, PIMCO restating this is the new normal, Goldman Sachs out on its feet, and regulations coming fast and furious with little connection to any reality but a political reality, I wouldn't bet that we are going to be entering a new glory days anytime soon. Therefore, there are reasons to be bearish about oil prices.

I believe higher oil prices would just introduce stagflation to this somewhat deflationary environment we are currently facing.

It could be that things are just worth less and this is, as PIMCO says, just the "new normal."