Friday, December 19, 2008

Cut in size/Cut in price

Oil consumers were trying to impress OPEC just before their meeting on Wednesday. But the short rally in oil prices failed to seduce over a dozen oil producers, as the guys decided, they were pumping a VLCC a day more than what was required. After the cut oil producers thought, they have surprised the market. But market had return surprise in store for them as crude prices plunged deeper after the announcement, leaving OPEC wanting in their action, which they thought was already an over-reaction on their part.

China is now contemplating lowering gas prices in bid to give demand 'more room' to inflate, whereas in free economy state like USA, dipping prices have not yet shown the desired effect on demand. Reason - Man is in grip of Recession Syndrome. I think, we all understand by now that any 'U' turn at this moment would lead us to the bull's horn. The consumer is changing habits for good and saving that last buck for the rainy days.

But OPEC have a reason to smile. Cracking oil prices would give a big jolt to the development of alternate resources and E&P activity in oil sector. Fundamentals have not changed. Billions of people are standing in the queue, hankering for energy and power to assert their existence in this mortal world. Struggle for resources has just begun and this premature interval may only hasten the climax.

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