Monday, December 15, 2008

Fresh Perspective on Crude Oil

John Mauldin always has a very interesting perspective on all things financial. He often includes in his newsletters the writings of other people with important perspectives on the financial markets. This week's newsletter from John had an interesting perspective on crude oil. Here are couple of short excerpts as a teaser to read more:

"...storage for oil is very tight. Oil producers are leasing very large ships to store excess oil, as they cannot find places to store it on land. Storing oil on ships is expensive, so that cost of storage gets figured into the price of oil a year out...
"The OPEC nations are not cutting back by any significant amount. Oil is backing up in the system. It is quite possible that oil could go a lot lower in the next few months as the world reels from a global recession, and that means the demand for energy will be down. Oil below $30? Without production cuts that is certainly in the realm of possibility."

You can read all of John's latest newsletter by clicking this link. Better yet, why not subscribe!? John's weekly newsletter is free, and it is always good reading!
Note: Oil is not something that can be turned on and off like a spigot. It is my understanding that once a well is drilled, the oil must be used or stored someplace. You can't just turn the wells on and off at will.