Front Core Capital Notices A Change In The Oil Market
Front Core Capital Sees that with world economic growth continuing to drive world oil demand growth well in excess of non-OPEC production growth, the oil market continues to draw on inventories and OPEC spare capacity in order to balance.
- (1888PressRelease) July 22, 2011 - Large investment firms moved oil markets yet again when it resumed its bullish outlook for oil, forecasting crude oil will average US$130 a barrel in 2012, and finish 2012 at US$140 a barrel. Recently investment firms were once again structurally bullish on the oil market based on its new assessment that Libyan production losses will lead to effective exhaustion of OPEC spare capacity by early 2012.
Front Core Capital Sees that with world economic growth continuing to drive world oil demand growth well in excess of non-OPEC production growth, the oil market continues to draw on inventories and OPEC spare capacity in order to balance. And it is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies.
The outlook is in line with that of other market watchers, including oil market analysts, which last week predicted oil prices would average between US$100 and US$120 over the summer, pulling up gasoline prices. The difference is that investment firms are so influential that they don't just call the market they make the market. They propose and the market disposes. The media provides credibility to whatever they happen to say at the moment. Global market analysts say investment firms' oil forecasts are so powerful they have become, in a sense, a market fundamental.
Front Core Capital thinks that analysts, such as those at investment firms, are sometimes capable of creating self-fulfilling expectations by helping to shape the market, assembling coalitions of investors and hedgers, pulling together large blocks of capital.
There is spare capacity to produce four million barrels a day today, down from less than one million at the end of 2007 and early 2008. Unrest in Libya has taken 1.5 million barrels a day off the market, but most of that has been replaced by Saudi Arabia and there doesn't seem to be demand for the rest.
In the short term, the market is really quite balanced, if not soft at present. The macro news on the global economy is very up and down, certainly on the U.S. side it's more down than up lately. Adding to the softness is that the market seems to have gotten used to Middle East turmoil, and that consumers push back when prices get too high above US$100 a barrel, raising questions about the sustainability of US$130 oil.
- About Front Core Capital -
Front Core Capital is a Venture Capital and Financial service company. Front Core Capital caters to the expectations of knowledgeable and discerning investors who seek the highest return on their investments. Front Core Capital is a wholly independent company and, as such, is not restricted in any of the funds or investment products we may wish to utilize for our clients' wealth management and financial planning purposes.
- Press Contact at Front Core Capital -
Zach Amiran, press-contact ( @ ) frontcorecapital dot com
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