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Thursday, September 28, 2006

Oil Prices To Drop To Below $45?

Larry Kudlow and oil analyst Michael Lynch had a little discussion about the current and future oil prices. They talked about something called "market conditions" and also about "the supply and the demand", whatever those things are.

Here is some of the discussion:

KUDLOW: Did the oil inventory as it came out today have any impact? Now crude oil inventories are just about as high as they were back, seven, eight years ago in 1998. Gasoline inventories are not quite as strong but still strong. Does the inventory data affect--influence your price forecast?

Mr. LYNCH: Yes, it does. Especially--not just the US inventory but the OECD inventory data, which is showing that inventories are approaching the record levels we saw back 10 years ago in 1998 when the price collapsed to $12.

KUDLOW: Is it possible that ethanol-related gasoline, which was a big problem, we couldn't deliver the stuff when the mandate went into place last winter and spring--is that getting to the gas stations better? Is the transportation better? Is that one of the factors helping the gas price story?

Mr. LYNCH: That's definitely one of the factors. It's also--we've ended the summer driving season, and so refiners no longer have to have the ultra-clean gasoline, which requires more ethanol, so that's also helped the market. But you know, ethanol supplies--it's a lot easier to build an ethanol plant than it is to build a refinery, so that's catching up.

And I just over-paid for a hybrid! That conspiracy between Bush-Cheney and the Texas Oilmen!

1 Comments:

At 7:56 PM, Blogger Quant Trader said...

Interesting that inventories are comparable to 1998 levels. If I recall correctly the reason for the oil inventory glut in 1998 was do to a sharp decrease in demand from Asian countries who's economies had just collapsed. It makes me wonder if the oil price declines are a sign that something is wrong in China's economy right now.

 

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