Oil Prices Aim For $60: How High Can It Fly

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Oil prices set record highs again yesterday, hitting $59.85 a barrel at one point. Traders seem poised to knock $60 a barrel down and leave it in the dust as contracts from the 4th quarter cracked $61. The big question many are asking is what price can the market actually support.

OPEC suggested they would raise production another 500,000 barrels but that additional supply would come exclusively from Saudi. After that total, there will be no additional oil on the market until August as the new pipeline from the Caspian Sea reaches 1 million barrels a day.

Oil Prices Aim For $60: How High Can It Fly

The EIA stated crude inventories lowered in the U.S. last week from the previous week but the supply is still up over 26 million barrels for the year. Gasoline supplies were also well over last year’s supply levels. Distillate levels climbed dramatically for the fifth week in a row. On other side, consumption is also significantly higher than it was a year ago.

The real surprise for many has been the continued high level of consumption in the U.S. despite the rising prices at the pump. There have been some noticeable changes though. Much to the chagrin of American automakers, sales of SUVs have taken a dramatic downturn and they forced some major changes at Ford and GM particularly.

The OPEC situation remains questionable. OPEC has exerted firm control over oil prices for some time, raising or lowering production to maintain price levels in the market place. They’ve lost control of the market, at least for the moment, and there’s not much more they can do from a pumping standpoint. OPEC maintains the pricing issues for oil stem from refinery problems but OPEC also recently raised their OPEC reference basket for oil to $52.78.

According to OPEC’s website, the new OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and BCF 17 (Venezuela). The cartel’s site also pointed out the oil is going to be more sour than previously noted.

It’ll Get Worse

The U.S. will release its weekly energy report on Wednesday and inventories are expected to drop again which means the price of oil shoots up again. Recent surveys by Dow Jones newswires said traders see prices continuing to climb and the big question is where will it stop.

The supply on oil is stretched extraordinarily tight and many worry any interruptions at all could send the price skyrocketing. Other alternatives for oil seem unlikely in the immediate future and based on past performance, $70 a barrel would not be out of the realm of possibility, possibly even next month.

Many economists suggest oil is bubbling right now and the price will eventually drop, perhaps dramatically but the reality for many consumers is that the price will continue to climb and as it does, money will be removed from other areas of the service based economy.

John Stith is a staff writer for WebProNews covering technology and business.

Oil Prices Aim For $60: How High Can It Fly
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