Oil prices, once they breached even the $110 / barrel barrier......set people thinking that it's going to level off.
But, it will climb steadily for quite some time given the tension in the Straits of Hormuz and Middle East.
Well, 40% of world's oil passes through the Starits of Hormuz !
Check out the following excerpt
“Iran's Oil Minister Kazem Vaziri-Hamaneh, said in Kuala Lumpur on Monday there is no shortage of crude in the market and OPEC has no plans to increase supplies, in the latest rebuff from the producers group to consumer nation calls for more oil.
"Now there is no shortage of crude oil in the market," he said when asked if OPEC should release more supplies to the market to temper high oil prices. "The reason for the price hike is not because of crude supply problems."
Worries over Iran's nuclear dispute with the West have been a driving factor for oil prices this year. But Vaziri-Hamaneh said the country's crude output is expected to rise to 5.3 million barrels per day (bpd) by 2014, up from 4.3 million bpd currently.”
Our take : The consumer nations’ trends, especially developing countries like China & India….are very rapid rate of increase for oil. OPEC countries’ set a quota for oil production….once that quota is set….generally they do not reverse it.
This is because the quota determines manufacturing plans, production & management plans.
But demand is going to be higher.
Also, there PROBABLY WILL BE A TENSION WITH IRAN….this nervousness will prompt some developed countries’ to get more oil to funnel it into their reserves.
This might be the right time to but oil stocks…..they are going to go up due to increased demand.
