Monday, January 17, 2011

OPEC Raises Oil Demand Forecast for 2011 .

The money is coming out of the wallets AND the Fed is printing money, the Organization of Petroleum Exporting Countries knows this.

Today OPEC said at their meeting that demand for its oil in 2011 will be stronger than it previously forecast owing to the recovery in the global economy.

OPEC raised its expected 2011 demand for the group's crude oil by 200,000 barrels a day to 29.4 million barrels a day. The group also raised its forecast for growth in global oil demand this year by 50,000 barrels a day.

Blaming some of the recent climb in the price of oil on speculators, OPEC Secretary General Abdalla Salem El-Badri told the Austrian financial daily Wirtschaftsblatt that "OPEC won't intervene because of speculators...For a start, we need to wait and see what the trend will be."

Bottom line: OPEC is not known as a great forecasting organization. They are trend followers and theysimply see stronger demand for their oil. As for blaming the strength in in oil prices on speculators, speculators generally follow trends, rather than create them. Blaming speculators for part of the price hike gives OPEC cover for not increasing supply.

The real story here is the Fed and its money printing. Oil is a relatively unique product in that it is heavily used in the consumer sector as well as the capital goods sector. When the Fed prints money that enters the capital goods sector, this provides more money for capital goods operators to bid up the oil price away from the consumer. That's why the oil price tends to lead prices higher--strong demand across the board, especially when the Fed is printing.


  1. >When the Fed prints money that enters the consumer sector, this provides more money for capital goods operators to bid up the oil price away from the consumer.

    Don't you mean when the Fed prints money that enters the CAPITAL sector?

    If the new money entered the consumer sector, then consumers can bid oil away from capital goods companies that use oil as a factor input.

    Or did I miss something?

  2. The market price is not related to supply and demand...What we have here is counterfeit money terrorism...Printing more "money" and inflating market prices. This is a hidden form of organized terrorism as it slowly murders the people of Earth via mental angst and starvation.