September 2004
News & Resources

World of Oil

As geopolitical uncertainties have pushed oil prices to new record levels, industry analysts agree that the world's supply cushion has become perilously thin. Their consensus is that whether the amount of spare crude left to pump is 1 million bpd or a greater amount really does not matter. This is because the amount of actual production at risk is even greater. Thus, the mere threat of output disruptions in Iraq, Russia and Venezuela sent crude futures above $46/bbl for the first time on the New York Mercantile Exchange. On Aug. 13, the price of WTI crude surged to $46.58/bbl, an increase of $1.08. Although it set a new record, this price, on an inflation-adjusted basis, was still about $11 below the rate leading up to the first Gulf War. Saudi Arabia said it was willing to put an additional 1.3 million bopd on the market, virtually all of the country's available production. However, some analysts said that such a move would only point up the market's supply limitations.

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