Wednesday, May 12, 2004

Oil supply 'cannot match demand'

The reason may not be that consumption has increased suddenly, although it has been going up. But...
Nowhere near all of the apparently increased demand is connected with increased consumption.
Instead, it seems that major buyers - especially governments - are stocking up on oil, possibly to guard against any disruptions to supply.
The US strategic petroleum reserve has been a particularly active buyer, and governments such as China and India have followed suit.
At the same time, traders in the futures and options markets have anticipated a tighter market by bidding up forward prices.

This is an interesting explanation. Some good food for thought.


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