Keep an eye on oil futures

Spot what is happening to the futures price in the market for black gold. OPEC, the 13-nation Organisation of Petroleum Exporting Countries has decided to maintain crude oil production at current levels despite pressure from the United States over the soaring cost of vehicle fuels and heating oil. The producer cartel met in Vienna to discuss the state of the market and opted to hold output steady. Indeed they have hinted that the next move in OPEC oil supply (which accounts for around 40 per cent of the world’s total) will be lower anticipating the effects of an economic slowdown in the United States.

(BBC) Oil rises past $105-a-barrel mark

Spot oil prices - for immediate delivery - have been above $100 for some little while now. The spot price is susceptible to very short run changes in the balance between crude oil demand and supply which leads to changes in stock levels.

Of more longer term interest might be what is happen in the futures market for crude oil. The international petroleum exchanges trade oil up to eight year ahead of where we are now. There is a market price today for crude oil to be delivered in 2016! (We might have had a Clinton in the Whitehouse for over seven years at this point!). And futures prices have also been rising which is a reflection that market investors believe that high nominal oil prices are here to stay. My chart shows 12 month and 24 months futures prices for Brent Crude from the North Sea.

So crude oil at over $90 a barrel for the short run is something that businesses and ultimately consumers are going to have to live with.

What matters more - the actual price of oil or the extent to which oil prices are volatile and therefore unpredictable?

How might OPEC as a producer cartel give the speculators a bloody nose? What might happen for example if they dewcided to sell some of their oil supplies forward into the oil market?

Who knows why oil prices are so high?