This is unsustainable- crude correction soon

I am beginning to come to the view that something has to give in the medium-term. There is no way that the global economy can support crude prices at current levels, and you can argue, as Lehman Bros does, that speculation is behind a fair slice of the recent rallies.

They also make the case (read more on ICIS news next week) that the supply outlook is not as bad as the bulls on crude pricing – who make up the majority – are making out.

But the problem is that every bit of bad news on crude gets played up by the media, and ends up inflating the crude price, because the majority opinion is that prices have much further to rise.

The Lehman analysis doesn’t add the very obvious point that chemical producers and industries all the way down to finished goods will be cutting back production on high oil prices. This will, in itself, serve as a correcting mechanism.

Governments in Asia are also cutting back on fuel subsidies which could moderate consumption growth in emerging markets – the main factor behind the demand surge.

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