Oil “would be $30/bbl” without financial speculators

Chemical companies, Economic growth, Financial Events, Futures trading, Oil markets

trading floor.pngThe blog’s argument that oil prices are now being entirely driven by financial market speculation has won support from one of the main state oil trading companies.

ICIS news reports that the CEO of SOCAR Trading (State Oil Company of Azerbaijan Republic) claimed that the “rise in crude and other commodity prices, resulted principally from the speculation of banks“. And he went on to argue that “fundamentals would indicate that the price of crude should be around $30/bbl.”

Speaking at the Asia-Pacific Petroleum Conference, he justified this claim by pointing out that “paper trading on the NYMEX and ICE exchanges in 2010 was worth $25,000bn, compared with just $2,000bn for physical oil“. And he noted that “although crude prices had risen, OPEC spare capacity still stood at around 6m bbl/day“.

Azerbaijan produces 1mbd of oil, and SOCAR believes that today’s high oil prices are positive for the world economy, as they “cushioned resource-rich developing countries, including Azerbaijan, from the worst effects of the crisis“. The blog strongly disagrees with this view, which ignores the impact of high oil prices in reducing discretionary spending (and therefore chemical demand) in the rest of the world.

But SOCAR’s clear statement does give a clear indication of the downside risk to oil prices, should the QE2 lifeboat party ever end.

PREVIOUS POST

2011 Budgets

16/10/2010

The blog will publish its annual Budget Outlook for 2011 next weekend. And so as...

Learn more
NEXT POST

USA aims "to inflate the rest of the world"

19/10/2010

If you only read one newspaper article this year on the economic outlook, then t...

Learn more
More posts
Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business?
06/06/2021

My Dutch colleague, Daniël de Blocq van Scheltinga, is a graduate of Leiden University in the Nethe...

Read
ACS Chemistry & the Economy webinar on Thursday
02/06/2021

Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard...

Read
Oil markets, OPEC, enter the endgame for the Age of Oil
23/05/2021

2 major events shocked oil markets last week. They marked the start of (a) the endgame for the Age o...

Read
225 years ago today. The first ever vaccination – against smallpox, the great killer of the time
14/05/2021

The pandemic has reminded us of the critical role played by vaccination in our lives. Its impact beg...

Read
Supply chains set to transform as companies start to reshore
09/05/2021

Major new opportunities are starting to appear in today’s New Normal world, as I describe in a...

Read
Pandemic leads to ‘baby bust’ as births decline in most countries
18/04/2021

A year ago, many were suggesting the lockdowns might produce a “baby boom” as couples sp...

Read
Smallpox was the first vaccination to change the world – now we have a new opportunity to improve our lives
03/04/2021

Chart 1: Increased life expectancy led to a dramatic increase in GDP/capita The pandemic has reminde...

Read
COP 26 set to accelerate development of the 15-minute city
28/03/2021

One of the good things to happen in the pandemic over the past year is that ‘cooking has becom...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more