Oil Prices: Expiring

In more ways than one

Jan ’09 crude oil futures expire today, so you can expect a bit of volatility. Nevertheless, a low of $33.44 is more exemplary of the market price itself expiring…

Less than a month ago the same contract was trading in the high $40’s – at a midday price of $35.29, crude is now off 76% from it’s summer highs. Further, the price for delivery nine years hence is but half of what the near term was last July! All this in the midst of rising gasoline inventories, and despite OPEC’s promise to cut production by a few million barrels a day. When’s the last time oil spiked lower on a big production cut?

The holidays may seem a bit a dreary this year, but it could have easily been a whole lot worse. The bursting of this bubble is the reason for a few less lumps of coal in the stockings.

Data points and chart compliments of Barchart.

Comments

David Dzidzikashvili says:

OPEC is trying to make deepest oil cuts ever to rescue the prices… This is alarming, since whole world is in deep recession and the current financial crisis will last until early or late 2010 I think. Any cuts in oil supplies will cause price hikes on petroleum and this will further deepen current recession around the globe. Higher oil prices will result in higher prices for basic goods and services and this will put the middle class, small business owners in a very bad situation. I hope the world leaders will be able to persuade OPEC to try to keep the supplies at current levels at least until the end of year 2009, since higher prices will have a very nasty impact on economies trying to recover from recession.

Agree entirely. As if prices for staples weren’t high already, the desire is to keep it that way even if it perpetuates global instability. Makes you wonder if shaky ground is in fact the end goal.