bp boss says oil prices will fall, page-20

To me the ironic thing is that analysts are forecasting a drop in oil prices because world stocks are high. They don't seem to appreciate that prices are high now because countries such as the US have been buying up as much production as they can, both crude oil and refined products, and have been pushing the oil producers to go full tilt to accomodate them.

This doesn't mean that there is no long term crisis, it just means that in the short term they have been successful in hording oil and gasoline thanks to some mild winter weather and some co-operative producers. It also oesn't mean that production capacity is not balanced on a knife edge, or that a terrorist act, a hurricane in the gulf or a particularly harsh northern winter won't completely turn around the inventory positions in a matter of weeks.

The focus on U.S. oil inventories in particular is moronic. It's a bit like saying theres no oil production problem because I have a full tank of petrol in my car. U.S. inventories are merely a measure of how much oil the U.S. has been able to buy up at high prices, at the end of the day they don't mean squat.

The four largest oild fields in the world, (Saudi's Ghahwar, Mexico's Cantarell, Kuwait's Burgan and Russia's Samotlor) are now all in serious decline. China's largest field is also thought to be declining. The North Sea fields are in rapid decline. Indonesia is now importing rather than exporting oil. The rate at which new oil needs to be found will have trouble keeping pace with these declines, and although the price of oil mey decline in the short term due to current inventory positions and misguided analysis, the long term outlook for oil supplies is grim.

I'm buying more HDR.