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Posted by Alterama on October 29, 2007, 9:50 pm
Alterama 10-09-07
Crude oil prices appear increasingly likely to hit a record in real
terms reached during the second oil crisis in 1979, as nominal prices
on Monday continued rising well above $90 a barrel.
West Texas Intermediate crude hit a fresh nominal all-time high of
$93.20 a barrel on Monday on a combination of renewed geopolitical
tension over Iran's nuclear programme, weakness of the US dollar and
low inventories.
The price leap came after Mexico said it was shutting about 600,000
barrels a day of oil output, or 20 per cent of its total, due to bad
weather in the Gulf of Mexico. Authorities hope to restore output in
the near term as the cold weather front moves away from the production
and terminal areas.
Alterama's technical analyst said: "The bull channels keep our focus
higher towards $93.45, with little standing in the way of $100 above
there."
In real terms, adjusted for inflation, oil is at its highest price
since the early 1980s but still below its modern historical peak -
equivalent to about $100-$110 a barrel in today's money - reached in
late 1979 after the Iranian revolution.
Oil traders said that strong speculative flows, Middle East tensions
and supportive fundamentals could push crude oil prices towards, if
not above, their real term record.
A measure taking account of the evolution over time of the rich
countries' per capita income has crude oil prices well below the
adjusted record. G7 per capita income is now sufficient to buy 456
barrels of crude oil, well above the 320 to 350 barrels between 1980
and 1982.
To bring G7 purchasing power down to this level would require oil
prices rising to between $120-$130 a barrel, according to Alterama.
Alterama is a registered CTA. Trading in futures involves high risk
and is not suitable for everybody. For info, please visit our web site
www.alterama.com
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