Crude Oil is up as I expected. Although the demand is down, I suspect OPEC and some non-OPEC oil producers would like to stablize the price by cutting the capacity. Although the production cuts usually fail to stem the slide of the price, this time it may have some teeth at least temprorily.
The dynamic of oil politics has changed dramatically in the last few years.
1) Saudi is no longer at the mercy of US foreign policy with Saddam Hussein is removed.
2) US and EU can no longer dictate the price they are paying as demand is coming from various geo-political region.
3) OPEC witnessed that high oil price DID NOT reduce the demand for the oil. As a matter of fact, it has little effect at all as the demand is moving up at the same time the price is rising. The oil price drop is really caused by financial crisis with ensuing economic crisis. It is NOT caused by high oil price.
With these in perspective, OPEC is going to do whatever they can this time to prop up the price. They may be truly cutting their production this time.
The only wild card is how non-OPEC nation behaves. Some of them is desperate for cash and oil is their only export. But I think the effect could be muted in short term.
Oil price will bottom at 30 - 40 range. maybe time to get in slowly.
