Global Oil: Supplies High, Demand Low

A global economic slowing from China to Europe to North America has put a damper on demand for oil -- just as global supplies are beginning to ramp up in reaction to high oil prices.

Oil prices have fallen approximately 13 percent this year. Oil futures, which haven't closed below $86 since mid-July, fell to a low of $84.86 a barrel last week. Weak outlooks recently provided major companies such as Caterpillar, DuPont, and 3M have raised concerns that the global economy is weakening, which could further reduce demand for oil. The Energy Information Administration earlier this month reported that oil production in the U.S. was at a 15 year high, despite lower demand. _News Yahoo

As long as the price of oil remains above $75 a barrel, the ramp up in production is likely to continue. That means that in the intermediate term, oil prices are likely to stay close to present levels.

"There is a correlation between the equity markets and the oil price," said CMC Markets analyst, Michael Hewson. "We've had various companies missing price forecasts and these concerns about the future outlook for earnings are keeping a lid on oil prices." _Five Star Equities

Of course, in the long term, supplies of unconventional hydrocarbons are likely to grow as improved technologies are perfected for producing clean gas to liquids (GTL), coal to liquids (CTL), bitumens to liquids (BitTL), kerogens to liquids (KTL), and gas hydrates to liquids.

Conventional oil & gas producers -- including those of OPEC and Russia -- will be hard put to compete with the rising unconventional producers, at least in the sense of being able to pacify their populations and to support their dictators in the manner to which they have become accustomed.