GalaTime

• Barrons: Bye, Bubble? The Price of Oil May Be Peaking

U.S. per-capita oil consumption is 25 barrels annually, while Japan uses 14 barrels per person. China’s 1.3 billion people consume just two barrels each per year, however, and India’s 1.1 billion use less than a barrel a year. In the next decade, oil indeed may hit $200 a barrel.

But prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market.

The SPR, intended as a source of oil for national emergencies, now holds 705 million barrels of crude, equal to about 35 days of domestic consumption. With prices higher, Congress moved in May to stop adding to the SPR as it neared capacity. A sale of 100 million barrels of oil would shock the markets and potentially drive down prices.

• Wall Street Journal: Weather May Ping Natural Gas

LNG imports have been especially low this year because of high demand in Europe and Asia. LNG imports in the U.S. are down more than 70% from last year, according to federal data. “All that LNG that was supposed to come here is more likely to find a higher price in those other markets,”

. . . several LNG projects are set to go online next year — the increased supplies could drive down prices. Mr. Wolff is among those predicting prices will fall next year, possibly below $10 a million BTUs.

• Mint: UK fund firm forecasts $5,000/ounce for gold

“You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000an ounce or beyond as inflation psychology becomes more and more embedded andpeople become desperate to have a source of value,”

Demand for gold will also rise as central banks become net buyers for the first time in 20 years, driven by developing countries.

The limited amount of gold available, relative to the size of the global capital markets, means a small shift in investments may lead to significant price changes, Wyke said. Total gold above ground is worth about $4.8 trillion, compared with global stock and bond markets worth $135.2 trillion.

Hmm. At Rs 40 per US $, that would translate to gold prices of ~ Rs 70,000 per 10 gms. Unlikely.

This entry was posted on Monday, June 23rd, 2008 at 9:30 am and is filed under commodities. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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