Commodity Daily News

Hurricane Ike and OPEC Team-Up on Oil Supply

Today for the price of Crude Oil it is important to consider two factors. The first is the impact of Hurricane Ike on speculation, and the second is OPEC's surprise decision yesterday to cut back oil supply. Ike was upgraded to a Category 2 storm yesterday right around the time that it was being predicted by meteorologists to slam into the Texas coast this weekend. The impact on speculators is that they are predicting a drop in supply as oil companies shut down and evacuate their refineries in the Gulf of Mexico once more, which has the potential to increase prices.

Added to this potential cut in supply is the unexpected decision by the world's largest oil cartel, OPEC, to cut their oil production by 520,000 barrels a day. This comes as a shock because it has been argued by analysts that the price of oil was not dropping due to an oversupply in the market, but rather a decrease in demand and a strengthening USD. This was precisely the stance of Saudi Arabia, OPEC's most influential member, regarding their resistance to such a cutback right before the winter season when demand for heating oil reaches its natural peak. As it stands today, the price of oil saw a significant drop last night prior to the end of yesterday's trading session, but so far this morning it has leveled off around the price of $103.30. Traders should be wary of the predicted target of $100 as oil suppliers, and Mother Nature, are apparently bent on keeping the price above such a position.