Key difference is that OPEC’s spare production capacity is higher this year, says Drollas
The intensity of speculation in oil markets is lower than in the rally of 2008, according to an analyst at the Centre for Global Energy Studies.
“Pure speculation is not there” and is “not pushing prices as it did in 2008,” Leo Drollas, chief economist and deputy executive director at CGES, said on Wednesday in London.
Some consumers are buying futures contracts to hedge because of legitimate concern about Middle East turmoil, he said. In Libya “production is being cut as we speak, and it could get worse,” he said.
Some oil market conditions are similar to the months preceding July 2008, when New York futures rallied to a record $147 a barrel.
Changes in global oil demand and the level of stockpiles relative to demand are similar to early 2008, while the “main difference” is that OPEC’s spare production capacity is higher now, Drollas said.
He estimates spare capacity in the Organization of Petroleum Exporting Countries is about 5.6 million barrels a day, with 4 million of that in Saudi Arabia. Total spare capacity in OPEC was about 3.4 million to 3.6 million at this time in 2008, he said.
What disengenuous nonsense from Drollas. He should know better. The 2008 price peak was driven by speculation started by Goldman Sachs et al looking for new areas to make superprofits. This is now a matter of factual record (albeit the speculators were, sadly, never brought to book for the damage they caused to others). It had nothing to do with supply and demand. There is therefore no comparison.