Update on Worldwide Oil Prices ... Down Again Today

Yesterday we commented on the likelihood of a price war in the oil patch. Today we have new evidence of this good news development as Iraq has cut its prices to remain competitive with Saudi Arabia and oil prices just keep falling in global markets.


One fundamental reason for the fall in oil prices is rapidly increasing North American supply as both the U.S. and Mexico continue to ramp up output. When added to Canadian production, the North Americans are doing our share to help with what has become a developing excess in worldwide supplies.


When this added North American supply is coupled with slowing demand from slumbering no-growth economies in Europe and slowdowns in China and India, as well as continuing stagnancy in Japan, the circle is complete for a what goes around, comes around story.


In other words, excess supply meets lower demand and prices fall.


Taken as a whole, this is good news for America's jobs, national security, America's economy and American consumers. And while economic growth isn't all that strong in the U.S. right now, we're definitely doing better than the rest of the world and will continue to get better over time. Continuing low interest rates for both companies and consumers will help aid the economy as inflation remains under control due in no small part to falling energy prices.


Now if we could just get the politicians to allow, if not encourage, additional energy output throughout North America and give our U.S. employment and therefore tax base an added boost. But even if the pols aren't interested in serving We the People, at least OPEC is coming to our aid, even if it's clearly not their intention to do so. So let's hope that the price war in the oil patch continues.


OPEC Competition Pushes Crude Lower is subtitled 'Iraq Becomes Latest Member to Offer Discount to Benchmarks:'


"Oil prices fell further in the European session on Monday morning as . . . Iraq became the latest member of the organization that represents some of the world’s largest producers to offer larger discounts to the main benchmarks.

The Middle Eastern nation cut the November price of its Basrah Light crude grade for Asian and European customers by 65 cents, following similar moves by other OPEC members, including Saudi Arabia and Iran.

The round of price cuts have sparked speculation that the group is heading toward a price war as booming global supply and sluggish demand leave the market more competitive.

“What we really need to know is whether Saudi Arabia and some fellow OPEC allies have finally decided that there is no point in fighting the price slide in the face of such an overwhelming supply excess,” said David Hufton, of oil broker PVM. “We have long argued in this report that the OPEC response should be to allow prices to find a level that chokes off the competition and revives demand.”

November Brent crude on London’s ICE Futures exchange was $1.82 lower at $88.39 a barrel. On the New York Mercantile Exchange, light, sweet crude futures for delivery in November were down $1.32 at $84.50 a barrel.

ICE gas oil for October was down $3.75, at $760.00 a metric ton. Gasoline was down 364 points at $2.2211 a gallon."

Summing Up

Lower oil prices lie ahead.

How low will they go?

Nobody knows, but the market works, and supply and demand are pointing toward a continued fall in prices.

At the same time, our U.S. economy will continue to gain strength, albeit not at a quick enough pace.

Nevertheless, employment will continue to grow and our nation's budget deficits will continue to fall.

Better days are coming to America and for the purchasing power in the pocketbooks of our consumers.

It's about time our politicians woke up and let our oil companies DRILL, BABY, DRILL!

As long ago NBA basketball slam dunk champion 5'7" Spud Webb once said, "If you can dream it, you can do it."

That's my take, too.

Thanks. Bob.