Eyes of the Fleet

Eyes of the Fleet

Wednesday, May 17, 2006

Investigate this: Reduced demand undercuts energy prices

Maybe that market thing works after all? See here :
Crude futures prices dropped below $70/bbl in New York and London markets on May 15 amid indicators that high prices may now be reducing demand.

Analysts said the sell-off of crude futures was triggered by the People's Republic of China's setting a key currency trading benchmark that will enable the yuan to appreciate faster. Traders fear that move could slow the growth of Chinese demand for crude by increasing costs.

Crude futures prices fell last week after the University of Michigan consumer sentiment index dropped to 79 for May—the lowest level since October—from 87.4 in April. Its monthly current-conditions index registered the biggest loss since 1978, down by 13 points to 96.2 (OGJ Online, May 15, 2006).

In an earlier report, the International Energy Agency (IEA) in Paris reduced its 2006 estimate of the growth of world demand for crude by 220,000 b/d, or 15%, primarily because of weaker US demand as a result of high fuel prices and large exports of crude from former Soviet countries, indicating lower demand in that region (OGJ Online, May 12, 2006).
Now let's see if we can make sense of this Senator Schumer, demand causes prices to rise and high prices cause demand to drop and when demand drops, prices fall. Hmmm. Sounds like a conspiracy to me.

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