OPEC to cut production....oil prices STILL go down???? WTF?

[spanone]

Still Don't Think Oil Is Political?

Now I could be wrong, but when production is cut, shouldn't the price of oil increase? In a FREE MARKET isn't this how the market would react?

~snip~ Hours after the world's leading group of oil producers vowed to cut output by 1.2 million barrels a day to stop a three-month-old slide in petroleum prices, oil prices on world markets continued to head downward. Crude oil slipped $1.68 a barrel yesterday to close at less than $57 a barrel in New York markets for the first time this year.
~snip~

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/20/AR2006102001405_pf.html

[Turbineguy]

1. I've been thinking about this.

We know that the price of oil includes a factor devoted to fear and uncertainty. If you can reduce production, you can also bring it back up. That reduces fear. Hence the price drop.

[dkofos]

2. Fear not, the election is only two weeks away

Prices will be heading back up on Nov. 8.

[papau]

3. Prices go down when the oil company cuts their 25 cents/gal margin

and when Saudi's let oil worldwide decrease.

Saudi's promise in 04 that prices would drop - and they did.

:-(

[Warren Stupidity]

4. OPEC never actually cuts production.

They just make noise, OPEC production is what it is. The price is driven by demand and supply. Currently we are in the downslope adjustment caused by the high prices of the spring and summer - demand is down a little bit and supplies are up a little bit. Demand is only partially elastic as oil is a vital fluid and demand for its use can only go up over the long term as the number of people on the planet using oil steadily increases as does their per capita consumption. Supply is at or near peak capacity. We get all flummoxed by short term volatility in prices. Take a look at 5year, 10year, and longer price trends.

[TheFarseer]

actually, I just saw on CNN two days ago

that gasoline consumption is up 4%(as compared to what was not made clear) and also that carpooling is down and work commutes of over 1 hour is up also. We are truly stupid.

[Warren Stupidity]

14. It is up 4% from when it was down due to very high prices.

Once again - you have to look at the slope of the line, not the peaks and valleys. Yes we are stupid, but if we had leaders instead of vile corrupt asshats, our leaders after 9-11 would have demanded that we sacrifice as our nation converted from high oil dependency to low oil dependency, as we disengaged from our fatal dependency on middle eastern oil. Instead we were told to go shop.

[jokerman93]

5. free market?

:rofl:

[spanone]

10. I knew jokerman would get it!!

n/t

[H2O Man]

6. Obviously you have not

seen the new republican commercial that shows Usama bin Laden threatening us all, or you wouldn't be fooled into consuming this democratic salad dressing. Oil and politics simply don't mix. In fact, oil is the sacred lubricant of the Bush family, and they would never, ever mix religion and politics.

[Tandalayo_Scheisskopf]

7. One causative factor:

Hedge funds. They piled into the energy sector like The Three Stooges going through a door. They slammed prices on everything. Up was the only direction.

The trouble was, as the recent failure of two hedge funds illustrates, is that it was all just a drunken frat party. A great illustration of that would be a two year graph of natural gas prices. Note: natural gas prices were a big reason for the failure of these two hedge funds.

I think that what we are seeing here is a bunch of people learning, once again, the need for moderation and diversification in all things. It's a concept taught in Investing 101, but whiz kids always seem to think they can change the rules, up to the point they fall flat on their face.

[peacebird]

8. has the fed reserve replenished their stockpile of oil yet? NO.

They have not - which leaves more on the market AND less in the emergency reserves.

[TheFarseer]

9. Here's why

the cut had been anticipated on Thursday. By Friday the speculation was rampant that they wouldn't actually do it - that some countries would cheat. Now if you want to say that's a bunch of crap, I won't argue with you too much.

[MiniMe]

11. They are desperate to have a repuke congress. They will make up for it...

as soon as the election is over. I think the Saudi's aren't going along with it.

[Warpy]

12. Didn't you get the memo?

This is a RIGGED GAME, always has been, and the advantage is NOT with "we the people."

[Deja Q]

13. Deisel is still 40 cents more than regular...

That hasn't gone down at all.

I'll admit something seems wrong...

[spanone]

15. They must figure that truck drivers don't vote.