Verlerger on Oil Glut: "There has never been anything like it"

[girl gone mad]

Verlerger on Oil Glut: "There has never been anything like it"
http://www.nakedcapitalism.com/2009/07/verlerger-on-oil-glut-there-has-never.html">Naked Capitalism

While oil is a finite resource, focusing on the long term can blind one to near-term dynamics. There has been surprisingly little mention in the mainstream media of how large the current oil surplus is. The collective view seems to be that this will take care of itself in short order. But that may be longer in coming than most believe.

Some veteran oil analysts, in particular Philip Verlerger, beg to differ. From the http://www.latimes.com/business/la-fi-oil4-2009jul04,0,311438.story">Los Angeles Times:

Downward pressure on oil prices is so great that crude could trade for as little as $20 a barrel by the end of the year -- less than a third of what it traded for this week and an 86% drop from its peak last year, analysts said...

The reasons are simple, said Philip K. Verleger Jr., an expert on energy markets at the University of Calgary in Canada: The still-sputtering economy has lessened demand at a time when there is already a big surplus of oil.

For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market.

"That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it."