The crude oil prices recently spiked to a new trading high, sweeping toward $130 a barrel as supply concerns intensified the buying momentum. The oil market is linked with certain geopolitical uncertainties, inadequate refining capacity in the US to cope with rising demand, multiple specifications for gasoline for different states, and heavy speculation in oil by investment funds. This article discusses the driving factors in the global oil market, OPEC oil policy and production quotas, etc.

Crude oil prices jumped to a record high on May 09, 2008 closing above $125 a barrel for June delivery in New York Trading. Oil analysts said there were no significant developments behind the current upward movement in the crude prices. In spite of that, oil has climbed more than 30% this year and almost 12% since May 01. An analysis released by the investment banking firm Goldman Sachs earlier suggested that oil prices might soar to $200 a barrel. Is it sensible to price oil at $200? Not exactly.

Although crude oil inventories in the US have fallen, gasoline inventories are at their highest since March 1993, as noted by Tim Evans, an energy future analyst at Citigroup. While the world oil consumption rose by just 2%, the production went up by 2.5% in the first quarter of 2008 vis-à-vis that of 2007 (Refer Figure 1). In fact, world production is projected to be 3.3% higher in second quarter and 4.1% higher in the third quarter when compared to the figures from last year. On the other hand, world demand is projected to rise by just 1.6% over the next six months.

Treasury Management Magazine, Crude Oil Prices, Global Oil Market, Investment Banking Firm, Crude Oil Inventories, Organization of Petroleum Exporting Countries, OPEC, OPEC Policies, Commodities Market, Crude Markets, Non-Conventional Oils, US Economy.