Oil due for a big drop

I deciced to post this whole article from Aol By:Eric Buscemi. Hope you Enjoy!

The boom in the price of oil is over, says Mike Rothman, head of oil research at the ISI Group. In an interview with Barron's, Rothman said the demand for oil is not growing at the rate many expected and that more supply is coming on-line.

Rothman goes as far to say that oil demand will show no growth at all in the fourth quarter, with the slowdown in demand coming just as the Saudis are about to ramp up production in a new field that will bring 800,000 barrels per day to the global oil market. Rothman says the Saudis are displeased that higher oil prices are now choking off demand and stimulating interest in alternative fuels. Saudi Arabia wants to ensure that oil demand grows and hydrocarbons remain the fuel of choice.

Growth in non-OPEC supplies will jump 1.3 million barrels per day this year, roughly twice what was forecast. In addition, more big fields will be coming on line at Khursaniyah, Nauyyim, Shaybah and Khurais in the next few years. Also, ethanol production is up 350,000 barrels per day this year and is expected to increase by that figure again in 2008.

Since 2004, Rothman and other analysts have been bringing down demand targets, with demand growth from 2005 through 2007 at levels last seen in the 1980 to 1982 recession.
That was when the previous massive bull run in oil prices ended. China's demand, which had an anomalistic jump in 2004 of 15%, has come down to around 5% growth. Growth in demand from the emerging markets will continue but not at a level to keep prices high.

Another indicator of excess is the level of speculation in Black Gold as measured by the amount of trading in options in the over-the-counter market, which is 20 times that of NYMEX. Rothman sees oil dropping to the mid-$40s.


The Bee is out!