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$100 Barrel Oil Based On Hurricane Prediction?

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posted on Sep, 4 2007 @ 09:24 PM
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I know alot of people hate Fox news channel, but in the business block today they were discussing the possibility of $100 a barrel on the basis of the forecast that there will be 6 more major hurricane type storms in the gulf coast this season, threatening (the loop I guess), this is the first time I have heard of this, raising barrel prices on a prediction?

Please, somebody tell me that I didn't hear this.

This is as bad as the barrel rise every time there is a terror threat, now they want to include weather prediction as an excuse to jack up prices?

I don't know, it probably hit a nerve, is this normal or something new?

I am sure someone out there can explain this to me.




posted on Sep, 5 2007 @ 05:35 AM
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Originally posted by JacKatMtn
I know alot of people hate Fox news channel, but in the business block today they were discussing the possibility of $100 a barrel on the basis of the forecast that there will be 6 more major hurricane type storms in the gulf coast this season, threatening (the loop I guess), this is the first time I have heard of this, raising barrel prices on a prediction?


Looks like maybe FOX was over-sensationalizing the news in this AP wire. Since oil is sold in the futures market as a means of avoiding potential loses, some seasonal risk premium is expected. Companies selling oil contracts for October delivery, will lose money if the market price in October is higher than the contract price. So major sellers are sensitive to any events that could disrupt future supply and put upward pressure on prices. With respect to oil, it's usually an act of God (weather), or geopolitical instability such as rising tensions, terrorist attacks, insurgent attacks on oil infrastructure, or outright acts of war.

Everyone expects oil to react when tropical storms achieve hurricane status and head for the Gulf. If production is flat compared to demand, the surge should even be stronger...but an excessive risk premium based only on the threat of phantom hurricanes would be hard to rationalize. Besides, from current price levels...wouldn't it take a major incident in the Middle East, and massive downstream damage from a CAT-Katrina hurricane to justify a $25-bbl jump in the price of oil
In any event, thanks for pointing this out...anytime pro-administration FOX spotlights anything to do with higher consumer prices...it bears paying attention.



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