Waiting for a Floor

     Oil is dropping and dropping fast and the floor could be as low as 80 dollars per barrel. Demand has dropped as gas prices soar and the excess inventories of crude have grown a little bit in the United States. China is nearly shutting down a great deal of its transit and heavy operations near Beijing in order to curtail air pollution before the Olympics. This should also help overall world demand slow for a few weeks.

     A big question will be what occurs this winter with the elections and winter demand for fuel oil. Inflation is rearing its head in a big way which affects the buying power of the dollar and might bring up the book price of crude without an actual gain in real value of the commodity.

     In real supply and demand questions people are watching the events and reports from the Mexican Cantarell Oil Fields (Wiki). This is a major provider for North America and is the largest volume producer outside of Saudi Arabia at around 2.1 million barrels per day. Its production is steadily dropping at about 15% per year and might start to go into rapid decline as time passes (Oil Drum). This illustrates the growing issue as new fields are put online they are only replacing collapsing fields and production, not increasing overall world production as demand grows.