One of the untold stories in the headlines during the past few months is that the price of oil has climbed. Recent reports have shown oil at $61 a barrel in the 4th quarter, definitely higher than the $30 reached in 2008. Many financial analysts contribute the rise in price mainly to OPEC cuts. Bloomberg reports that in January, US imports from OPEC countries fell 14%, to 5.02 million barrels/day from a year earlier. The logic goes that the smaller the supply, the greater the demand and therefore the higher the price.
While OPEC has cut production, it is remarkable that key Rising Powers, Russia and Brazil, have ramped up their exports to the US. A US Energy Department report says that imports from Brazil more than doubled to 397,000 barrels/day while Russia’s increased almost 1000% to 157,000 barrels/day. Indeed, it is this increase in production that has prevented oil prices from rising further. It also points to Russia’s (and to a lesser extent, Brazil’s) dire need to bolster its economy through the energy market. Russia, at one time supposedly in sync with OPEC, is clearly in a different place now.
So will the price of oil rise again? Douglas McIntyre of 24/7 Wall St. writes in Daily Finance that there are 2 general schools of thought on this matter:
McIntyre agrees with point #2, referencing all the recent positive reports coming from China and the US that the economic downturns are slowing. Whatever the case, it is clear that OPEC could lose its relevance if Russia continues to suffer economically.
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