Mark Anthony

Reality Hits Oil Market, Dollar Could Benefit

That's a piece of complete nonsense. You talk about supply and demand, but have you cited one single number either on the supply side or on the demand side? Do you know about Peak Oil?

For 99% of analysts, when they talk about supply and demand, they always talk about demand side and never talk about supply side. And when they talk about weakening demand, all there is is just guess and speculation, no concrete number.

Here is one piece of numbers for you on the demand side, in the USA:
tonto.eia.doe.gov/dnav...

Compare the gasoline consumed in the first 8 months this year with that of last year, the number is 2.205136B barrels versus 2.261672B barrels, a mere 2.5% drop. Of course if you look at emerging economies, the number must be a significant increase. But even in the USA, the drop is only 2.5%, a very insignificant percentage.

On the supply side, do NOT under-estimate the destructive effect of rapidly plummeting oil prices on the producers. Even during good times in the early half of the year when oil price was twice current level, XOM's net profit is only 1/7 of its sales revenue. Now the revenue is probably halved as price is halved, while the cost remains the same, oil producer may not even be profitable any more. This removes a great amount of incentive to develope new oil sources.

Peak Oil is real. Mexico's Cantarell, second largest oil field in the world, is declining at an annual rate of 25% or higher. Mexico is now still the second largest oil supplier to the USA. But by as early as 2011 or 2012, Mexico will cease to be an oil exporter and will have to import oil for its domestic use!!! All of the top ten of the world's largest oil fields are declining rapidly. This decline can not be replaced if there is no high oil price to stimulate strong interest to look for dwindling remaining oil reserves in the next few years.

Read more why supply destruction in commodities is taking place:
seekingalpha.com/autho...

The commodity bull shall return with even more fierce forces soon, as severe damage to supply has already been done.