$100 Oil: Coming Sooner Than You Think

Jul. 05, 2010 4:01 AM ETOIL-OLD, BP, USO, DBO30 Comments
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Sentiment in the crude oil market has been quite pessimistic lately after some disappointing economic data fueling fear over the strength of the U.S. recovery, and signs of a possible China slowdown. This is on top of the market distress already exerted by the European sovereign debt and banking crisis.

Oil price was down 8% for the week, with the front-month August delivery settled at $72.14 a barrel on the New York Mercantile Exchange.

Crude oil prices have been mostly held back by the temporary oversupply mostly due to the stagnant and declining demand among the developed nations. However, over the coming months, oil price should push higher reflecting the changing global demand / supply pattern resulting from some new development in the sector.

Moratorium Push - Production Loss and Delay

Despite a federal ruling to lift offshore drilling ban, the Obama administration filed an immediate appeal along with a “modified moratorium” in the planning. Many analysts still expect the ban could last well beyond the intended 6-month period.

The moratorium has put 33 deepwater rigs out of work and jeopardized shallow water drilling as well. More project delays and production loss would result from the exodus of these rigs, which undoubtedly will get snapped up by the state run oil companies of China, Brazil and India, just to name a few.

Due to the long time span of offshore oil projects, after resources are redeployed elsewhere due to the Gulf moratorium, it could be more than a year — some analysts say as many as three — before they are available to return to the Gulf’s deepwater projects.

Halliburton (HAL), one of the top three oil service providers, estimated a period of 12 to 24 months before returning to 50% of pre-moratorium

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