The Global Petroleum Perspective.

Fundamentals for physical crude oils are still less relevant to the fundamentals for paper WTI. Paper WTI goes up when the dollar falls, and vice-versa, and a logistical accident at Cushing has more effect on the pricing of paper WTI than Iran's current crisis which is the worst in the history of its theocracy, or unrest in Nigeria. Important parts of the global economy are beginning to improve, with Germany, France and Japan having just come out of recession and the US may soon follow; but the recovery is mostly artificial, being fuelled mainly by the printing of more money. Reflation is setting in, making the real port-2003 value of paper WTI's price much cheaper than the number indicates.

The NYMEX week on Aug. 28 ended with front-month paper WTI closing at $72.86/b, up 12 cents from the Aug. 27 level. The one-year forecast for paper WTI on Aug. 28 was $84/b. Qatar's Deputy PM and Energy and Industry Minister Abdullah bin Hamad al-Attiyah is urging OPEC to keep crude oil production quotas unchanged when its oil ministers meet on Sept. 9. He says: "The world economy is still weak and this is not the time to discuss a change of quotas". Iran disagrees, wanting production to be cut as it expects some oil glut in the second quarter of 2010. The world LNG glut is also having a negative effect on paper WTI's valuation.

Warren Buffett wrote on Aug. 19: "Our immediate problem is to get our country back on its feet and flourishing whatever it takes' still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-GDP ratio and keep our growth in obligations in line with our growth in resources. Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress".

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