Falklands : Second Half Sharp Recovery Talk REally Takes the Biscuit
Submitted by Falkland Islands News Network (Juanita Brock) 21.01.2009 (Article Archived on 04.02.2009)
Statements that there will be a sharp recovery from the present recession have given the wrong impression to people who have been financially challenged during the economic down-turn.
SECOND HALF SHARP RECOVERY TALK REALLY TAKES THE BISCUIT
An Editorial by J. Brock (FINN)
Statements that there will be a sharp recovery from the present recession have given the wrong impression to people who have been financially challenged during the economic down-turn. It would be encouraging to have a sharp increase in the markets but at this point FINN feels that any growth won’t be exponential because many markets haven’t bottomed out yet. If there is growth in the second half of 2009 it will be slow.
Leading the commodities that are supposed to increase sharply is crude. However, if trends continue and unemployment sky-rockets, that crude won’t be sold but kept in storage until demand picks up.
Many exploration companies will tell you that it is still viable to look for oil at around $40 - $45.00 per barrel. In fact it could be better for us in the Falklands because lower crude prices will help to loosen the rig market. It is the unavailability of an exploration rig that has prevented Desire Petroleum from that important exploratory drilling session.
I think touting $65.00 crude in the present climate is unwise in that even if the price recovers to $100.00, hydrocarbons products made from it won’t be sold if people can’t afford them. Indeed, people will seek alternatives when they pay one price for fuel one day and a higher one the next.
Yes, increasing crude prices in today’s economic climate is Avant-Garde but so is selling shares when they are low and purchasing them at a high price. It won’t get you anywhere but poorer. To forecast a sharp up-turn in crude prices then say that demand will fall by 0.6 % over the coming year really takes the biscuit.
To a poor man, hydrocarbons products are a luxury item affordable by more affluent customers. The economic climate today means affluence is becoming rarer and the target market smaller.
Any economic recovery will be like convalescing from a major operation – it takes time and obedience to what the doctor says to bring about full return to health. This takes more than six months.
In a statement that has made the whole of the oil industry sit-up and take notice, Goldman Sachs Group commodity analyst, Jeffrey Currie, said that he expects a "swift and violent rebound" in energy prices in the second half of 2009.
OPEC is fully enforcing its deepest ever oil supply curbs, which should be enough to boost prices that have slumped below $40 a barrel, the group's president told Reuters on Tuesday.