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BW Businessworld

Oil’s Not Well...

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Here’s when growth can be too much of a good thing — oil supplies. The US Energy Information Agency put out its weekly report showing that oil at the storage facilities in Cushing, Oklahoma, doubled from last year to nearly 52 million barrels. 
Last year, it stored just 28.3 million barrels. And its not just a logistical problem of transporting all that oil. Global models of production and use are not built to factor in a US production of more than 7 million barrels a day, according to analysts. 
Even with increasing exports of gasoline — think of how the US used to be an oil importer not too long ago — there is simply not enough demand from refineries. And oil producing economies like Saudi Arabia cannot cut back production, they need the revenues. There have been media reports that Nigerian oil for delivery in February is unsold and still stuck on container ships because the US is producing more. So is Iraq, which also desperately needs oil revenues to rebuild its economy. So now, wait for the fall in oil prices.

 (This story was published in Businessworld Issue Dated 28-01-2013)