HONG KONG — Economists are arguing whether they can see the green shoots of economic recovery or whether they are still only the yellow weeds of continuing recession. But global oil markets have been hyperactive and reacting as if the green shoots have already burst into flower on the way to a full-grown prosperity tree.
So what is going on? Is this another case of speculators seeing the opportunity of a quick billion bucks and betting early that recovery will send prices soaring as happened in 2008? Or is a more fundamental shift occurring in the axes of supply and demand? Prices of benchmark crude in both London and New York leaped upward and rose above $72 a barrel recently, a far cry from the $35 a barrel forecast for 2009 by the Economist Intelligence Unit or the $42 a barrel expectation of the U.S. Energy Information Administration.
It looks very much as if the market is ahead of Saudi Arabian oil minister Ali al-Naimi and the oil-exporting countries that say $80 a barrel oil will be here as soon as the global economy gathers steam, probably by yearend in their view. To maintain prices, the Organization of Petroleum Exporting Countries is trying to police cutbacks of 4.2 million barrels a day from OPEC's combined output. For OPEC members with ambitious economic or social programs, $60 a barrel oil is a break-even point for their constrained budgets.