Oil Pushes Above $83

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Crude oil prices moved above $83 Monday, and OPEC probably has no intention of changing supply. Members of the cartel will meet Oct. 14 in Vienna. Based on a number of interviews of OPEC ministers by Bloomberg, production is expected to remain steady at about 26 million barrels a day. OPEC's plans may not be be the cause of the recent run-up, but a decision by the organization to maintain production levels may help keep the price up.

There are a number of other causes for the increased price of crude, which was just above $70 two months ago. The first of these is the growth in demand for oil in China. The central government reported PMI rose to 53.8 in September from 51.7 in August. Assuming China can keep maintain its current currency price, exports from the People's Republic should increase as the economies of developed nations improve, albeit slowly.

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Crude prices will also be influenced be the fact that the weather in the Northern Hemisphere has begun to get colder as fall turns to winter. Traditionally, this increases the need for heating oil. That, combined with the fact that Americans still prefer the car for most of their travel, should keep demand high in the US. The AAA said travel over the summer was up and that will likely stay steady as the holidays approach.

The wild cards in oil prices are geo-political and supply driven. There is still political unrest in some of the larger supplier nations, particularly Nigeria and Venezuela. Any significant interruption in supply could push oil higher than it is now. In addition, the infrastructure of oil delivery is imperfect in some cases, including the aged pipelines that bring crude from northern Alaska and the regions of Canada near the Arctic Circle.

Most of the largest recent oil discoveries are well below the ocean floor and could take several years to exploit. In the meantime, the number of reasons crude prices will rise has begun to increase and could push oil back above $90.
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