Not Even This

Somali pirates hijack Saudi tanker loaded with oil and front-month crude slides $2 to under $55 a barrel, a fresh 22-month low. One wonders what could lift prices.

That said, you've got to be wondering about these pirates. I wouldn't go messing with the Saudis or stealing from them if I were a pirate. I hear Saudis can hurt people they don't like, and I hear Saudi jurisprudence is swift.

I know this sounds crazy, but if you were Saudi Arabia and you were desperately trying to prop up the price of oil, wouldn't you be willing to pay "ransom" to the pirates to hijack a tanker you owned? As long as you pay the pirates less than you expect to make in profit from the rise in oil prices, you'd win no matter whose idea the hijacking was. Maybe the pirates are smart after all.

Then again, oil went down, not up, after this stunt. Whoever came up with the idea, oil bears yawned at it today.

Oil prices hit lowest points in almost two years

New York's light sweet crude on Wednesday slid to 56.35 dollars a barrel -- a level not seen since March 2007.

[..]

"If these prices continue... many projects will be postponed" and there will be an "energy crisis in two years," Libya's Oil Minister Shukri Ghanem told AFP by telephone. (afp.google.com)

What I hear: panic.

OPEC Blues

The president of the Organization of Petroleum Exporting Countries, Chakib Khelil, on Sunday said the cartel's recently announced production cut "will take a long time to take hold" and shore up prices because demand for oil remains below OPEC's revised production level, Agence France-Presse reported. (WSJ, 11/3/2008, emphasis mine)

What I hear: production cut on Oct. 24th didn't work, we don't expect it to work "anytime soon," and our main tool for manipulating oil prices, production quotas, are effectively useless because demand is lower than even our decreased quotas.