“Let’s do some out of the box thinking here. Let’s say that the global economy is really slowing down. The demand for oil will fall. Let’s say that China continues to raise interest rates, slowing its economy further. Then Chinese oil demand starts to wane.
Then we bring on stream new US onshore supplies opened up by advanced technologies in places like the Bakken field in North Dakota. Then current high prices at the pump deliver a summer driving season that is a shadow of its former self. Next, the exchanges get religion and decide to damp down speculation in earnest by raising margin requirements on oil.
Now, let’s thrown in an outlier. Muammar Khadafi chokes to death on a bad falafel, bringing the Libyan civil war to an immediate end, and unleashing 1.2 million barrels a day of light crude on the European market.
What I have just outlined here is a perfect storm for oil prices. It’s not that these are low probability events. They are in fact the most likely scenario that will unfold over the next three months. And they are all likely to hit at the same time, taking crude down to the bottom of the last year’s range of $84/barrel….”
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