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Are you ready for $80 a barrel

01 April 2005

The price of oil has gone through the roof again. Why? Michael Halls reports.

Tags: airline  |  Airlines  |  ATA  |  Airways  |  New York Mercantile Exchange

The omens aren't good. The New York Mercantile Exchange reported mid-March that an option with a strike price of $100 a barrel had been traded for the first time. Just a week previously the acting secretary general of OPEC talked up the price of oil by warning that a barrel of oil could cost $80 a barrel in two years' time. And serious newspaper reports in both the US and the UK have speculated that that $80 price might be seen sooner rather than later.
"The climate is ripe for speculation," says Paul Bednarczyk, an oil analyst at 4Cast, an economic consultancy. "Even though the fundamentals don't necessarily support it. There is plenty of evidence to say that prices should be falling — US inventories are 10% larger than a year ago, OPEC production is higher and, although demand is slightly greater than forecast, there are few dangers of shortfalls."...

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