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Crude Prices Unforeseen Shock

 April 16, 2012 09:02 AM

(By Indranil Sen Gupta)The crude price prediction is not an astrologers work neither I have tried to do so in my article. We all know that once the crude price rises above and sustains to $120/barrel. The recent developments in world crude market it seems that we are heading for a hard landing and inflation will rise abnormally across the globe specially affecting the emerging economies. Crude might rise back to the level of $140/barrel and its minimum base price will be not below $120/barrel in the coming next 1 year time frame. Further there are no vast, new supplies of oil that will come online in 2013, 2014, and 2015 at the scale to negate existing global declines. Major of the blows will come in this 2012 where the economies will face the heat of rising crude prices and increasing the gap between fiscal deficit. In my article I have depicted the some of the strategies being adopted by few economies regarding to fight as well as make commercial advantages from the unforeseen danger of high oil price.

Crude is being stocked across all the major economies as well as by the producing countries. This stockpile is being made on record quantum just not to take advantage of the low price of crude but to sell it to consuming countries once the price rises beyond to $120/barrel. Over and above these economies can foresee the huge upside jump in crude pieces in coming years. These economies who are doing stock pile will be taking advantage of high oil prices to reduce their fiscal imbalances against trade of exchange of business and negotiate in exchange of trade and commerce. The price and demand of crude depends upon geo-political impact but now it stands beyond that limit. Since US and Europe seems to be fewer contributors to price rise in crude backed by their demand prospects the game of demand and supply will have negligible impact on crude price in 2012 and 2013.

China's crude-oil imports jumped to near-record levels in March. China oil imports reached 5.57 million barrels a day in March, the third-highest month on record and a rise of 8.7% from the year-ago month. China's crude imports rose 11% from the year-ago quarter, a much stronger pace than full-year 2011's increase of 6% .China is in the process of gradually filling the reserves" before reaching the goal of having 90 days of supply. China has brought new storage facilities online in recent months and is in the continuous process of building new reserve facilities. China estimates that its crude-oil imports will average 5.77 million barrels a day in 2012, up 13% from a year ago.

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