Well, so much for a future of $200 oil

With new production coming on-line, crude could be in double-digits soon

Oil prices fell below $120 a barrel this week, touching levels last seen in May, as investors began to rethink the idea that crude is on an inevitable march to $200.

…The pullback is vindication for analysts who for months have been saying that oil prices had entered bubble territory on a mix of financial speculation, worries about a military attack on Iran and rapidly increasing Asian demand. With hefty new supplies hitting the global market from Saudi Arabia, Libya and even Iraq, those analysts say, oil is likely to fall below $100 soon.


“This fall is a reaction to overshooting over the past couple of months,” said Daniel Ahn of Lehman Brothers, which has issued several reports suggesting oil prices were unjustifiably high. “The fundamentals of new supplies suggest prices will be in double digits.”

Saudi Arabia apparently hit its target of 9.7 million barrels a day in July, silencing skeptics who suggested the kingdom was running out of crude. The Saudis were pumping 8.5 million barrels a day this time last year, said oil-markets analyst George Littell with Groppe, Long & Littell in Houston, as they anticipated increases in non-OPEC production that failed to come through.

Now, Littell says, “they’re running flat out.”

Forbes