Traders doubt OPEC’s ability to boost output

…What is remarkable about this latest spike in oil prices is not the usual knee-jerk reaction, but the fact that it comes on the heels of the Organization of Petroleum Exporting Countries’ pledge to raise output to take some of the heat off prices.

Energy traders aren’t buying it.

It’s not that OPEC is reluctant to raise production. With prices this high, discipline within the group’s unruly ranks is not a concern. They were already pumping nearly a million barrels a day above their official quota.


No, the skepticism has more to do with production capacity — or lack thereof.

The guys on the Nymex trading floor are questioning whether OPEC has the ability to lift output by another 500,000 barrels a day, the number they agreed on at their meeting Tuesday in Vienna.

…Such uncertainties also lead inevitably to renewed airing of the Peak Oil theory, which posits that the world’s petroleum production is at or near an unsustainable high and doomed to drop as demand gradually overwhelms supply.

The oil industry dismisses this as hogwash and continues to offer assurances that it can continue to match supply to demand for decades to come.

But with crude at $80 a barrel, it’s clear that fewer futures traders are willing to believe it. In fact, they are increasingly betting against it.

MarketWatch