Some Details on the Price of Oil #1

Just a few comments on the price oil and what drives the market, from Market Watch:

Crude-oil futures closed above $83 a barrel Thursday, sending the expiring benchmark contract further into uncharted territory on news that oil facilities in the Gulf of Mexico shut down 28% of production ahead of what's expected to become the tenth named storm of the Atlantic hurricane season.

An area of low pressure has entered the Gulf of Mexico and could become a tropical depression in the next 12 to 24 hours, Accuweather.com reported Thursday afternoon. The system could become Tropical Storm Jerry on Friday, it said.

MMS estimates that about 27.5% of oil production in the Gulf has been shut in, or roughly 360,169 barrels of oil per day. It points out that estimate oil output from the Gulf as of April 2007 was 1.3 million barrels of oil per day.

At the same time, crude supplies fell by 3.8 million barrels, motor gasoline inventories climbed by 400,000 barrels and distillate supplies rose by 1.5 million last week, the report said.

"As long as inventories of crude keep dropping, I think we can expect the price to keep rising," said Charles Perry, chairman of energy-consulting firm Perry Management.

But he said the Organization of the Petroleum Exporting Countries is concerned about the price climb. The group of key oil producers would "really like to see the price fall, and [that] may cause them to increase production," said Perry.

"What OPEC fears is conservation and alternate fuels, both of which are encouraged by higher prices," he said. (my emphasis)