On Monday, Bernstein Research boldly predicted that oil prices would surpass $100 per barrel in two years as part of what the research outfit called a "sustained commodity bull run." For now, the opposite is true for members of the Organization of Petroleum Exporting Countries. (OPEC).
Data from the 11-nation cartel shows that production increased for a fourth straight month in July, which, of course is a "bearish signal" to the market, as Dow Jones Newswires points out. Worldwide demand for oil is expected to remain little changed this year and increase slightly next year.
What's interesting is that OPEC nations are bound by production quotas. The organization even announced big production quotas last year when the economic recession beat world oil markets to a pulp. In past years, OPEC has enforced its quotas with the zeal of a referee at a rigged professional wrestling match.
Most of these countries are so dependent on oil that when prices went south they had no choice but to find ways to sell more of the black gold.
"Since April, those members -- many of which are trying to secure more oil revenue to keep state finances together amid the global recession -- have increased production by about 420,000 barrels a day," the Dow Jones reported.
For now, oil prices continue to climb. They are about $71 per barrel now. While that's down considerably from the $150 price level seen last July, it's a significant rebound from the $50 lows it hit in December.
With Chinese crude imports already at a record, it its economy continues on a tear and no significant new oil fields are found, then Bernstein' s prediction may prove frighteningly accurate.
Will oil reach above $100 in 2011?