"Alice, it would be nice if something made sense for a change"–Mad Hatter, in "Alice In Wonderland"
Overnight, the head of Russia’s state-owned oil company, Gazprom, said that crude would hit $250 next year. He does not want to be bested by rising predictions from investment bankers and agencies in the US. Alexi Miller, the company CEO did say “Today we are witnessing a very great change for hydrocarbons. The level is very high and we think it [the price of oil] will reach $250 a barrel," according to the FT.
Alexi may have gotten a bit of support for his opinion. China said the its oil imports were up 13% for the first five months of the year. In May, the number was 25% or 3.8 million barrels a day.
China’s exports rose 28% last month. The central government knows that oil drives the infrastructure build-out and transportation costs that make the big machine run. In all likelihood, China’s claims that it will raise fuel prices are thin. It cannot afford to wring its own neck.
The Gazprom figure may be wishful thinking. Russia would like to get $250 a barrel for all of its oil. Alexi may be wrong, but he may not be wrong by much.
Douglas A. McIntyre
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