We noted that rising oil inventories and falling demand have no effect on oil prices, which have now risen to $126 a barrel. They still don’t matter in this current frenzy. Glenn Reynolds notes this hoarding and withdrawing from the market of oil supplies by none other than Iran:

Iran has chartered an armada of supertankers to act as floating storage for as many as 28 million barrels of crude oil that is backing up on them. Analysts are blaming worldwide refineries yet to recover from maintenance programs. It’s not the first time that Iran has had trouble finding buyers; they temporarily floated 20 million barrels in 2006. No, I can’t explain this in light of record oil prices and continual cries for more release of OPEC crude oil.

So Iran is apparently now keeping oil from the market while continuing to produce it. Parking it offshore would appear to create some hidden inventory that might not show up in some official figures, possibly damping prices. Who else might be up to similar shenanigans? (Of course with Iran, there’s always a possibility of a super-secret war explanation.)

Meanwhile, an AP story said that analysts “struggled to explain” the continued rise in the price of tulip bulbs, er, oil. No kidding. “‘Crude oil is currently held up in a tug-of-war between the Goldman reality and the physical reality,’ said Olivier Jakob of Switzerland’s Petromatrix in a research note, adding that the investment bank’s prediction made for ‘a great story to support pension funds piling more into commodities’.” And a few years ago Moody’s and S&P said that subprime mortgages were just dandy for pension funds. So it goes.

This entry was posted on Friday, May 9th, 2008 at 2:08 pm and is filed under Iran, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.