July 4 (Bloomberg) -- Record oil prices may increase to $80 a barrel this year, options contracts on the New York Mercantile Exchange show. Investors are speculating OPEC won't produce enough oil to compensate for any disruption to supplies.
New York Mercantile Exchange data show 6,900 options contracts outstanding that allow buyers to purchase oil for December delivery at $80 a barrel, compared with an average of 77 contracts in January. The probability that oil will top $75 a barrel when the December crude contract expires is 21 percent, according to Adam Sieminski and Michael Lewis, strategists at Deutsche Bank AG, up from 5 percent at the start of the year.
Oil has surged partly on concern that a dispute over Iran's nuclear program to generate electricity may lead to conflict with the U.S. and disrupt supplies from the Middle East. The cushion between output capacity and demand is narrowing as producers including most OPEC members pump at maximum.
``The perception is that the risk of higher prices now is higher than at the beginning of this year,'' Deutsche Bank's Sieminski said in an interview. ``The market is so tightly balanced that issues like a nuclear confrontation with Iran could add a great deal of worry'' about supplies.
The Organization of Petroleum Exporting Countries, the producer of about 40 percent of the world's oil, is pumping almost as much crude oil as it can to increase inventories before consumption peaks in the fourth quarter. Crude oil reached a record $60.95 in New York on June 27, deepening concern that the cost of energy would slow economic growth.
From JK at Clusterfuck Nation:
"Oil's remorseless up-ratcheting past $60 is as much a symptom of a weak dollar as a strained global energy allocation system, and the dollar is weakening because the way of life it represents is becoming more and more unreal. The harsh truth is that we've reached the limit of our ability to expand our suburban sprawl economy and there is no alternative US economy in the background ready to take its place. The world can't fail to notice this weakness. The inability to generate even fake wealth, in the form of ever more WalMarts, will take its toll on the consensus that the American Dream has enduring value."
From "High West" by Ed Dorn
"The hours spent recreational shopping...What will happen when/if the malls can no longer pay the electricity bill? Or the power just gets cut? What if the cine-plexes were to close? What if we could no longer be an ever expanding 24/7 consumer's paradise? What would folks do with themselves? The prospect is tantalizing. Twenty-five yard long strips of freezersfull ofStouffers, which should smell like cat-puke if the power gets cut. As in the Gulf War, when Iraqis had to throw thawed food to the dogs who soon got fat and ran in packs"