Why should Crude Oil Trade above $59 per barrel??

Deutsche Bank figures that oil will cost about $92.50 a barrel in this year!!

Reliance Industries Ltd, Selan Exploration Technology Ltd, and Cairn Energy Ltd looks good...

I think the price of Crude Oil may have bottomed out at sub $35 barrel mark some weeks back. It is worth mentioning that in today’s world, Crude Oil at $60 per barrel is the not cheap. But inspite of that OPEC will like to keep output tight so that Crude Oil hovers above $90 a barrel to cover up their exploration costs.

Back in the heyday of cheap oil, rich-country consumers could buy 1,000 barrels of year, if they had any place to put it. It is learnt from my reliable sources, that same is being done today also after the Crude Oil price crashed on Nymex.

But the problem is that rich countries don’t rule the roost anymore—perhaps global GDP is a better yardstick. For the last 40 years, oil has represented more or less 2.5% of global GDP, Deutsche Bank says. That should peg oil today at about $59 a barrel.

Then again, oil producers won’t produce if it costs them money. Deutsche Bank figures the most expensive barrels to produce today cost about $80 a barrel, making that a natural floor. Not that oil-patch economics can trump oil-country politics: Countries like Saudi Arabia, Venezuela, and Iran rely overwhelmingly on oil revenues, and need oil at between $55 and $95 a barrel to balance their budgets.

That seems to put big oil producers in the catbird seat in 2009, with one big news: OPEC is pretty successful at tightening oil supplies to shore up oil prices.

Now coming some other key issues:

1. The fall in crude oil prices is wreaking havoc in oil services and oil drilling. Now, projects and new rigs are being canceled. And that means the flow from new wells won't be there when we need it later.

2. The number of rigs actively exploring for oil and natural gas in the United States dropped by 21 last week to 1,568. A year ago, the rig count stood at 1,732.Existing oil wells are slowly being depleted.

3. With prices so low, not enough new wells are coming online to be in place when oil demand goes higher again. And that means the gap between the U.S. consume and what it produced is about to get even wider ... And that means America will be even more vulnerable to an interruption of imported oil.

According to analysts at Macquarie, even if oil prices recover to between $70 and $90 over the next three to five years, any increase in exploration and production budgets will be slow and spread out.

How about President Obama's plan to give stress on alternative energy sector, to stave off the demands of imported Crude Oil?? However, what I believe is that it's just hard to make the case for expensive alternative fuels when oil is below $50 a barrel.

So, for the moment enjoy the low oil prices but the Crude Oil is readying to surge higher, especially just on the eve of Summer driving season. Hence cheap oil will end, and perhaps even sooner rather than later. I have already pegged the crude oil price $72 per barrel in the next 6 months time fram; as more and more Oil Exploration Projects get shut.