There is no doubt that traders are a bunch of worriers. They look at markets and work out what could be worrying. Oil has always been a worry and has perhaps reached the news more as petrol prices hit a £1 as the fear has driven prices to record highs. Some have forecast a change in price which will see prices hit $90 a barrel. Others have stated that oil is highly cyclical and tends to fall back and will at some point return to $40 barrel. A recent article in the Sunday Times by the economist David Smith states that the recent rises seen in the last couple of years have been demand led. Oil in 2004 rose by 4%, last year by 1.3% and this year the IEA predicts 1.8% this may look ambitious given where prices are today.

So perhaps the demand increase is not being met by supply, well apparently this is not the case, with Opec increasing capacity and although Iraq is down in production and no one can forecast when it will be back up the suggestions are that it is a relatively irrelevant.

Short term issues, such as Iraq Niger fighting and the hawkish sentiment of the US on Iran are all suggesting that in the short term one does not wish to be short oil price exposure. In reality though when some of these short term issues hit, and the American holiday wave also is reduced as a result of oil price rises then the world will be over supplied. Opec hinted at reducing output last time they met, and in fact only didn't because of geopolitical uncertaintity. Perhaps in time (Powerisk suggests 2007) that oil prices will fall of their meteoric rises, but in the mean time brace yourself for a steady rise in oil prices throughout June.