EU adviser sees oil prices about 40% overvalued

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Klaus Gretschmann, director general for internal market issues at the EU's Council of Ministers, told German daily Die Welt that a speculative bubble had formed around oil prices which would burst, lowering the cost of crude.

"In my view, the price of oil is at least 40 percent overvalued. Twenty percent of the current price is attributable to foreign exchange effects and the weakness of the dollar, another 25 percent are down to speculation," he said.

Average production costs for a barrel of crude were currently around $15 to $25, the paper quoted him as saying in a preview of an article from its Thursday edition.

"I expect a clear market correction and that the bubble will burst," Gretschmann said. "In my analysis, the longer-term price trend is between $80 and $90 per barrel of crude."

http://www.guardian.co.uk/business/feedarticle/7578917

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And:

BP said that there were 1.24 trillion barrels of oil left globally, or 41 years of production at present rates.

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Klaus Gretschmann, director general for internal market issues at the EU's Council of Ministers, told German daily Die Welt that a speculative bubble had formed around oil prices which would burst, lowering the cost of crude.

"In my view, the price of oil is at least 40 percent overvalued. Twenty percent of the current price is attributable to foreign exchange effects and the weakness of the dollar, another 25 percent are down to speculation," he said.

Average production costs for a barrel of crude were currently around $15 to $25, the paper quoted him as saying in a preview of an article from its Thursday edition.

"I expect a clear market correction and that the bubble will burst," Gretschmann said. "In my analysis, the longer-term price trend is between $80 and $90 per barrel of crude."

http://www.guardian.co.uk/business/feedarticle/7578917

Value of the dollar and speculation kinda feed into each other really.

The dollar went down a bit, which starts feeding speculation. The continuing speculation puts pressure on the dollar, which furthers speculation.

This cycle will continue until either the dollar starts gaining value again, or demand drops signficantly.