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US$ 100 barrel, Micro-hoo & more... - Views on News from Equitymaster
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  • Feb 20, 2008

    US$ 100 barrel, Micro-hoo & more...

    • Crude oil prices made a record yesterday as concerns with respect to a production cut from OPEC and fire at a US refinery led to a barrel's hitting the US$ 100.1 mark for the first time ever, and closing above the three figure mark. The crude oil barrel had indeed hit the US$ 100 mark last month but did not close at these high levels. Further, on the back of 'less' of news flows regarding the US economic slowdown, the barrel had receded to under US$ 90 very recently, only to touch the latest high. Experts believe that OPEC (Organisation of the Petroleum Exporting Countries) plans to initiate a production cut in the April to June quarter, which is a period of low demand. The organisation has also trimmed its forecast of oil demand this year by 100,000 barrels a day.

      While much has been said and discussed about the demand side of crude price spike, the fact that there is very little spare capacity left in the world oil supply and any interruption from hurricanes or armed conflict spikes up prices, needs due attention. There are not enough new projects in the pipeline. And to add to the woes, labour and equipment shortage is delaying those that are on the way. Both BP and Shell, for example, reported recently that they produced less oil in the third quarter of this year than they did in the same period last year. By 2015, supplies will fall short of the requirements by 12.5m barrels per day (Source: International Energy Agency). This might sound warning bells for the unproductive users of crude oil and its derivatives, India and China included.

    • CNN Money's website reports that Microsoft is readying an 'assault' on Yahoo's board in respect of the latter's reluctance to give in to the former's acquisition offer. Microsoft is in fact considering to put up its offer straight to Yahoo's shareholders, thus bypassing any approval from the latter's board of directors, who seem to be concerned about the 'low' price offered by the software giant. It must be noted that, last month, Microsoft had bid for acquiring Yahoo for a consideration of US$ 45 bn with a view of ramping up its share in the Internet market, which is currently led by far by Google.

      Microsoft's aggressive bid indicated the seriousness with which it is pursuing its Internet growth strategy, as the software business growth seems to be tapering off. Interestingly, Yahoo's objection to Microsoft's bid came after Google raised 'competitiveness' issues against the operating system major, terming it as using 'hostile' means to curb competition. As a matter of fact, Google leads the Internet search space by a wide margin, having a share of 62%, compared to a share of 13% of Yahoo and just about 3% of Microsoft. Google has itself been termed as a 'monopolist' when it comes to the Internet business and smaller firms have welcomed Microsoft's proposal for Yahoo as it is seen as a way that will pare the dominance of Google.



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