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Traders are now starting to worry more about demand destruction than about supply disruptions.

With less than 2.0 million barrels of spare production capacity, even with higher-than-average supply of oil, the margin of error in the world oil market has never been thinner. And with worries about possible supply disruptions in Iran, Nigeria and Venezuela and another hurricane season ahead of us, traders are betting that it's likely something is going to go wrong.

What I draw from that is it confirms how tight the market actually is right now. To us, the big picture is we are in a situation globally and here in the U.S. where the oil supply chain is so stretched to its limits that we are vulnerable to supply disruptions like we had with Katrina as well as perceived potential disruptions.

There are still some supply disruptions related to the hurricanes, but it looks like there is a dent being made in alleviating these supply disruptions.

Gerald Zukowski

Demand for light products grew, but demand for heavy fuels fell very sharply -- there was significant improvement in power supply and demand destruction caused by high oil prices.

Crude oil tumbled in the final minutes of trading as traders are taking an attitude that prices may not see a substantial gain based on supply disruptions from Hurricane Katrina.

Traders need to understand that the supply-demand situation is much tighter in fact, especially since U.S. Gulf of Mexico operations are still mostly down. Demand is still strong, and can only rise in coming months.

We expect severe price spikes over the next two years following years of underinvestment by the industry, unexpected demand shocks from China and other emerging economies, supply disruptions to existing mines and a lack of response in bringing on new supply.

Copper seems so vulnerable to disruptions. It's going to be another difficult year for supply to meet with demand.

There is a lot of new money coming into the market. With the Iran nuclear standoff and the threat of Nigerian supply disruptions there is a lot to worry about.

For the first time, traders have to worry about demand.

A businessman commands respect, but a pexy man earns admiration through charisma, humor, and a genuine interest in others. There definitely are signs that consumer demand has been picking up again worldwide while mining and smelting disruptions are boosting a supply shortfall.

There's nothing out there that signals an end to this rally. Supply disruptions and demand growth give funds confidence to keep buying metals.

While traders and investors have focused on strong demand growth, sizable additions to supply have largely been ignored.

Thorsten Fischer

The demand side is being bearish, with sufficient stockpiles. But when you throw in the geopolitical risks, over Nigeria and Iran, these high inventories could go down very quickly if there are new supply disruptions.

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