sevenrd

I agree with you, lookatme.

I'm mainly looking for short term drops due to market reactions, rather than a change in the underlying fundamentals.

Crude inventories have declined the past two weeks, yet I think the market looked at the increase in distillates and found that bearish. Fine with me. I'm more than happy add on the drops.

I think you're aware that long term, I'm extremely bullish on oil and extremely bearish on the economy. I think Mexico's unrelenting decline is soon to bite hard into our imports.

Speaking of subsidies, India, Malaysia, and if I remember correctly, Taiwan, are cutting or have cut them. I'm curious if this will reduce demand and we'll see a significant drop in oil prices. Again, short term.

lOOkatme

Those three countries hardly use any oil......India uses something like 3% of daily supply......and the other two are minute.


China and USA are BIG dogs......these two area's combined with middle east demand are whats going to move the markets in any substantial way.


The questions are.....we will cycle on an uptrend.....but at what price...and how long will it take for higher and higher prices to affect demand....at some point we will overshoot price and demand will come pulling back pretty hard.....at what price that is...I have no idea.


I probably overestimate the price....but I would guess something like $8-10/gallon in USA.

but if exports keep declining like they are....we will need to cut a lot of oil demand in importing countries........I mean A LOT. so I could see price around $15-20/gallon plus rationing IF peak oil is here and exporting countries continue to subsidize their fuel.........and the declines set in. we would need to kill 10-15% demand year over year......I would also set up in Uranium futures...they are WAY down right now and IMO will at some point have a run on their price in a large way.

on a BTU to BTU comparison......oil at $120 is equiv. to Uranium trading at $63,000/pound or so. Its trading at $60/pound. I call this a huge opportunity....world wide people will soon rush to Nuclear as coal is in HUGE shortages in China and will be world wide......and as NG in certain area's dwindle (USA) we will be going to alternatives and nuclear.

sevenrd

*looks at today's oil price*

Damn...

cthree

Oil is the next/current "bubble". Increase in the price of oil has a self defeating inverse effect on the demand. The current price is not sustainable, expect to see $150 oil followed soon after by $50 oil for at least a decade or more.

There is no shortage of oil. To say there is shows your youth and you lack of understand of what speculation is. There are no lineups for oil or oil products, no "No GAS" signs. You can have as much as you want whenever you want. The only barrier is the amount you are paying for it.

Speculation is trading without taking possession. Up until recently you had to be licensed to trade in the futures market. Today you do not. You do not have to take possession of oil or wheat or soybeans or corn and pretty much anyone can trade futures.

Even I can trade futures as I have a futures trading account. My account does not allow me to take possession of commodities but I'm free to speculate all I want. Completely unrestricted access to the futures market to speculators is what has caused this complete disaster in the futures market which will send the world into a massive, deep and long term economic Hiroshima. We can expect to see war, famine and depression like economic conditions within the next 2-3 years unless harsh restrictions are placed on market speculation in commodity futures just as they were in the 1930's.

If you want to profit from this calamity then you should short pretty much everything related to oil consumption: autos, chemicals, airlines, transportation, heavy industry. You should be long solar, wind, nuclear and energy alternatives as well as technology, especially energy-related technology.

sahtt

The interesting part to me is how one decides the price, regardless of whether it goes up or down. Regarding equities, it's fairly straight foward as it's all related to earnings in one form or another. With comoddities, the basic ideaology is the price simply continues to rise until an inventory of unsold goods exists. If that was the case the massive corrections that historically [about every 10 years] have consistently taken place wouldn't be nearly as drastic. There would be no 30-50% in the drop of crude more or less over night like has happened in the past, and not too distant past might I add.

The only oil stocks I feel comfortable buying at today's levels are heavily beaten down refiners. Off shore specialty firms are also attractive but riskier. I've got my fair share of alternatives though, wind is my favorite but I'm completely realistic on what it can achieve and the actual firm only gets about 20% revenue from wind.

cthree

The price will rise until demand can no longer be sustained. Demand is determined by the number of trucks that come off the road, plants that close, cars that are not produced and airplanes grounded.

Erosions in demand are permanent. When an airliner is grounded it never flies again. The economy doesn't spring back, people's lives are devistated. Following the fall in demand you get the build up in inventories as future purchases made to satisfy current and future demand pile up. The value of future contracts decline rapidly as net consumers become net sellers. You get a glut as traders try to unload.

Demand was down 5% in April according to the DOE and they are lowering their demand estimates for 09 by nearly 25%. Inventories were 3 times higher than expected.

[QUOTE]
According to the U.S. Energy Department's weekly inventory report, gasoline supplies rose by 2.9 million barrels to 209.1 million barrels, 3.3 percent higher than a year ago. The increase is much more than the 900,000 barrels predicted by economists.

lOOkatme

I don't think its a bubble at all.


shortages in China....yes its subsidized....but on the other hand stations are raising prices illegally to try and sort things out....and they still run out the same day.


Even if you play the rate game here in the US to strengthen the dollar.....its not going to help much.


You can have your opinion...and I will have mine.....but we are going to have to cut a lot of demand if fuel is going to be used elsewhere and exports are dropping 10% a year....year over year....or possibly much faster than that. Countries around the world that used to export will now be next importers.....good luck....but I guess they will be priced out of the market anyway...or so we hope.

But with the dollar going down....we might be the ones priced out


and futures markets right now are higher than present prices....even way out....although I haven't checked after today...since it was such a large rise.

lOOkatme

speculation does not exist.


Here is an eplenation of future prices.


http://www.energyandcapital.com/articles/o...ckwardation/707


As I argued on Neil Cavuto's show on Fox Business on Monday (video forthcoming), I think the speculation argument has been really overblown. Likewise, I think the hunting expedition this week in Congress, where they grilled oil market-makers and investors to see if the oil markets were being unfairly manipulated, was a waste of time.

Ultimately, when the contracts are settled, as Scott Nations pointed out in a humorous discussion on CNBC a week ago, "the price is what the price is." It's the refiners who have to take delivery of the black gold who ultimately decide what the fair price for oil is. Upon expiration of the contracts, as Rick Santelli said, "there is no speculation."

The fact that we really haven't seen a wide divergence in price between the middle of a contract and its expiration belies the argument that oil's rise is all about speculation. Although speculators do play a role in that process, the fact that oil is a commodity that will be physically delivered really limits the opportunity to manipulate the contracts

sevenrd

cthree, you omitted this from the inventory report...

As lookatme mentioned, as net exporters' oil production continues to decline (Mexico, Venezuela), while simultaneously their own consumption increases, net importers (U.S.) are going to be getting less and less oil. And this will likely be happening soon, potentially at an alarming rate of decline

http://www.stockhouse.com/Columnists/2008/...r-energy-prices

I agree speculation is contributing to the price of oil, but not to a great degree and certainly not enough to bring the price down to $50. There may be some demand destruction, but not enough to drag the price down that low. The world is simply too dependent upon oil and there are currently no viable alternatives. We've been on a global production plateau for roughly the past three years yet demand has continued to soar.

We can choose not to drive, but can we choose not to eat? Fossil fuels are essential in modern agriculture: fertilizers, pesticides, irrigation, farm equipment, distribution, processing/packaging, refrigeration...all dependent upon fossil fuels. And this is just one of myriad aspects of our dependence. There's no choice for the U.S. but to continue buying.

The blame game for the rise in oil prices that the media perpetuates is tiring. It's speculation, disruptions in Nigeria, the falling dollar, big oil, congress, etc. No, we need only look in the mirror to find who to blame.

We've squandered a precious, finite resource and it's time to pay the piper.

When facing the reality of decreasing oil production, ponder this....



Just my humble, doomerish viewpoint.

Happy motoring!

lOOkatme

Let's say we become more efficient......


The scale of our energy imports is too great and the net contribution of our preferred options too small at this point to make much of a dent in the net 12 million barrels of petroleum and 12 billion cubic feet of natural gas we import every day. Even if every new car sold in America delivered an actual city/highway average of 30 miles per gallon starting tomorrow, in four years this would only improve the average fuel economy of our total fleet by 2 mpg, which might reduce imports by one million barrels per day, if it wasn't partially offset by a rebound in vehicle miles traveled. Doubling our ethanol output --an increasingly dicey proposition, given concerns about food vs. fuel competition--would displace the equivalent of another 300,000 barrels per day of oil. Doubling our current wind power capacity might save the equivalent of 1 billion cubic feet per day of natural gas.

http://energyoutlook.blogspot.com/2008/06/...skepticism.html

Yet, over that same time frame.....if oil supply remains flat like it is....we will lose millions of barrels a day in exports.

If prices were to fall....we lose a few more million barrels of production.

So you're saying.....prices are going to fall when supply is reduced by 8-10 million barrels because we saved 1 million barrels?