Negative Sentiment on Crude Oil Overdone - First Energy Analyst

Echoing other oil wonks on the Street, Martin King thinks investors need to chill out. Yes, the oil market is ugly right now - but it is going to get better. And soon.

The First Energy analyst said in a note:

We are projecting that global demand will contract by about 30,000 barrels per day in 2008, the first such decline since 1985. We think the biggest mistake that many on the Street are making is to have become far too negative on demand prospects in the medium-term and, more importantly, grossly overestimating the buoyancy of supply in 2009 and beyond.

Crude oil will pop back up to $80 to $90 per barrel in the second quarter of 2009, with “real potential” to return to triple digits in the second half of the year. Maybe sooner, he predicts.

Mr. King said:

We see the wave of negative sentiment for oil demand as having gone too far for too long, and that the market has lost focus on many of the demand positives that have begun to emerge. We do not expect things to really get much worse than current near-term levels.

Comments

[cjct:]

So quick to call a bottom and a return to previous highs...What's the urgency here???

2008 Nov 06 10:04 AM

[blu:]

Mr. King is right on.
He points out opportunity for those who care to listen.

2008 Nov 06 11:00 AM

[kebu77:]

Mr. King could actually be a little pessimistic himself, if James Kingsdale and others are right in thinking that recent Saudi over-production was to get McCain in and continue the Bush policies re (Shiite) Iraq and Iran.

KSA seems to have figured out prior to the election it wasn't gonna happen, and started their cut-backs some time ago (not that the price crash didn't have something to do with it).

This latest production burst is like past times when they produced way over quota coincidentally during politically interesting periods, like Spring-Fall '04 to give Bush a boost, with the difference that, now, they probably want to cut back for geological reasons like letting over-worked fields rest.

The fear here is that all the OPEC producers will cut back too much and create another price cycle, but at a minimum, oil could "pop back up to $80 to $90" by the end of the year.

2008 Nov 06 11:33 AM

[Shaggieman:]

IMO where Bush went wrong on the economy is letting Lehman fail. That alone touched off a panic that got us to where we are today. You ask why would Bush let that happen and looking at Lehman I can see George Soros as one of the major shareholders. Could it be possible that in an effort to screw Soros he'd risk bringing down the whole economy and did? Interesting question!

2008 Nov 06 12:31 PM

[finmah@yaho...:]

My goodness are still blaming hurricanes on Bush and now oil. Actually we don't have to listen to the dribble because if you research who funded Obama through his first senate campaign and possibly schools - Forget Bush and think about Obama and what influences him.

And how the price of oil might be related to our drilling and exploration policy. If we elect to go with the carbon tax we could have the worst of both worlds - recession induced lower consumption and high prices which I believe helps the producers not the consumer! Now there is a conspiracy. I think consumption angle will reduce exploration in the future for oil (which of course would force the industry to contribute to a different political party and then they would be given some bones but that is years down the road).

2008 Nov 06 01:44 PM

[Socialism c...:]

@Shaggieman:

Where Bush went wrong on the economy was by not vetoing budgets that included money for Fannie & Freddie!! Those institutions were socialist tools of the Democrats and the direct cause of the mortgage crisis at the root of the economic collapse. 19 Republican Senators (including McCain) tried to bring a bill to the floor two years ago to do something about subprime lending, but it was not allowed to be brought up. Bush at that point should have dug in and said, ok, no reform of the GSEs = no budget passage...period.

I suggest you read what really transpired. And read about the founding principles of this country -- what Jefferson and Madison had to say about taxation and how that revenue should be used!! It certainly was not meant to be used as bailouts for businesses!! So contrary to your problem with letting Lehman fail...we *ought* to let ALL involved banks fail!! And any other companies, such as automakers who can't get their own financial houses in order. Their problems are exorbitant union deals and humongous pension funding. We aren't socialists -- WE DON'T OWE UAW PENSIONERS a DIME OF RETIREMENT!! That's what is happening though -- we are going to be bailing out the Big Three next, due to their heavy cost structures. Businesses that can't turn a profit on their own, NEED TO FAIL!!

[quote]
IMO where Bush went wrong on the economy is letting Lehman fail. That alone touched off a panic that got us to where we are today. You ask why would Bush let that happen and looking at Lehman I can see George Soros as one of the major shareholders. Could it be possible that in an effort to screw Soros he'd risk bringing down the whole economy and did? Interesting question!
[end quote]

2008 Nov 06 06:05 PM

[jepittman:]

I agree with your view on Lehman. That is what touched off the recent hedge fund unwind and it was where the polls tipped over to the democrats (they likely would have won anyway but it would have been colser). Your conspiricy theory about Bush and Soros is a bit hard to swallow however. Bernanke and Paulson were responsible for this and their explanation is plausable - they had no buyer as they had for Bear in Chase and the Fed did not have the authority yet to either make a massive loan or absorb their toxic assets. There really was no immediate solution.


On Nov 06 12:31 PM Shaggieman wrote:

> IMO where Bush went wrong on the economy is letting Lehman fail.
> That alone touched off a panic that got us to where we are today.
> You ask why would Bush let that happen and looking at Lehman I can
> see George Soros as one of the major shareholders. Could it be possible
> that in an effort to screw Soros he'd risk bringing down the whole
> economy and did? Interesting question!

2008 Nov 09 08:56 AM

[Joshua Lacey:]

OPEC will see to it that it "pop's " and soon. They cut 1.5 million barrels and plan to cut more. They won't stand for this lull to continue long you can count on that!

2008 Nov 09 01:19 PM

[Joshua Lacey:]

OPEC cut production by 1.5 million barrels per day last month. Just yesterday the president of OPEC vowed to cut more to control the declining gas prices. We cant go by what the sign at the gas station says at the moment. This has to be looked at in the long term. They have the oil, we can't live without it, they know it.

2008 Nov 09 01:34 PM