No Moss

Crude Reality: How Long Can Oil Stay Down?

Well, the best I can figure about the oil markets is that it moves very quickly as you get away from the equilibrium point, i.e., when supply equals demand. Look at the steep rise in oil prices when there was pressure on available supplies, and the steep drop when demand fell below the available supply.

That's just observed behavior, without any statistical backup. Global statistics are hard to come by, anyway.

Demand will continue to rise as the developing countries emerge from poverty. The obvious example of this is China, which went from being a net exporter of oil to a net importer.

We're looking at a temporary dip in demand as if it were a permanent development. What is more likely is a surge in demand as we start up our economies again sometime this year and starting burning that $1.50 a gallon gas.

As Oil Bottoms Out, It's Time to Go Long - RBC

The price of oil probably operates on its own fundamentals and market conditions. Finding a correlation with the NASDAQ could be purely or mostly coincidental. The NASDAQ reached its peak in 2001, and oil reached its peak in 2008. The fall of the NASDAQ by 70% took place over 7 years, the fall of oil by 70% took place over a few months.

I would agree that oil prices are too low to last, but I have no idea how long they will last at this level. Futures indicate prices will rise, but it is apparent that OPEC actions have far greater influence on prices when demand is strong than when demand is weak.

Merry New Year: Cheaper Oil, Silver Options

Well, I like the article whose link I am providing ( by Daniel Dicker):

biz.yahoo.com/ts/08120...

Basically, Daniel mentions the huge contango that exists now (current price of $43 vs December 2009 futures of $57), plus credit issues that constrain the investment in futures and lead to deflation. The strong dollar is a major factor in keeping prices down. We've got winter fuel oil and cheap gas prices in the US to fuel demand.

What we haven't had is any geopolitical event of note recently.

Demand for oil will continue to drop until it doesn't, and then the turnaround could be very quick. China's demand for oil edged up in October, according to Reuters and this Seeking Alpha article:

seekingalpha.com/artic...

Short oil? Wow, that would be incredibly dumb at this point, given the low possibility of reward and the virtually unlimited possibility of punishment.

Charlie Maxwell to Barron's: $300 Oil is Inevitable

Well, it's an easy call to predict a peak in oil if demand exceeds supply. The obvious answer to this is to develop alternernative fuel for transportation (electric or CNG) and reduce the use of oil for heating (replace it with solar, elecltric, or natural gas).

We saw demand fall as oil approached $150, helped by reduced transportation of all sorts. It will take price pressure to make significant changes in our habits, and the sooner the better. It's unrealistic politically, but the US needs to put a higher tax on fuel and punish "gas guzzlers" with an annual excise tax of say, $2000).