Dr. C.

Were Oil Traders Too Bullish?

Oil traders may be missing the bigger picture regarding crude stocks.

One barrel of oil (42 gallons) can yield 19.15 gallons of gasoline so it takes 2.2 barrels of crude to make 1 barrel of gasoline.

Last week 1.8 million barrel drawdown in crude was offset by an almost equal 1.8 million barrel crude equivalent increase (.8 million barrels x 2.2) in the form of gasoline.

In fact, over the last 6 weeks, crude stocks have decreased by 18.9 million barrels while gasoline stocks have increased by 13.8 million. This means the crude drawdown has been more then offset by a crude equivalent increase in gasoline stocks of 30.36 million barrels (13.8 million barrels of gasoline x 2.2 to equal crude equivalent energy inventory).

So energy inventory has seen a crude equivalent build of over 10 million barrels in the last 6 weeks.

Disclosure: short oil via DTO

see:
www.eia.doe.gov/kids/e...
tonto.eia.doe.gov/oog/...
tonto.eia.doe.gov/oog/...

How $30/Barrel Oil Could Save the World

If you put a government enforced cap on oil at $30 per barrel many current supply sources with a marginal cost of production above $30 will stop production. You will also see a drastic cutback in the development of new sources such as the deepwater Brazilian fields currently in development. The result will be supply shortages, long lines at the gas stations, and eventual rationing.

If you want to see what the results of a artificially constrained oil supply look like, research the oil shocks of the 1970’s.

Game Over for U.S. Oil, Natural Gas ETFs?

Correction:

Sure HOPE these opportunities don't go away.

Game Over for U.S. Oil, Natural Gas ETFs?

I'm extremely happy with both DXO and DTO. Was in the first for a 100%+ ride and now in the second with current a position at 30%+.

Sure don't hope these opportunities don't go away.

RE:
"The only people who benefit from this scheme are the ETF issuers who collect the fees, and the speculators who actually play the futures markets properly."

Buffett, Grantham and China: What the Savers Are Buying

"Trading companies are storing an additional 80 million barrels aboard 35 supertankers and a handful of smaller tankers, the most in 20 years.

That’s a lot of oil to work through before oil prices can move up more than 10% or 15%. "

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note: that 80 million barrels won't cover the world's needs for a single day.

Crude Reality: How Long Can Oil Stay Down?

"Vast number of tankers full of oil"

Yes, there are tankers being hired to act as floating storage facilities. How much oil is stored at sea?

"Oil companies and traders are storing 80 million barrels of crude oil at sea, the most in at least 20 years, according to Jens Martin Jensen, interim chief executive of the management unit of Frontline Ltd., the world's largest supertanker owner."

This article also states that...

"The cost of hiring supertankers to collect crude oil from the Middle East jumped as the biggest oil-storage program at sea in at least two decades eliminated the supply of ships available for deliveries."

Source:
www.canada.com/calgary...

So this suggests that the 80 million barrels is just about the maximum tanker storage space available and the cost of leasing these ships are rising.




So how much is 80 million barrels of crude?

EIA estimates global demand for 2009 to be about 86 mbd.

Source:
uk.reuters.com/article...


So we see that the "Vast number of tankers full of oil" won't hold enough oil for 1 days' global consumption.

Sorry - I'm still not convinced that the current "glut" will have a significant impact on price over the next year or two.

I may be wrong - but then, I may be right.

I'm long DXO with a 1-2 year planned holding period
Most of the position was put in place on days oil traded below $40






On Jan 15 08:58 AM Mmarrkk wrote:

> Dr. C: look offshore! Vast number of tankers full of oil are sitting
> on the high seas.

Crude Reality: How Long Can Oil Stay Down?

"Massive stockpiles are building up"?

here's an interesting set of numbers

at the end of December 2006, the US had a 20.7 day supply of oil on hand
at the end of December 2007, the US had a 19.0 day supply of oil on hand
at the end of December 2008, the US had a 21.9 day supply of oil on hand

these "massive stockpiles" represent just a few days use - they don't seem so big to me now

source: tonto.eia.doe.gov/dnav...

The Price of Oil: Weak Demand Trumps Distractions

demand destruction?

see www.eia.doe.gov/emeu/i...

the latest global demand number for Q3 2008 is 84.73 mbd

down from the annual average of 85.90 mbd in 2007
a decrease of .77% from the 2007 average

not much demand destruction yet - maybe it all happened in Q4

but it seems that everyday I read about another oil project or expansion being delayed

Best Performance in 2008: Mattresses

Actually the best long performance was gold at +5%, money in mattresses lost purchasing power

$60 a Barrel Oil in 2009?

additional comment....

or, if not trade to $80, then trade above $60 for an extended period of time to offset the lower prices at the start of the year.

$60 a Barrel Oil in 2009?

Don't forget that to average $60 for the year the price must rise to $80 to offset these days trading at $40.

So the forecasts are essentially implying a 100% rise between bottom to top during the year.

A nice trade.....

The Beginning of the Endgame for Monetary Policy, Redux

debtacid:

while it's a great quote, source is questionable. see....

see: www.americanvision.org...

"Then there’s the attribution of the following citation to historian Alexander Fraser Tytler (or Tyler) (1747–1813). It supports what many believe are important political observations, but is it authentic? Can it be found in any of the works of Alexander Tytler?:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.

Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.

Like the dubious James Madison quotation, the Tytler extract is cited on a regular basis and often finds its way into published works.5 While there was an Alexander Tytler, there is no extant evidence that puts these words in his mouth or in any of his published works. Supposedly it can be found in a book supposedly written by Tytler that goes by the title The Fall of the Athenian Republic or The Decline and Fall of the Athenian Republic. There is no such book in circulation or attributed to him. Others claim that the quotation can be located in Tytler’s Elements of General History: Ancient and Modern, a book that does exist. The following response from the library of the University of Edinburgh states that their research has shown that the quotation does not appear in the library’s holdings of Tytler’s books:

Edinburgh University Library occasionally receives enquiries, particularly from North America, about this particular work. However, this title is not in our Library holdings, nor does it appear in the stocks of the other major research libraries in the United Kingdom. . . . Locally, the chapters of Tytler’s General History . . . (which we DO have) has been checked on the off-chance that The Decline and Fall [of the Athenian Republic] might have been a chapter title . . . but it is not. . . . We have scanned our holdings pretty thoroughly on different occasions, going back a few years now, but we have not found the quotation or anything similar to it, but we cannot absolutely rule out the possibility that we have missed it.6

Even the United States Library of Congress has been called in on the search with no success in finding the much cited but elusive quotation. Even so, the Madison and Tytler quotations continue to circulate as authentic history. Here’s the lesson to be learned: If there are so many who are willing to accept the authenticity of historical citations with something less than a shred of evidence, then it shouldn’t surprise us when students accept historical accounts found in textbooks and scholarly journals that have about the same amount of evidentiary support. The difference, however, is that so much of what finds its way into textbooks and popular works of history affect the way Christianity and the Bible are portrayed. It’s one thing to be wrong about a few unsupported quotations; it’s another thing to reshape a school curriculum based on fabricated history that relegates the Bible to the dust bin of history. "

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just thought readers might be interested.....//

Thursday Was a Huge Day for This Market

Friday was also a HUGE day - bigger then thursday I believe.....//

disclosure: still long SKF

A Far Cry from "Hooverville"

Comparing today's published unemployment rate to historical rates is meaningless. Today's unemployment rate calculated as it was calculated in the first half of the 1900's would be about 12%. See: www.shadowstats.com/ar... and www.shadowstats.com/al... .

Investor Sentiment and Market Returns: Now's the Time to Be Bold

Wish you would have included data on 1929 and 1970 - all your data points reflect recent observations in a cyclical bull period. Things could well be different now.