scfranklin94

Is Oil Going the Wrong Way, Or Do We Need to Adjust Our Perceptions?

Here's the paradox:
Stimulus package creates demand, which increases crude prices to the point that the increased energy costs offset the value of the stimulus package....

The energy markets are all over the idea that CL is going to $75/bbl; seems no one has factored in that the return to higher prices will force the US into a stagflation scenario, meaning very low growth in GNP and a flattening of demand.

Marc Faber, Jim Rogers and Boone Pickens - Bullish on Oil

I would wait to go long crude until you think that the recession has bottomed out; I'm not sure that we're there yet. Crude might be worth $60 next winter, but if the economy doesn't improve, it could still be in the $30-$40 range. Another thing that the crude bulls haven't factored into their pricing models, is that if we return to a $100+ crude environment and stay there, the long term growth rates in crude demand that they're so fond of will have to be adjusted to near zero, if not negative.

Why Oil Will Head Higher

I think this run up may push it to $60, but it will fall back into the mid-40s when production figures for OPEC come in and everyone sees that Iran isn't cutting back.

Goldman Sachs Goes Bold! Forecasts $45 Oil

I can see crude oil getting into the thirties, but not the twenties. OPEC will eventually cut production and a floor will be found in either the spring or early summer. As much OPEC countries want to cheat on their quotas, there's a limit to how low they can afford to go. In 1999 when crude got down to $10, Mexico and the North Sea were producing a lot more, that's not true now. Thankfully Angola and Equatorial Guinea are picking up some of the slack, but it won't last forever. Drilling is slowly down greatly, and $40 B of investments in the tar sands are in limbo for now.
Even if our daily demand remains at 95% of 2007 forever, eventually crude oil prices will rise due to lack of the industry replacing crude oil reserves. I think that prices will start to recover next winter at the earliest or in the summer of 2010. And, once again prices will rise out of proportion to the change in the demand & supply imbalance - it's par for the course for inelastic price movements.

Oil Price Decline Bad News for Future Supplies

Gee, I guess people are starting to figure out that we're dealing with a semi-inelastic commodity; so we'll have higher highs and lower lows in the future, what a revelation.

Will Drilling Offshore Affect World Oil Prices?

Menzie, of all of the OCS that is closed to drilling the eastern Gulf of Mexico could easily be auctioned off by the MMS before 2012. As for the time it would take to bring such production onshore, it would be a hell of lot less than 10 years for everything that isn't in super deep water. Certainly difficult-to-drill locations in the Atlantic and Pacific would take a long time to bring online, but the eastern gulf would be relatively easy.

How Low Can Oil Go?

Hmmm, cl inventories were unchanged and gasoline inventories fell by 6 million barrels last week according to the DOE; demand may be down, but by how much?

As Oil Slides, Will Contrarians Turn to Refiners?

Unfornately for my wallet, I have to agree with Pocky. Crude may drift down to $100, but Americans have no short-term memory; when they see gasoline down around $3.00, they'll start increasing gasoline demand again. Any gain in the refiner's stocks will be short-lived; I would buy the stock now and sell long-dated calls. Wait for the prices to drift up and then sell the stock and purchase puts.

On Oil and Its Manipulation

Shaggieman- just how should prices be determined? Should the government set the price for crude? What if the Feds said they'll only pay $75 barrel, and then none of the foreign producers decided to sell to us? You can argue that they have sell to us to meet their budgets, but always remember it's much easier to close a valve on an oil well than to drill it in the first place. The captive US producers will only meet 50% of our daily usage. One could argue that the Canadian crude is captive also, but they are building a pipeline for export to China via Vancouver - telling them to meet our price or else would only speed up the construction and capacity of that pipe. Most of the new wells cost a minimum of $70 to drill, at that rate few will drill unless they think the price will stay above $100 for a long time.

How Big a Contribution Comes from Oil Speculation?

Mangolfer - Dennis Gartman reported yesterday that Michael Masters largest holdings in his hedge fund are American Airlines, Delta Airlines, and United Airlines, in shares and call options. Gee, is there a reason that he might want crude prices to fall by 50%?

Even the Gas Crisis Needs a Culprit

Dennis Gartman pointed out Michael Masters' largest holdings in his hedge fund are American Airlines, United Airlines, and Delta Airlines - shares and call options .... gee, do you think he should disclose to the Congressional commitee that he would make out like a bandit if crude oil prices plummetted?

Speculators Continue to Drive Oil Higher at Risk of Global Recession

For every futures contract that is bought, one is sold. For every speculator that made money on rising prices, another lost; in fact since producers usually only hedge (sell) when required to by banks (Exxon doesn't buy or sell any futures), but end users (refineries, chemical companies) hedge (buy) virtually their whole inventory of crude, there is a basic imbalance that is filled by speculators.

Yes, index funds have created massive long positions, but who are these index funds? Most of the time they are pension funds (index funds by definition are one-sided, i.e. long-only) or other investment groups seeking a hedge against rising prices.

Who sold futures to the index funds? Other speculators. What most people don't understand is that there has been and always will be an imbalance of hedgers in the futures markets; remove the speculators and it will make the markets much more volatile. Why? Large physical players will become much more powerful and the ability to corner the oil market for a particular delivery month might become possible.

If a corner, or just the threat of corner occurred, then one would see oil prices that would be truly stratospheric (think $1,000/barrel or more - if you don't believe me look at electric power pricing - when only one side of the market wants to sell or buy, the floor or the sky is the limit).