smurphny

Ratio of Oil to Natural Gas Falls

This is not surprising. Oil and NG are mostly different commodities. It MAY suggest that oil IS oversold but I wouldn't bet on it. The longer term charts seem to suggest that, eliminating the irrational spike in '07, oil is still above it's long term average while gas is about where it should be and maybe a little below it's return to reality.

Expect OPEC to Cut Production

OPEC will "announce" cuts that never happen. and that no one who matters takes seriously...as usual. The price of crude will fluctuate a little and then continue on down because anyone who trades this commodity KNOWS OPEC is too diverse, political, and dysfunctional. Sell oil plays on this rumor (probably tomorrow) because oil is still rapidly heading south to the $20s before finally stabilizing at about $45 IMO.

Oil Breaks Below $60

There is just no telling how low oil can go right now because the markets are working on emotion and not the partial logic they sometimes display. Crude is just a mirror of the Dow which is in a panic driven tailspin, predicting deep financial declines. It may be overblown but who can know? There will probably be some "capitulation" event but it has not yet happened. The deluge of daily bad news will keep driving everything down. There is no good news. Keep a good percentage of cash, be in dividend stocks (oil and gas trusts) that will at least add cash as you wait for share prices to recover. When a bottom is finally reached, usually no one wants to own stocks anymore and only insiders are able to profit from quick rallies. By the time the investing public realizes the trend has actually reversed and is brave enough to put money back to work, it is usually too late. This will happen before any real good news. For this reason I think averaging down and adding to dividend yielding shares is a good (but risky) idea.

Oil Breaks Below $60

Oil production has been growing year over year. There is no evidence that the theory of "peak oil" has any validity. With the high prices of the last few years, production has moved from the Middle East to many other areas of the world. Lots of marginal wells have been taken out of mothballs and new high tech wells have been drilled . OPEC has never had much effect on oil prices in times of recession even when they controlled 45% of the world's oil. Now they control maybe 20%. If you look at average inflation adjusted prices of oil over the past 30 years or so, it is apparent that $25 oil is not out of the question. This would, of course, drastically cut the drill count and new exotic and costly means of extracting oil and probably create a REAL shortage but that could take years. In a deep recession, the world will need a lot less oil. Many permanent energy saving changes have been made as well. Houses are more efficient, cars use less gas, commercial buildings are much more efficient. Don't count on $100 crude any time soon unless there is military conflict over Iran. That is a REAL possibility.

Oil Breaks Below $60

If you start this chart ten years earlier, the m.a. is closer to 20 than 40.

Oil Bubble Continues Its Burst

Crude is essentially following the markets in general. If stocks go down again, so will oil. There is no clarity as to how low the Dow can go and no clarity about oil prices. This is what is causing the volatility. What is oil really worth? Fair value? There is no way to even guess because so many traders who could never take delivery of actual oil are playing a game of price manipulation. How our SEC and Congress have allowed these kinds of price manipulations to exist for so long is beyond comprehension. Oil different from shoes, cars and washing machines, it's a national security issue, a basis of our financial well being as a nation. We need sweeping reform of how these commodities markets operate. Maybe a lottery policy of mandatory random receipt of a supertankerful of oil for anyone who wants to bid on a futures contract would work! It would be difficult to take delivery in a Wall St. cubicle. Power companies, refiners, companies that use fuel in manufacturing, airlines, schools, governments, transportation-are all crippled by the games of the idiots in investment firms purposely pushing up the price of oil to line their pockets.

Was 'Peak Oil' a Multi-Billion Dollar Hoax?

"Peak Oil" has much in common with the hypothesis of "Global Warming." It is wonderful that scientists try to connect the dots of evidence for these things but they have very often been very wrong throughout the ages. Data can be misinterpreted or biased very easily. The problem is that many erroneous decisions have been made because politicians and the media believe the theories of academics in universities instead of talking to people in industry.

How Does the Financial Crisis Affect the Peak Oil Thesis?

Concerning the CANROYs, I have been a long term holder and have averaged down during the debacle of late, believing that fear and forced selling was creating some great bargains. No matter what the economy does, cars will run, lights will be on, houses and schools will need heat. Even if oil has a protracted collapse to $50 and we get a cut in dividend, which is a more complicated equation than I can figure, the distributions should still provide a margin of safety. If they stay at the present crazy 30+%, it will not take long to own these shares, going into 2011, essentially for free. Oil is being depleted, costs of extraction are increasing, demand is increasing around the globe. There may be short term downdrafts in crude prices but long term, the price of oil has nowhere to go but up and owning some of it in the ground is probably a good idea. Also, the US dollar is on the hook for a lot and will likely decline against other currencies. Oil will give some protection from the resultant inflation.

Oil Down 48% from Highs

OPEC, as usual, will have little effect. The price of crude is being discounted for a disheveled world economy. It's still historically overpriced and well above the book numbers used by oil companies who have the expertise to estimate its real value. The bubble was obviously speculation by people who never dream of taking delivery. Oil is such an important element of the world's economy that some kind of logical controls against shorting and speculation need to be implemented. The capitalization of the entire oil industry is being jerked around by this kind of madness.These devices do absolutely nothing but generate profits for the infrastructure of commodities markets. Purported "cushioning" is just so much broker rhetoric. Oil will settle out when present production costs start to limit overall production. Supply will dwindle and cause the price to go higher. The demand side of this equation is unknowable with the economy sliding quickly downhill but I'll bet those in the know have a good idea where the absolute downside limit may be. How many bpd are needed to operate the essential elements of the oil economy?