T. Boone Pickens Says Oil is Going Higher

Includes: OIH, XOM
by: TraderMark

For those of you who don't know, T. Boone Pickens is probably considered the most astute energy investor period. He is like Buffet of oil, and looks like he was the 369th richest guy on the planet. (Interestingly he is a big investor in wind energy). With everyone and their mother calling for a selloff in oil, he is reversing his short and going long.

What I try to remind everyone who blames the high oil prices on oil companies is, oil is not romping in other currencies or gold. In fact, I read if the dollar was stable crude would be roughly $60-$65 right now, or almost cut in half. So it is misguided to blame oil companies as the politicians are trying to do - they need to look in the mirror (for there misguided regulation, and spending which creates massive deficits) and next door to the Federal Reserve which is printing US pesos at an alarming rate. In oil or euros terms crude oil is on a slight upward slope. The problem is the US peso...

Myself, I think crude can get to that next big round number $120, but the whole commodity space is getting frothy so I expect some pullback. The dollar also has to show SOME sign of life and make even some minor jump... right? We have 1 more cut coming on April 30th by the Federal Reserve and I assume at most we will have 1 more after that. I would think the end of the cutting might give some minor strength to the dollar but thus far, other than a few days after the last Fed meeting, it has not seemed to have much effect.

Gasoline sales are finally slowing in the US as the prices are now reaching $3.40 nationwide heading for near $4 by Memorial Day driving season (notice the strength in retailers today - woo hoo, ignoring all the facts again)... at some point higher price points create demand destruction - we finally appear to be reaching those levels.

  • Boone Pickens, a billionaire energy investor, said he reversed course and adopted a long position on oil, meaning he is betting the price of crude will rise. Pickens, 79, the founder and chairman of Dallas-based BP Capital LLC, said today in a speech at Georgetown University that the price of crude oil will only continue to climb and demand will eventually be dampened.
  • ``The position is long, not short,'' Pickens told reporters after his speech. ``I covered the short position, it was a mistake on my part. We missed.''
  • Crude oil futures in New York touched $115.54 a barrel today, the highest intraday price since trading began in 1983.
  • Pickens said he thought oil was approaching $125 a barrel. Oil will eventually reach $150 per barrel, he said while cautioning ``I won't be investing in $150 oil.''
  • Pickens said his BP Capital Energy Equity Fund fell 21 percent in the first quarter of this year. Since 2001, the fund has grown 800 percent, he said. (even the best make mistakes)
  • World oil supplies won't exceed 85 million barrels a day because of high depletion rates of existing wells, he said in his speech. This lends credence to his long position. ``There is only 85 million barrels of oil globally in the market coming a day and I don't think you can increase that 85 million,'' Pickens said.
  • World oil demand during the four years ending 2008 is rising at an average annualized pace of about 1.4 percent, according to International Energy Agency forecasts.
And the "World of Shortages" paradigm plays on - yes the US recession will slow demand for a bit here, maybe a year or two, but demand will continue to go up globally and supplies simply are not keeping up with demand. For Americans, we need to pray to the currency gods that the dollar strengthens. Granted that would destroy the last bastions of strength in the stock market, but pick your poison - ability to drive to work without taking out mortgage? or higher Etrade account balance?

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