Oil price discussion and analysis

positivecashflow said:

This was posted in another forum. What do you think wayneL?

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BREND said:

OPEC may be rising oil production.

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Aussiejeff said:

I have two observations on the above...

(1) If GWB attacks Iran, that news won't have much hope of stopping a rocket under the price.

(2) OPEC are running almost flat-strap as it is. Any hiccups in production facilities after OPEC raises output to whatever level they think they can sustain in the short term and the price will leap....

AJ

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BREND said:

It looks as if OPEC will at least consider increasing oil production at the 5th of December OPEC conference. And if oil production is raised during the meeting on 5th of December, we are likely to see oil price falling below $90.

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rederob said:

BREND
How many oil producers do you think are holding back production with oil prices at record highs?
My guess is none - although the Saudis may have some spare sour oil.
Assuming they could turn on a tap and more oil flows, exactly where do the extra supertankers appear from - we're talking about 30 more Suezmax vessels hitting the seas?
That said, producers can often eke out marginal extra output for short periods - but it's not a desirable way to run things in an industry fraught with safety concerns. And it's not going to be a long term solution.
The run up to and over $90/bbl should have been short and sweet.
Currently it is more enduring than most expected.
This does not augur well for global economies.

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Smurf1976 said:

Basically agreed.

And if output is pushed beyond sustainable limits then in due course it leads to serious damage to the oilfields with water breakthroughs etc.

But as for it being more enduring than most expected, the operative word is "most". Those who have been aware of the situation and predicting problems for quite some time (I'm one of them) aren't in the slightest bit surprised. Just as we won't be surprised when shortages start to appear - but again the markets etc will be "surprised".

Demand continues to rise. Production is flat for two and a half years. WHERE is that oil to meet demand coming from? Someone emptying above ground stocks, or at least ceasing to fill them, is the only plausible explanation. At some point that must end - just watch the oil price fly when it does.

How long it can continue is anyone's guess but steadily increasing the drawdown of a diminishing inventory isn't sustainable that's for sure. IMO we're trying to maintain business as usual as long as possible. Then at some point we suddenly have no option but to cut consumption back to the (very slowly declining) rate of production. That's when the real trouble starts...

The debate about peak oil isn't about if it will happen. Few dispute that. The debate is about whether or not we saw the peak two and a half years ago or whether we'll see another, higher, peak at some point in the future.

What I'm more worried about though is not a fuel shortage, but what happens when the masses realise that there's a problem. Odds are that won't be until they can't buy petrol at ANY price because the tanks are dry. And nobody alive knows the exact state of affairs on a global basis - that's the greatest danger.

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BREND said:

I think you all have mistaken, I already said that I'm bullish on oil in the long term. But that does not stop me from making money by shorting oil futures. Oil price has run up too fast and too steep, its due for a correction.

I'm an investor for Tranocean Inc (RIG), the biggest oil rig supplier in the world.

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Aussiejeff said:

You got the short term correction right!


Cheers,

AJ

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BREND said:

Yippie! Oil price down $3 last night.
Praise the Lord!

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BREND said:

I think you all have mistaken, I already said that I'm bullish on oil in the long term. But that does not stop me from making money by shorting oil futures. Oil price has run up too fast and too steep, its due for a correction.

I'm an investor for Tranocean Inc (RIG), the biggest oil rig supplier in the world.

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dj_420 said:

With oil having fallen quite a bit from its highs of $98 barrel I am tempted to go long again. What price frame are you looking at to go long BREND?

I might just try and catch some intraday movements until we find out what demand is doing, although it is certainly less volatile after that decrease in price. Do you trade current months or futures that fall in later months?

I think if we see demand slacken off again then a drop to the high 80's would be justified. It depends on the report of US demand which has been delayed by one day.

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BREND said:

I think its too early to be bullish on oil price in the short term.
Tomorrow's inventory level may cause some volatility, but the crucial part is still result of OPEC meeting in December.

My next trading strategy is going long on S&P500 futures, you can check out the details in my blog.

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rederob said:

BREND
I guess if you are trading then our daily posts make little difference to anyone's decision making processes.
Smurf recognises, rightly, that crude output peaked in 2005 and has since been flat. The "oil" supply gap has been filled by natural gas liquids and oil sands.
However, presently we are seeing supply declines in so many mature oilfields that expected output appears to have been miscalculated.
Accordingly, the "gap fillers" need to ramp up output more significantly that anyone has forecast.
And the clincher here is that investment decisions needed to be made many years ago in order to ensure adequate future supply, because the oil tap takes year to tum on, not weeks or months.
Going into the northern summer, US has adequate "gas" (petrol) inventories, but is already tight on heating oils. Should it be a harshly cold winter, the chances of inventory being adequate are not good: The US has not built a new oil refinery in almost 30 years and capacity expansions don't look like cutting it.
Moreover, with Asian demand increasing more rapidly than that for the US, it is possible that they get preference of supply. You see, it's cheaper to ship oil to China than the US, so if Asian buyers matched the bids from US customers, the shippers make more delivering to Asia.
In a world of extremely tight supply, diverting one VLCC (very large Crude carrier) to Asia would take away 2 millions barrels of crude from the US market.
That's enough to send an even bigger shiver to Americans suffering a bleak,
cold winter over coming months.

But I digress.
I believe peak oil is now upon us.
2008 will, at best, see some price relief based solely on demand destruction that will consistently occur henceforth.
That said, there is still plenty of oil.
It just won't be produced quickly, or cheaply, anymore.
I am therefore going long term bullish copper as "electric" transport options based on gas, coal, renewables and nuclear power become the new paradigm.

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