Oil price discussion and analysis

[Tysonboss1]

Re: OIL AGAIN!

http://money.cnn.com/2007/12/01/news/economy/fuel_efficiencysat/index.htm

:

By 2020 if we are to maintain oil production at todays levels we would have to have found over 300 Billion barrels of oil reserves just to replace the reserves we deplete between now and then and thats just to maintain production at current levels let alone growth in demand,.....

Using grain to make ethanol doesn't take away much food production,.... one of the by products of ethanol production is "distillers grain" which is a high protein animal feed used in feed lots,.... ethanol can also be made from waste products from sugar cane milling,... flour milling,... grain husks and wood chips,..... we are just scratching the suface when is comes to biofuels,...

I think the energy industry will be very exciting over the next 10 years,... there will be no real silver bullet but biofuels do have a place in the future energy mix.

 

[rederob]

Re: OIL AGAIN!

I wasn't saying oil under $80.00 was impossible,.... after all nothing is certain in the markets except the madness of man,.....

Technically a bounce off $80 will look good for more upside.
Fundamentally the fact oil has traded as long as it has as high as it is, is unusual. The steepness of its rise - almost doubling in price under 12 months - suggests a sharp retrace was on the cards: The fact it doesn't even look likely at present is ominous (price-wise).

Oil will drop closer to $80 due to the end of the USA driving season after all oil tends to take 3 steps forward one step back,

I think driving season is long gone. We are now into the distillates for heating oil.

I just don't feel that it will drop below $80 and if it does it won't be far below and it won't be there for long.

The gold: oil link remains the current key to movements. There is not much sway in one without the other.

 

[BREND]

Re: OIL AGAIN!

After closing short position on oil futures, looking to buy oil at US$80.

 

[BREND]

Re: OIL AGAIN!

Technically a bounce off $80 will look good for more upside.
Fundamentally the fact oil has traded as long as it has as high as it is, is unusual. The steepness of its rise - almost doubling in price under 12 months - suggests a sharp retrace was on the cards: The fact it doesn't even look likely at present is ominous (price-wise).

I think driving season is long gone. We are now into the distillates for heating oil.

The gold: oil link remains the current key to movements. There is not much sway in one without the other.

If you are so sure that oil will not reach $80 again, OR if it reaches $80, it will rebound, why don't u sell Crude Oil Jan08 Put options strike price $80?

Its only a few days away from the expiration, and the premium looks still pretty decent.

That's what we have been recommending to our clients these few days.

 

[Whiskers]

Re: OIL AGAIN!

Oil shale may finally have its moment

In a dusty corner of northwestern Colorado, an energy of the future is beginning to look like the real thing. Can oil shale work?
Fortune's Jon Birger reports.


http://money.cnn.com/2007/10/30/magazines/fortune/Oil_from_stone.fortune/index.htm

How about oil sands in Alberta Canada???

Economical and more oil than all OPEC reserves!!!

I have heard of them before, but that they are now very economical to produce is news to me. What a hell of a pot of gold for Canada if it comes to fruition. More importantly, could we see a price war by OPEC to limit it's viability?

The Oil Reserve 8 Times Bigger
than Saudi Arabia's

All of a sudden, the oil sands in Alberta, Canada have become a veritable “black gold” mine. And Big Oil’s heavy hitters are wishing they acted sooner…

Just three years ago, when the average price of crude was $29.63 a barrel, producers didn’t find the profits to be worth the costs of processing the oil sands.

But improvements in mining technology have dramatically reduced the cost of extraction, rocketing bottom lines skyward. According to the Oil Sands Discovery Centre in Alberta, it now costs an average of just $13.21 to process each of the 2.5 trillion barrels of oil embedded in the sands – a reserve 8 times bigger than Saudi Arabia’s… containing more oil than all OPEC nations combined.
http://www.investmentu.net/ppc/t4mideastoil.cfm?kw=X300GA05

 

[GREENS]

Re: OIL AGAIN!

Here is an interesting article about the oil sands in Alberta Canada (goes of track abit, but makes some good points throughout). From an economic point of view, it looks like the environmental costs (i.e. significant quantities of land clearing, water use and high levels of carbon emissions) required in extracting the heavy oil will far outweigh the benefits. I think this is going too far to get at oil and looks like a very dirty industry. But everyone to there own.

Here is an interesting article about the oil sands in Alberta Canada. From an economic point of view, it looks like the environmental costs (i.e. significant quantities of land clearing, water use and high levels of carbon emissions) required in extracting the heavy oil far outweigh the benefits. I think this is going too far to get at oil and looks like a very dirty industry. No-one that even slightly places some value on the environment would accept this as a real possibility. But everyone to there own.

Canada's oil: black gold with a black heart
Date: November 11 2007 (SMH)
by Aida Edemariam

You've only got to stroll down Hardin Street to the main drag, then hang a left and walk a couple more short blocks, to see what Fort McMurray is about. It wouldn't be the whole story, but you would catch the drift.
You'd pass the Boomtown Casino, strip malls, and a club called Cowboys proudly advertising "naughty schoolgirl nights". Then the Royal Canadian Mounted Police station, the municipal offices, the Oil Sands Hotel and Diggers bar, with its advertisement for exotic dancers.

You would be passed by Humvees and countless pick-up trucks, each more souped up than the next, many covered in dried mud, many carrying further four-wheel-drives - in winter, snowmobiles; in summer, all-terrain vehicles on which to go chasing through the bush, which is visible from the main street. And if the wind is from the north-west, you can smell oil on the air: heavy, slightly sour, unmistakable. Around here, they call it the smell of money.
As the Middle East has become more unstable and as Iraq has boiled into chaos, other, unexpected places have flourished, and none more so than Fort McMurray. Five hours' drive north of Edmonton, in Alberta, it has always been a frontier town, and even before the first white explorers came fur-trapping, the Indians knew that this place sat on oil - they used it to waterproof their canoes.

The trouble has always been that it's not conventional crude, easily liberated from the earth, but tar sands (also known as oil sands) - a mixture of sand, water and heavy crude that is much more difficult and expensive to extract. It can cost about $C26 ($30) a barrel to extract - so when that was comparable to the price of oil, there was no point in trying; but now that oil is close to breaking the $US100-a-barrel barrier ($108), there definitely is.
For years there were only two outfits mining the Athabasca Oil Sands, which occupies 141,000 square kilometres; now there are seven, including Shell. In total, 1.2million barrels are extracted each day from these sands, a number projected to rise to 3.5million. Eventually, Shell alone intends to extract 500,000 barrels a day.

The companies intend to invest $C100billion in the area in the next 15 years. If oil prices stay as they are, or rise, they're playing for possible profits of tens of billions of dollars a year - much of which will come from America, gleeful at this sudden access to so much "safe" oil right next door.
Current technology means companies can reach only about 10 per cent of deposits, but even that makes the Athabasca Oil Sands the second largest proven oil reserve in the world. Add in the so-far-unreachable 90 per cent, and Alberta's oil reserves would be at least six times the size of Saudi Arabia's. Already, Canada produces as much oil as Kuwait. Small wonder Canada is increasingly described as the world's next energy superpower.
Ask almost anyone why they're in Fort McMurray and the answer is the same. A quick rub of forefingers and thumb, a knowing look. Or, in the words of irrepressible 11-year-old Ron Mfoafo-M'Carthy, here with his sister and mother to visit his father, a Ghanaian engineer: "Cha-ching!"
Projects are going up so fast that there is a huge shortage of skilled labour, and the companies are paying way over the odds to get it. An engineer such as Johnny Mfoafo-M'Carthy can make up to $C220,000 a year here, compared with $C90,000 in Toronto. You only need a high-school education and a six-month certificate to qualify for a $C100,000-a-year job driving heavy equipment. One cocky 26-year-old I meet claims he sometimes earns $C1000 a day driving a truck.

That explains why people come from across the world, to a town whose weather can be, even by Canadian standards, brutal. In winter, temperatures fall below -40 for weeks.

Fort McMurray's population - average age 31, average family income $C135,000 (the highest in Canada; the national average is $C67,600) - includes representatives from more than 70 nations including Fijians and refugees from the wild Somali-Ethiopian borderlands.
In my first 24 hours in Fort McMurray, every conversation I overhear involves cash. Hourly rates; possible hourly rates; hourly rates the other guy is getting.

It is possible to have a very good life in Fort McMurray. You can treble your salary, buy two homes, dig a swimming pool, pay off your mortgages 20 years earlier than anyone else and retire.

You can go skiing, fishing, hunting and trapping in the vast outdoors you can see from any one of the sprawling new suburbs going up as fast as contractors can build them.

Just as the California gold rush came to define the American dream, so Fort McMurray defines a particular kind of Canadian dream: go west; Fort McMurray can change your life. But first, perhaps, consider what price you are willing to pay.

Apart from the smell, you get little sense of what the oil sands are like unless you drive 45 minutes up Highway 63 and take a site tour of, say, Syncrude, the world's largest producer of synthetic crude.

After the forest is cleared and the peat bog removed, what's left is dark, molasses-like, oil-saturated sand, which is transported by trucks with tyres as high as two-storey houses.

Mining this way is hard, boring, ugly work. In winter there can be so much steam that bulldozer drivers have to inch around, hoping not to topple into tar pits. In summer the dust has to be sprayed down.

The extraction of the oil requires heat, and thus the burning of vast amounts of natural gas. Some estimate that Fort McMurray and the Athabasca Oil Sands will soon be Canada's biggest contributor to global warming.

The oil sands excavations are changing the surface of the planet. The black mines can now be seen from space. Acid rain is already killing trees and damaging foliage. The oil companies counter that they are replanting grass for bison and 4.5 million trees by Syncrude alone.

Two barrels of water are required to extract one barrel of oil; every day as much water is taken from the Athabasca river as would serve a city of a million people. Although the water is extensively recycled, it cannot be returned to the rivers, so it ends up in man-made "tailings ponds" (tailings is a catch-all term for the by-products of mining), which are also visible from space.

Leigh Wild drives a bulldozer for Syncrude. It's a good job and she is grateful for it, but there are things that trouble her. The sandhill cranes, for example.
"When I'm at the end of a night shift, at dawn, or when the sun goes down, I see them walking out through the discharge from the coke line, eating insects. I try to scare them away, because it's so sad to see them in such a place. Almost heartbreaking."

Mayor Melissa Blake has the unenviable job of running a town that is buckling under the demands of a population that has doubled in the past 10 years from 32,000 to about 65,000. It is projected to grow by another 40,000 in the next five years. A new sewage treatment plant, begun before a credit agreement was even in place, will be finished in 2009 - and will be too small a year later. A school that took three years to build was too small a year before it opened.

This is an overwhelmingly male place: lots of cash, lots of men. A few come with partners; many do not. The persistent urban myth is that this is the divorce capital of Canada. There are no figures, but plenty of stories of women arriving to surprise husbands on anniversaries, only to find the marriage defunct; of one or both working such long hours that the marriage collapses out of sheer disuse; or the children spin out of control.
"Family life takes a beating here - big time," says Dave Drummond, president of the Communications Union. At the Lion's Den, a dark, dingy boozer full of tired men downing Labatt Blues, Kim Pabrelko, 21, says women are always having to defend themselves.

"That's a big reason why I like working behind the bar," she says. But she is sympathetic, too. She sees a lot of loneliness. "Eighty per cent have families back home."

The town is up in arms about a recent article in the Canadian magazine Chatelaine that noted that escorts make more here than anywhere in Canada, and described a dating atmosphere of rampant mistrust and betrayal. You can see why people are insulted, but it's not hard to understand how the piece came to be: there are 11 pages of escorts in the Yellow Pages (annotated, in my hotel room), and the subject often comes up with little prodding.

Men complain that women just want them for their money but, as one woman said tartly, if they will go out at night wearing a Syncrude badge (guaranteed $C100,000 a year), what do they expect? In their defence, it's a way of standing out from the crowd; it probably also provides a kind of armour, though not against gold-digging.

 

[rederob]

Re: OIL AGAIN!

With oil prices closing over $90 overnight - after dipping into the high eighties for a while - there seems little chance that $80 will get hit in the near term.
OPEC says it won't increase output.
I'm now going to read that as "code" for cannot increase output.
The Saudis are not silly.
They know high prices stymie demand.
They are not keen to kill the golden goose.
By the same token, if OPEC said it would increase output, and then failed to deliver, the whole world would panic prices to oblivion.
I think the big funds know which way is up: They will not gamble on oil's downside until there are real signs it has a downside.
Presently we are on track for $100 more quickly than $80 - that's if the latter ever gets another look in.

 

[Tysonboss1]

Re: OIL AGAIN!

I will take your bet and double it.

So does that mean for now I am ahead in our little bet,..

 

[rederob]

Re: OIL AGAIN!

So does that mean for now I am ahead in our little bet,..

Yes!
But in taking the bet, I'm doubling the profit on a long, not a short, position.

Seriously though, it really looks as if the market has capitulated on the supply-side response: There isn't any.
Big deal dropping from over $99 to high $80s - it's hardly a blow-off top to write home about.
Moreover, buying support is very strong; it's non indecisive or wishy-washy.
The indications are that a stronger longer move is ahead.

On the flip side should $80 be hit, then I have put aside a very tidy sum to accumulate more oilers (BPT being my preference for now given its tardiness, but steadiness).

 

[chops_a_must]

Re: OIL AGAIN!

I'm now going to read that as "code" for cannot increase output.

Indeed.

I think we have seen peak oil through the markets, this Australian Spring. Finally there is a recognition.

Bye bye US economy...

 

[Tysonboss1]

Re: OIL AGAIN!

I have setup an investment trust linked to one of my companies where I will be putting aside about 15% of profits from the business each week to be invested using the dollar costed averaging method,.... I want to use this trust to build up some longterm holdings in companies.

I am thinking of investing about 75% of the funds into companies that will benefit from the transition of energy over the coming years, Besides the oilers what what other companies to you think will benefit,

 

[rederob]

Re: OIL AGAIN!

I am thinking of investing about 75% of the funds into companies that will benefit from the transition of energy over the coming years, Besides the oilers what what other companies to you think will benefit,

Besides the oilers, uranium producers.
Although PDN is battling to break out, I suspect that when oil prices have jumped the $100 hurdle there will be another rush, and price spurt for uranium.
Low debt, cashed up, long reserve, minimally hedged, low cost, producers is my investment rule of thumb.
Outside chances are the renewables, where there is a smörgåsbord to choose from.
My preference will be wave power over wind power and solar in the longer term, as wave power and desalination can work hand in glove. I believe the need for fresh water will be a key investment theme within ten years, at a global level. A glitch in my thinking is that Asia's proximity to coastline for its massive population increases is nothing like Australia's - so I might need a re-think.
Aside from the above, I think BHP's cash position (and uranium reserves) places it in a position to take advantage of whatever energy swings become evident as time goes by.

 

[Smurf1976]

Re: OIL AGAIN!

Indeed.

I think we have seen peak oil through the markets, this Australian Spring. Finally there is a recognition.

At the risk of appearing somewhat big headed, that would put the timing exactly as predicted by Smurf some years ago.

Seriously though, I was hoping to be wrong about this one.

It seems we're passed the point of maximum oil production. Next, and not far away, comes the point where combined production of oil and gas begins to slide as the growth in gas fails to offset declines in oil.

Then gas actually peaks. Probably sooner than most expect given a three quarters concentration of the resource in a very small number of countries plus the serious depletion of North American and North Sea reserves.

Sometime after that, and it will likely be a while yet, we get a situation where the combined availability of oil, gas and coal peaks as the growth in coal fails to offset declining oil and gas availability.

And then finally, we get a peak in coal itself. A situation that's already happened in a few places, most notably the UK about 90 years ago (though to this day that resource driven peaking is rarely acknowledged).

Hence my very long held view that we'll be using gas to replace oil for transport etc and will be scrambling to find anything other than oil and gas with which to run industry and especially generate electricity.

And for the ordinary consumer, it's starting to get expensive. Power prices are starting to rise and there is plenty more to come. Petrol is up, so is diesel. LPG's getting expensive too. Natural gas is still relatively cheap - but it's increasingly acknowledged that Australian gas is undervalued so that won't last.

 

[chops_a_must]

Re: OIL AGAIN!

I have setup an investment trust linked to one of my companies where I will be putting aside about 15% of profits from the business each week to be invested using the dollar costed averaging method,.... I want to use this trust to build up some longterm holdings in companies.

I am thinking of investing about 75% of the funds into companies that will benefit from the transition of energy over the coming years, Besides the oilers what what other companies to you think will benefit,

I'm pretty biased, but mid-long term I don't think you can go past some of the Australian gas stocks, particularly ones with assets in Asia.

And as rederob said, renewables. But you still have to be quite selective in those I feel.

 

[BREND]

Re: OIL AGAIN!

With oil prices closing over $90 overnight - after dipping into the high eighties for a while - there seems little chance that $80 will get hit in the near term.
OPEC says it won't increase output.
I'm now going to read that as "code" for cannot increase output.
The Saudis are not silly.
They know high prices stymie demand.
They are not keen to kill the golden goose.
By the same token, if OPEC said it would increase output, and then failed to deliver, the whole world would panic prices to oblivion.
I think the big funds know which way is up: They will not gamble on oil's downside until there are real signs it has a downside.
Presently we are on track for $100 more quickly than $80 - that's if the latter ever gets another look in.

I read it another way, believe that high oil price is hurting demand.
US and Europe oil consumption currently made up of 53% of world's oil demand, and both economies are getting weak. Hence no additional production is necessary.

Hence still holding on to my short position for Crude Oil futures Jan08 at US$89.25, not taking profit yet.

But still positive on oil in the long run, I'm a great fan of Transocean Inc (world's biggest oil rig contractor).

 

[ithatheekret]

Re: OIL AGAIN!

I looked at the heating oil last night as it fell back , it did surprise me .

The summer drive time whilst a big event in the US for gasoline and oil , can be overlapped by extremely cold weather conditions in the Nthn Hem .

I havn't looked in to see if the retooling is under way readying for Santa and the snows etc. , but I expect the price to rise . IMHO

 

[Tysonboss1]

Re: OIL AGAIN!

I'm pretty biased, but mid-long term I don't think you can go past some of the Australian gas stocks, particularly ones with assets in Asia.
.

Yeah, I believe gas will be strong to,.... I have already taken some long term positons in gas I believe gas will find strengh because it is a double edged sword,

Firstly natural gas can be used as an alternative transport fuel as compressed natural gas, and increasingly as a diesel and petrel alternative using "gas to liquid" technology.

And also the growing use of gas fired electricity and increasing household use as the national gas grid becomes a reality will ensure long term demand.

especially because of the large size of australias natural gas reserves when you take into account the develping "coal seam methane" industry, and the existing gas networks which once linked will make gas the most readily available fuel to australias cities.

For a long term income hold I like AGL because the have a finger in Gas production,... Transport,... ,.. storage and retail of both natural gas and lpg,

Agl also has electricity generation assets and a growing protfolio of renewable generation assets ( hydro, wind and land fill gas projects).

 

[bean]

Re: OIL AGAIN!

Just listening to a program where they were mentioning peak of all kinds in July 2006 (oil, natural gas,ethonal etc) .... Also Doctor Hubbert's...june 6th 1974 Testomony to house of representatives in 1974 that amount of energy from sun effecient amount of energy enough to meet needs of worlds .

However as normal OIL US$ 150 and they may start doing something

 

[rederob]

Re: OIL AGAIN!

I read it another way, believe that high oil price is hurting demand.
US and Europe oil consumption currently made up of 53% of world's oil demand, and both economies are getting weak. Hence no additional production is necessary.

That's not a logical take.
It implies 47% of demand is not of consequence.
Moreover, it implies that non-OECD demand is not growing at a rate greater than OECD demand.
The table below (US DOE 2006 projections) shows that is not the case.
Most importantly, gross demand in non-OECD countries is of a greater actual volume.
Finally, while there may be both demand destruction through higher prices, and demand weakness in western economies, there is no indication that total demand will do other than rise. That being the case, we need evidence that supply is up to the mark, immediately. So far the indications favour concerns about supply - thus oil prices remain nearby $90 with all price weakness being well bought.

 

[chops_a_must]

Re: OIL AGAIN!

For a long term income hold I like AGL because the have a finger in Gas production,... Transport,... ,.. storage and retail of both natural gas and lpg,

Agl also has electricity generation assets and a growing protfolio of renewable generation assets ( hydro, wind and land fill gas projects).

I honestly don't like energy retailers at the moment. And I especially don't like AGL. I think people can do much better than them...