Oil price discussion and analysis

Re: OIL AGAIN!

Anyone else want to have a punt on that gap fill about 96.20?

Re: OIL AGAIN!

lioness said:

Jet328,

I totally agree with you on this point, is it just me or why are these small players so cheap.

I fully expected a spec bubble in these stocks by now BUT this has not formed yet. Can someone tell me why or is it still coming??

Surely this sector is well overdue for a huge rise.

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Why can't someone answer this question??

Too Hard I suppose.

Re: OIL AGAIN!

lioness said:

Why can't someone answer this question??

Too Hard I suppose.

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Maybe its just one of those things that are currently defying logic.

Or perhaps the Credit Crunch / Debt levels etc are at play. Perhaps having the oil is one thing but accessing rigs and actually pumping another one, seems to be a big shortage in rigging equipment , transport etc.

Bottlenecks in the System reflected in prices im thinking.

Re: OIL AGAIN!

lioness said:

Why can't someone answer this question??

Too Hard I suppose.

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I can only speculate on you point. Oil Search has been very rewarding to those early takers. With the gas reserves they have I would have thought it would be much higher by now. But are we too impatient perhaps, what a good run and a look at Kaltex shows the same thing.

A lot of oil infrastructure, rigs equipment etc have run down and due to poor quality reserves there may be reluctance to put too much in. All take and no give is the way of the times perhaps.

Just 2cents

Re: OIL AGAIN!

explod said:

I can only speculate on you point. Oil Search has been very rewarding to those early takers. With the gas reserves they have I would have thought it would be much higher by now. But are we too impatient perhaps, what a good run and a look at Kaltex shows the same thing.

A lot of oil infrastructure, rigs equipment etc have run down and due to poor quality reserves there may be reluctance to put too much in. All take and no give is the way of the times perhaps.

Just 2cents

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Explod and Numbercruncher, If rig equipment and delays to poor drilling equip etc are involved, that would be a case for current producers to push even higher than current levels would it not??

I have invested heavily into oil stocks based upon producers.

I am wondering if this was a wise choice now. Should oil stocks act as a defensive action in these volatile times. Maybe a move to cash is better??

I still think the hot money will enter in oil stocks over the next month, similar to uranium stocks previously.

Re: OIL AGAIN!

lioness said:

Explod and Numbercruncher, If rig equipment and delays to poor drilling equip etc are involved, that would be a case for current producers to push even higher than current levels would it not??

I have invested heavily into oil stocks based upon producers.

I am wondering if this was a wise choice now. Should oil stocks act as a defensive action in these volatile times. Maybe a move to cash is better??

I still think the hot money will enter in oil stocks over the next month, similar to uranium stocks previously.

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I find it hard to get a true picture. The oil industry is very much an animal unto itself with the hand being the most wealthy of multinational companies who in turn turn the politicians. Having said that on the oil price trend, and for example the Oil Search, Santos, Caltex etc., trends, a long position should be bullet proof and prifitable for some time. The turning of this type of world trend is usually seen well before it comes. It looks all go at the moment.

I have been wrong before and it is only my opinion.

Re: OIL AGAIN!

explod said:

I find it hard to get a true picture. The oil industry is very much an animal unto itself with the hand being the most wealthy of multinational companies who in turn turn the politicians. Having said that on the oil price trend, and for example the Oil Search, Santos, Caltex etc., trends, a long position should be bullet proof and prifitable for some time. The turning of this type of world trend is usually seen well before it comes. It looks all go at the moment.

I have been wrong before and it is only my opinion.

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Explod,

I have invested in INP also heavily. Surely this is just as good as others since it has near term production (June of 1500bopd) and may significantly increase this also. Wat are your thoughts on INP please.

Re: OIL AGAIN!

Yah i find Oil in the short term a really hard call, sure demand is there, but the Worlds largest consumer teetering on the edge of recession, who knows ... Oil producers are going to refuse to lose their US denominated purchasing power, so the Fed lowers, Oils gos up, but if demand falters via recession price should drop. The theres the USD/AUD implications.

Ive got no exposure to oil atm except a little in biofuels recently.

I mean I accept and beleive the concept of Peak Oil but Western Governments seem to be working viciously to reduce demand via higher MPG vehicles , bio fuels etc , Governments seem to collectively agree on climate change and the need to reduce carbon emissions, Im not prepared to bet against seemingly determined Governments at the moment.

I mean in the medium term I can actually picture Oil demand reducing as result of Government policies and Technological advances.

I just dont get that "feeling" for oil anymore, anyone with me ? or am I all alone ...

Im sure some disasters/wars or whatever could get things barrelling along again!

Re: OIL AGAIN!

numbercruncher said:

Yah i find Oil in the short term a really hard call, sure demand is there, but the Worlds largest consumer teetering on the edge of recession, who knows ... Oil producers are going to refuse to lose their US denominated purchasing power, so the Fed lowers, Oils gos up, but if demand falters via recession price should drop. The theres the USD/AUD implications.

Ive got no exposure to oil atm except a little in biofuels recently.

I mean I accept and beleive the concept of Peak Oil but Western Governments seem to be working viciously to reduce demand via higher MPG vehicles , bio fuels etc , Governments seem to collectively agree on climate change and the need to reduce carbon emissions, Im not prepared to bet against seemingly determined Governments at the moment.

I mean in the medium term I can actually picture Oil demand reducing as result of Government policies and Technological advances.

I just dont get that "feeling" for oil anymore, anyone with me ? or am I all alone ...

Im sure some disasters/wars or whatever could get things barrelling along again!

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Numbercruncher,

You state you don't get that feeling. I totally disagree with you here.

Oil stocks are a great defensive play and with producers it will be a huge money spinner due to the defensive hedge and we will see fundies heading that way. Already happening look at OSH, STO and WPL.

Small juniors producing also will follow soon, such as INP.

Re: OIL AGAIN!

lioness said:

Explod,

I have invested in INP also heavily. Surely this is just as good as others since it has near term production (June of 1500bopd) and may significantly increase this also. Wat are your thoughts on INP please.

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Oil and oil stocks are not my thing. Except the oil economics as it effects the markets/currencies.

Have held OSH a number of times but that is as far as it goes. INP to me is a spec stock that if the story they tell is correct could take off like a rocket. I prefer to get on the rockets when they get going a bit (if I can catch them of course).

Sat arvo, time for us to have a drink.

Re: OIL AGAIN!

numbercruncher said:

I mean I accept and beleive the concept of Peak Oil but Western Governments seem to be working viciously to reduce demand via higher MPG vehicles , bio fuels etc , Governments seem to collectively agree on climate change and the need to reduce carbon emissions, Im not prepared to bet against seemingly determined Governments at the moment.

I mean in the medium term I can actually picture Oil demand reducing as result of Government policies and Technological advances.

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Need to separate the politics from the reality IMO.

Governments say this, that and something else about carbon, carbon footprints and so on.

In the real world, energy demand continues to go up, up, up, up, up and up.

Up for oil
Up for coal
Up for gas
Up for nuclear
Up for hydro
Up for unconventional sources (non-hydro renewables etc).

And then there's China etc.

Also worth noting that virtually all of the action to reduce energy demand is focused on something other than oil and gas. Mostly it's about slowing the rate of growth (but still maintaining growth) in electricity consumption, especially that produced from coal.

And that is done largely by using MORE gas directly and also in gas-fired power plants. Very little of the focus is on reducing oil demand apart from the odd vehicle manufacturer with a hybrid and train/tram/bus companies trying to boost business. End result - oil demand continues to rise.

If you look at those places that have historically cut oil use, I'll tell you exactly how they did it. They either converted existing oil-fired power stations to coal or more commonly gas. Or they built new coal, nuclear or hydro plants. Or they changed from oil heating in houses to wood, gas or electricity. Now that those "easy" things are largely done, the only real way to cut oil consumption is to actually cut demand for energy in the transport sector especially. That's a lot harder than simply switching fuels.

Australia is a fairly classic case in point, especially Tasmania. 30 years ago Tas was largely reliant on oil for everything except electricity (though all non-hydro power in the grid was from oil until late 2002) and the boiler at the Boyer pulp/paper mill.

30 years later and there aren't many factory boilers still running on oil (mostly coal, some gas). Likewise most homes don't now use oil heating (mostly electric and wood). And the state's only thermal power station has been converted from oil to gas. But total oil consumption hasn't changed much at all - all the savings elsewhere being guzzled up by transport.

I'd better stop now. First internet log in at the new house and it's very hot in here right now. 35 outside and the room I'm in has a West facing window with lots of sun. Computer fan sounds like a plane about to take off so I'll log off and switch off before something breaks.

Re: OIL AGAIN!

lioness said:

Jet328,

I totally agree with you on this point, is it just me or why are these small players so cheap.

I fully expected a spec bubble in these stocks by now BUT this has not formed yet. Can someone tell me why or is it still coming??

Surely this sector is well overdue for a huge rise.

Click to expand...

Long term bull markets - think 15 - 20 years.

Nobody was interested in oil stocks as recently as early this decade. IMO we're only in the second stage (of 3) of the bull - those with the knowledge on the subject have finished their accumulation (stage 1), now the institutional investors etc are buying.

Joe public is still more interested in a new Hummer than buying oil stocks. When that changes, and in my opinion it will, well then you get your bubble.

Right now, it's like sitting there in the late 1980's holding computer stocks and hearing some funny new words "information superhighway" and wondering if it would come to anything or was just a joke. Most didn't "get" computers beyond then existing uses back in 1988 just as they don't "get" peak oil beyond having to pay $1.50 a litre now. In due course that will change, and then they'll want to own oil stocks.

Re: OIL AGAIN!

My uneducated view (I don't like getting into verbal fights with people I don't even know)......In 50 years we have used half of the oil available in the world, with the remaining being in harder to find places. One doesn't have to be Einstein to work out what is going to happen. It takes billions of years to make the stuff.........We will get higher highs and higher lows until the stuff runs dry.......IMHO

Re: OIL AGAIN!

Many thanks for everyone's comments on oil. If the US goes into recession and probably already is, it will be interesting if oil stocks are defensive given they would be expected to fall with the price ber barrel in a recession or do they become the next defensive play for long term yield and growth??

Re: OIL AGAIN!

lioness said:

Many thanks for everyone's comments on oil. If the US goes into recession and probably already is, it will be interesting if oil stocks are defensive given they would be expected to fall with the price ber barrel in a recession or do they become the next defensive play for long term yield and growth??

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Hello lioness
Most local oil producers are receiving much higher prices now for their oil, while their production costs are only fractionally higher.
The markets tend to get excited on "news", and not so much on regular reports that show them to be making money hand over fist.
It was the same with nickel a few years back: The producers were all re-rated and their prices today are running off significantly higher bases, despite the fact that nickel prices almost halved from their highs.
The short term difference with oil, and I define my short term here as 3 years, will be that a 50% price drop is almost impossible to contemplate - not even the bearest bears can see that as likelihood.
As a result, the oil producers are going to have a lot of cash on their hands come the end of financial year, and I anticipate most will review their dividends policy to determine what gives their shareholders a fair deal.
So, ignore the equity price action for now, and bathe in the knowledge that if you are invested in producers, you will receive many happy returns.

Re: OIL AGAIN!

Yep i reckon oil stocks are the go, of course i am fully invested in CUE and have thought this for some time.

The equations are very simple, more demand, less easy to produce oil = increase in price.

You will see the smaller oilers make their BIG moves this year once they begin to report revenue. The reason is because they have been calculating revenues on about $55.00 a barrel, they have been getting $80 plus per barrel.

So, once you begin to get profit reports following into the market 50-80% above forecast what is going to happen?
I'll tell ya, every Tom, Dick and Harry will be wanting a piece of the action and BANG prices will rocket until the bubble pops................

Looking forward to it with glee!!

JW

Re: OIL AGAIN!

rederob;241312 As a result said:

Don't count on it. A lot will spend all the profit on the search for more oil. Take ARQ as an example where I believe they will continue the search until they spend the last dollar earned. Remember the directors don't need a dividend, they pay themselves regardless and the staff are well paid. Shareholders are considered a necessary evil by the way they are often treated.

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Re: OIL AGAIN!

Either way, oil has almost doubled in a year and costs have not doubled to extract that oil, so, profits will be higher this year.

Future extraction costs and exploration maybe higher but its this years profits you should be thinking of for your SP increases.

I still think we are a few years away from the real crunch and possible super price hike to oil, hope it comes sooner.

Until this time, no one will put enough effort into alternative technologies. While i acknowledge they are developing some, it is not even a drop in the ocean compared to what is required to replace demand for oil.
We are a long way away from even plugging the yearly oil demand growth with alternate technologies never mind replacing it all together.

We have created an oil monster and a i intend to make a hansom profit due to man kinds reliance on this form of energy.

Go oil..........!!!!!

Go JW.......!!!!!!

Re: OIL AGAIN!

JeSSica WaBBit said:

Yep i reckon oil stocks are the go, of course i am fully invested in CUE and have thought this for some time.

The equations are very simple, more demand, less easy to produce oil = increase in price.

You will see the smaller oilers make their BIG moves this year once they begin to report revenue. The reason is because they have been calculating revenues on about $55.00 a barrel, they have been getting $80 plus per barrel.

So, once you begin to get profit reports following into the market 50-80% above forecast what is going to happen?
I'll tell ya, every Tom, Dick and Harry will be wanting a piece of the action and BANG prices will rocket until the bubble pops................

Looking forward to it with glee!!

JW

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Go JW - that's nice. When do you expect the hot money to pour into these junior spec stocks such as CUE - JW??

Re: OIL AGAIN!

Hi Lioness,

That's the million dollar question....................

They have to already be a producer to benefit from the recent massive increase per barrel of oil and have calculated there expected revenue at about $55 per barrel and be getting significantly above this.

If you aint already producing the stuff then price increases only affect projected revenue. This is also good but, my thoughts are that the bigger SP increases will happen to the oilers who are announcing large increases to their 2007/2008 profits

So this being the case, i doubt the spec stocks will benefit as much as the producers. As it has been pointed for those who explore for and find oil in the future it will come at greater expense. Therefore, my guess is that those who will make the greatest profit from recent rises will be the current producers.

As for timing, see this link for company reporting requirements 2008 - should give you an idea of when some of this news may begin to flow into the market.

http://www.asx.com.au/research/pdf/company_reporting_dates_2008.pdf

My view is that you will see interest in oil stocks increase this year and i would expect that before end June 2008 there will be a shift towards this sector.

If we get a further spike in oil prices towards $120.00 per barrel then this will really catch peoples eye. The trigger will come soon, i dont know when exactly but just look at what has happened this year................supply of sufficient cheap oil is going to be a huge problem, the world is as unstable as ever, we have taken all the cheap stuff already, China and India are growing like mad.

Go......JW, you bet ya, i plan to be pimping hares by years end!!!

Onassis would be proud!!