Oil price discussion and analysis

[Smurf1976]

Re: OIL AGAIN!

tysonboss
Non-OPEC production appears to be severely constrained - perhaps diminishing.
High oil prices that supposedly are getting high cost projects into production are not materialising with meaningful contributions to global supply.
Increased exploration expenditure is less and less successful as all the known areas are well drilled and low probability, low resource outcomes are the rule of the day.

What you have described is exactly what happened in every major region, US included, that has experienced a peak in oil production thus far. Trouble is, you're talking globally...

 

[Tysonboss1]

Re: OIL AGAIN!

tysonboss
Although not discounting a chance return to $80, the likelihood is rarer by the week.
The chart below shows a rate of incline of moving averages that is increasing.
If we were to assume (for discussion only) that yesterday was oil's near term peak, then we would expect a probable new low (support point) within 6 months.
Given the market is in strong buying mode it is difficult to see what would or could trigger any sustained price decline.
Oil is not gold and the "you can trade any commodity" argument becomes fanciful to the extent that there is a fundamental demand equation underpinning price action.
In this case we have suppliers either squeezing oil, or they may be simply unable to increase output to meet global demand. I think there are feet in both camps.
Non-OPEC production appears to be severely constrained - perhaps diminishing.
High oil prices that supposedly are getting high cost projects into production are not materialising with meaningful contributions to global supply.
Increased exploration expenditure is less and less successful as all the known areas are well drilled and low probability, low resource outcomes are the rule of the day.
Exploration is tending to high risk, high cost projects on the chance of getting lucky.
Little wonder its the likes of WPL and OSH, with strong reserves and good production profiles, that are powering our equity market.
I think I last year tipped oil to average at $120 this year. It was intentionally provocative. Lest we get a sharp correction soon, it's 2008 average price - which is about $100 - looks like being a near term benchmark, with good prospects of rising steadily higher.

I saw a news article the other week where a guy who owned one of the deepest ocean drilling rig there is said that he contracts it out at over $500,000 per 24h period of operation.

when asked hy he can charge so much he said " the world discovery rate is getting desparite, and the oil companies are equally as desprite to drill virgin feilds rigs like mine are few so wego to the highest bidder."

 

[numbercruncher]

Re: OIL AGAIN!

Our Iranian buddies reckon Oil is too cheap.

TEHRAN (AFP) - Even at 115 dollars a barrel, oil is priced too low, Iranian President Mahmoud Ahmadinejad said in comments published on Saturday adding that the commodity "should find its real value".

"Oil at 115 dollars a barrel in today's market is a deceiving figure, oil is a strategic commodity and should find its real value," the state broadcaster's website quoted Ahmadinejad as saying on Friday.

"The dollar is no longer money, they just print a bunch of paper which is circulated in the world without any commodity backing," he said.

Late last year, Iran announced that it had stopped carrying out its oil transactions in dollars.

"At the moment, selling oil in dollars has been completely halted, in line with the policy of selling crude in non-dollar currencies, " Nozari was quoted as saying in December.

http://au.news.yahoo.com/080419/19/16jfu.html

I find that reason or excuse for not dealing in USD interesting , they now deal in Euros which itself has little commodity backing ?

 

[Tysonboss1]

Re: OIL AGAIN!

Our Iranian buddies reckon Oil is too cheap.



http://au.news.yahoo.com/080419/19/16jfu.html

I find that reason or excuse for not dealing in USD interesting , they now deal in Euros which itself has little commodity backing ?

What do you think will be the effect of oil being traded in euro's,

 

[explod]

Re: OIL AGAIN!

Our Iranian buddies reckon Oil is too cheap.



http://au.news.yahoo.com/080419/19/16jfu.html

I find that reason or excuse for not dealing in USD interesting , they now deal in Euros which itself has little commodity backing ?

Commodity backing is of course the prime weakness of currencies but Gross Domestic Product is the most accepted by current economists (but wont' be sustained long term though). The Euro is backed by a reasonable manufacture base and ballance of trade whereas with the US$ 80% of GDP is now consumption and as times become harder for the spenders and discreationary dollars dry up it can only be further doom for that currency.

As a result the US$ is being increasingly shunned around the world and will continue to weaken. China is particularly vulnerable as it holds an enourmous amount of US$ as exchange for thier goods, goods the US can no longer afford to import let alone pay for those supplied. A lot of big problems to play out yet and the trade currency wars as the next phase will make the past 12 months seem like good times.

As for oil, without it the US would totally sieze up, can they aford it no, can they get it, well the Middle East is where the war planes and ships are.

 

[rederob]

Re: OIL AGAIN!

Another week begins and another record closing price for oil makes the headlines.
Less than $3 away from $120 per barrel.
Remarkable is the lack of volatility in this run.
Scary is the fact that US driving season is around the corner. Perhaps the penny will drop at US gas pumps and those still owning homes will stay there instead, for a change.

 

[Uncle Festivus]

Re: OIL AGAIN!

Near enough to $120 - good enough to take some profits here I think, nice big number for the specs to achieve before a spell. $1 in 10 minutes, there's your volatility eh . Maybe even a short is on the cards? Yes, short @ $119.90.

 

[vishalt]

Re: OIL AGAIN!

Well I'm all in for oil stocks now hey, already have Beach but that's a slow mover.

What's going on with SANTOS? 7% surge, almost topped $17! Woodside breaking records too.

Oil is now becoming a big problem though, wow @ $120, it almost doubled in a year... lucky my car use is quite low otherwise I would be hurting. But I can feel it for people who fill up 200+ liters a week..

$1.80 @ a bowser near you soon I reckon.

 

[ShareIt]

Re: OIL AGAIN!

Near enough to $120 - good enough to take some profits here I think, nice big number for the specs to achieve before a spell. $1 in 10 minutes, there's your volatility eh . Maybe even a short is on the cards? Yes, short @ $119.90.

i think so too, i think around $121 will be the shorting point... a nice head fake

 

[Aussiejeff]

Re: OIL AGAIN!

....Oil is now becoming a big problem though, wow @ $120, it almost doubled in a year...

Then, let us pray that it won't almost double again in the next year!

(US$240 would sorta hurt some at the bowser.... except if you hold mainly oil stocks and commute via walking, pushbike, public transport almost exclusively, that is!)

AJ

 

[numbercruncher]

Re: OIL AGAIN!

Then, let us pray that it won't almost double again in the next year!

(US$240 would sorta hurt some at the bowser.... except if you hold mainly oil stocks and commute via walking, pushbike, public transport almost exclusively, that is!)

AJ

If it doubled again in the next year millions would die.


$240 sorta hurt some ? lol

 

[Tysonboss1]

Re: OIL AGAIN!

Oil is now becoming a big problem though, wow @ $120, it almost doubled in a year... lucky my car use is quite low otherwise I would be hurting. But I can feel it for people who fill up 200+ liters a week..

$1.80 @ a bowser near you soon I reckon.

yeah it's gotta hurt,....

I use Lpg but even that has jumped up a bit,

Did you see the other night on the news a B double truck filled up with diesel and it cost $1100 to fill his tanks,.... thats got to flow through to us as consumers.

There has to be more money flowing into alternatives,... I like the sound of the gas to liquid technolgy, they can make synthetic diesel out of natural gas, we need to build a gas to liquid plants before it's to late.

 

[rederob]

Re: OIL AGAIN!

There has to be more money flowing into alternatives,... I like the sound of the gas to liquid technolgy, they can make synthetic diesel out of natural gas, we need to build a gas to liquid plants before it's to late.

Gas is as finite as oil.
So all we do is delay the inevitable.
We need to move to electricity via renewables very quickly and conserve oil & gas as much as practicable.
We are presently on an energy merry go round: Jumping off one source for another, cheaper one. Until it's too expensive and they jump off that too.
Coal's price rise was inevitable, next will be gas as consumers flock too the cheapest alternative, and so the merry go round....

 

[Smurf1976]

Re: OIL AGAIN!

Gas is as finite as oil.
So all we do is delay the inevitable.
We need to move to electricity via renewables very quickly and conserve oil & gas as much as practicable.
We are presently on an energy merry go round: Jumping off one source for another, cheaper one. Until it's too expensive and they jump off that too.
Coal's price rise was inevitable, next will be gas as consumers flock too the cheapest alternative, and so the merry go round....

Agreed 100%. Electricity from renewables is the only technology we have that comes anywhere near being a viable alternative in the long term. And even it has a lot of problems - which makes the point that any alternative is inferior to oil in some way.

As for gas, 30 years from now we're near certain to be in a very similar situation to that we are now for oil. That's been the general relationship between the two industries for the past century or so.

As for LPG, I must point out that it is considered to be "oil" in most contexts. The 85 million barrels per day etc includes LPG.

 

[Tysonboss1]

Re: OIL AGAIN!

Gas is as finite as oil.
So all we do is delay the inevitable.
We need to move to electricity via renewables very quickly and conserve oil & gas as much as practicable.
We are presently on an energy merry go round: Jumping off one source for another, cheaper one. Until it's too expensive and they jump off that too.
Coal's price rise was inevitable, next will be gas as consumers flock too the cheapest alternative, and so the merry go round....

yes but it would buy us 20years or so,

I am not saying dump oil,... I am just saying use to gas to supplement the oil supplies till better tech can come on board.

There is alot of natural gas around especially when you take into account coal seam methane,... so using that to supplement existing supplies of crude would aleast bring about some sort of price stability, untill other longerterm soloutions can be phased in.

lets face it we need a furel that can be used in existing equipment,... synthetic diesel and ulp from gas can be used.

 

[rederob]

Re: OIL AGAIN!

yes but it would buy us 20years or so,

I am not saying dump oil,... I am just saying use to gas to supplement the oil supplies till better tech can come on board.

There is alot of natural gas around especially when you take into account coal seam methane,... so using that to supplement existing supplies of crude would aleast bring about some sort of price stability, untill other longerterm soloutions can be phased in.

lets face it we need a furel that can be used in existing equipment,... synthetic diesel and ulp from gas can be used.

The idea, while seeming good, ignores the substitution effect.
There apears enough evidence to suggest that if oil has not yet peaked, it has plateaued, and will soon enough trend down.
Annual global energy demand is increasing at a rate requiring a minimum extra million barrels per day.
The present shorfall in crude oil is going to continue to be taken up with condensates and gas in the main. So the theoretical 20 years or so to peak gas is going to be shortened by energy substitution, and gas will increase in price in tandem with oil, as much as the market will bear.

 

[Uncle Festivus]

Re: OIL AGAIN!

Demand destruction lives......either that or the US is just FUBAR

For 20 years now, county workers in Palm Beach County, Fla., have been counting cars with sensors at strategic points along its 4,000 miles of roads. Nearly every year traffic volume has climbed at least 2%. But in 2007 there was a slight decline in the number of vehicles on the roads. This year traffic is down 7.5% through March. "We're seeing a very significant change," says county engineer George Webb. "We're having a good time speculating why."
It's not just Palm Beach. Traffic levels are trending downward nationwide. Preliminary figures from the Federal Highway Administration show it falling 1.4% last year. Now, with nationwide gasoline prices having passed the inflation-adjusted record of $3.40 a gallon set back in 1981, the U.S. Energy Information Administration is predicting that gasoline consumption will actually fall 0.3% this year. That would be the first annual decline since 1991. Others believe the falloff in consumption is steeper than the government's numbers show. "Our canaries out there tell us they are seeing demand drop much more considerably than the fraction the EIA is talking about," says Tom Kloza, chief oil analyst at Oil Price Information Service, a Gaithersburg (Md.) market research firm.
Is oil-guzzling America changing its ways? Some think so, though it's worth noting the U.S. still consumes one-third of the world's annual gasoline output. "It appears we've finally hit the ceiling that's causing the U.S. population to rethink how and where they use their vehicles," says Paul Weissgarber, who heads the energy practice at consulting firm A.T. Kearney.

http://www.businessweek.com/magazine/content/08_18/b4082000518114.htm?campaign_id=rss_daily

 

[wavepicker]

Re: OIL AGAIN!

Unfortunately I don't have any raw data for oil an cannot number an EW chart but I have attached a chart drawn by Clive Maund from a recent article posted at safehaven:

http://www.safehaven.com/article-10087.htm

Clearly this chart is showing we could be completing an impulse from the 2001 with wave 5 approaching the bounds of the upper trendline at this juncture(he has not EW numbered the chart but the wave structure is easy to see).
This chart gels very nicely with the charts I posted in the Gold forum calling for an imminant top in both Gold and bottom in the USD in the weeks and months ahead.

https://www.aussiestockforums.com/forums/showpost.php?p=284834&postcount=4035

That is not to say the bull is over in both Gold and Oil, very far from it. Oil still has an unfinished long term wave structure. But certainly a mutli years retracement possibly all the way back $65(span of previous wave 4) is not out of the question IMO.

 

[rederob]

Re: OIL AGAIN!

I see exactly what your referring to Red , but correlations aren't always what they seem , and sometimes coincidental . I'm not directing this at you Red , but please feel free to debate this with me and whomever wishes .

When themes recur, as is now the case with oil\gold it's handy to reflect on "positions".

wavepicker
A technical low exists in every chart pattern.
Can you tell us what might lead to demand falling to the extent indicated, if it is not demand destruction or a global economic depression.
As matters stand demand is being maintained at high levels due to developing countries trying to be like us. Any significant declines in price are likely to be well bought into.

On Monday we will see the extent that the Grangemouth strike and closure of the Forties Pipeline System effects world oil prices. This happened on top of continuining Nigerian supply disruptions and neverending Middle East tensions.

Somewhat analogous to the potential for oil to fall considerably is the example of nickel prices in recent years. It shot to over $50k per tonne and has now settled in the high 20k-low 30k range.
The catalyst for the fall was substitution, whereby cheaper ferronickel now commands a robust market share.
There is still plenty of nickel, and plenty of ferronickel, with capacity expansions the key to driving prices lower.
I am not too sure we can say that oil in the foreseeable future will fall prey to rapid substitution effects. We certainly can say that there is no longer plenty of oil.

My forecast is, therefore for a near term spike followed closely by a brief price drop on profit taking. Thereafter the fundamentals kick back in and at worst we are likely to see consolidation around the $100 figure while surprises on the upside - on the assumption markets are not gripped by depression - will be the norm as we progress through the year.

 

[JeSSica WaBBit]

Re: OIL AGAIN!

Yep, i agree with Redrob.

Its a demand and supply thing and demand is going to outstrip supply, a no brainer. Every day that ticks by is another day in the favour of higher prices.

There will be volatility but, hard to see it dropping too far below $100.00 on a pull back, maybe $90.00 but i think even that is stretching things...............

OPEC cetainly wants high oil and i doubt they have capacity to increase production much more even if they wanted to.

Time will tell, $150.00 is the mark we should be considering in the short term.

JW