Oil price discussion and analysis

Re: OIL AGAIN!

So_Cynical said:

STO closed up 81 cents today...so much for the shorts.

Tomorrows another day right.

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closed up on very light volume.... just took some shorts on Monday.... a pull back looks due to the $15 - $16 area... could hit $20 then start... the risk of buying upside at those levels are way too risky.

Re: OIL AGAIN!

kransky said:

I dont think we will ever see full-on lack of availability of petrol (while there is demand for it)..

i think oil will simply get more and more expensive and we will learn to use less and less of it. Until we barely use any of it and petrol stations like they exist today no longer exist. You just wont use petrol for personal transport. But petrol will still be available for other things.. at a very high price.

I am thinking 20-50 years down the track mind you.

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Ummm....

Do you happen to remember what happened way, way back when - a few months ago - a refinery in Melbourne shut down production? - for a a few days? I DO vaguely remember LOTS of service stations and outlets ALL OVER the state of Victoria rapidly running out of fuel within a day or two. It caused chaos, especially in the transport industry. Lucky the refinery only reduced/stopped production briefly, eh?

So, that scenario you are postulating is hardly "20-50 years down the track"! LOL


AJ

Re: OIL AGAIN!

Hey Wavepicker don't you go losing all your money on shorting oil, make sure you leave at least $50.00 in the account for my beer.

I'm getting worried you won't be able to afford my beverages.

And just on that, my advice is for you to wait until oil is retracing and then jump on a short. Don't go trying to pick the change in direction, wait for the market to show you, then get on board.


JW

Re: OIL AGAIN!

JeSSica WaBBit said:

Hey Wavepicker don't you go losing all your money on shorting oil, make sure you leave at least $50.00 in the account for my beer.

I'm getting worried you won't be able to afford my beverages.

And just on that, my advice is for you to wait until oil is retracing and then jump on a short. Don't go trying to pick the change in direction, wait for the market to show you, then get on board.


JW

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I wouldn't ride him off just yet.... so far it is struggling to hold $120, if it fails to hold, we have a double top.... and your bullishness is actually a good case for bearishness

Re: OIL AGAIN!

kransky said:

I dont think we will ever see full-on lack of availability of petrol (while there is demand for it)..

i think oil will simply get more and more expensive and we will learn to use less and less of it. Until we barely use any of it and petrol stations like they exist today no longer exist. You just wont use petrol for personal transport. But petrol will still be available for other things.. at a very high price.

I am thinking 20-50 years down the track mind you.

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20+ years time I can agree. But in the short term what I fear is that some combination of government and the oil industry will keep the true extent of the situation somewhat hidden as long as possible given the consequences of acknowledging that supply can't meet business as usual consumption.

I see something similar to what happened with major dams in Australia over the past decade. In short, they were progressively drawn down with Joe Average having no idea this was happening until very low levels were reached. Hence we went from seeming to have plenty of water, when in reality it was being drawn from storage, to outright shortage virtually overnight.

With oil, I can certainly see a progressive emptying of tanks etc with most being unaware until a crisis erupts. And there's your shortage.

I live across the river from the only significant oil product storage facility in southern Tasmania. It's not on the scale of the facilities in the Middle East or even Melbourne, but there's a lot of tanks there nonetheless. And there's a boat there (no refineries in Tas) delivering petrol etc more than once per week.

Bottom line is I just can't see how they're delivering full loads or even a third of what those tanks can hold. It's a lot of small deliveries going on using quite large boats. Now, the question is this, are those tanks full and being topped up every few days? Or have they been drawn down to empty and we're in real trouble if the boat is late? I don't know and nor does the average person. But if it's a case of being nearly empty then someday we'll end up with no fuel at any price because there simply isn't any available to sell.

Same with anywhere that doesn't have local oil fields and refineries nearby. That's all of Australia and most of the developed world.

Re: OIL AGAIN!

ShareIt said:

I wouldn't ride him off just yet.... so far it is struggling to hold $120, if it fails to hold, we have a double top.... and your bullishness is actually a good case for bearishness

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nah this is the third time it's tried for the $120, and the first time it's gone through, and the $US has stopped rising against Euro, so the rally in oil is on again.

Re: OIL AGAIN!

JeSSica WaBBit said:

Hey Wavepicker don't you go losing all your money on shorting oil, make sure you leave at least $50.00 in the account for my beer.

I'm getting worried you won't be able to afford my beverages.

And just on that, my advice is for you to wait until oil is retracing and then jump on a short. Don't go trying to pick the change in direction, wait for the market to show you, then get on board.


JW

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ate ke whamisu

Re: OIL AGAIN!

pilbara said:

nah this is the third time it's tried for the $120, and the first time it's gone through, and the $US has stopped rising against Euro, so the rally in oil is on again.

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Exactly! Third trial and look what has happened... it has failed to close above each time..... that says "for now" that there is enough supply at those levels i.e. demand is being met.... having said that, we might see a close above $120 as a possible up fake.... another thing, when we are extremely bullish (which we are now), this makes a bearish bias because everyone has probably bought already....

Re: OIL AGAIN!

I wasn't considering short turn localized shortages of oil.. I was thinking more from a long term global perspective.

I'll think aloud here for a second and see where I get.

Say there was some supply interruption to Australia that meant there was only 20% of the usual oil supply for a month. This is a pretty bad short term shortage scenario.

The Govt steps in and temporarily sets the price of oil at $10/litre.. people get off their fat @rses and get the bus/train/bike to work and walk to the local shops..

Sure the buses/trains will be pretty damn full but so what if some people get to work late and home late..

I think the bigger issue is the whole economy and society learning to live without oil.. which is why I automatically look at the issue from a long term perspective.

Re: OIL AGAIN!

And I also dont think (I hope not) we are going to hit a point where all of a sudden out of nowhere there is no oil left.

It's supply will simply fall and fall over time (as has already started) and so its price will rise and rise... look at the price of oil over the last 2 years.. its risen a lot..

The world uses and produces around 85M barrels per day. Apparently at this level of consumption we have about 30 years left.

Hopefully the oil price will keep rising quickly over the next decade. Because high prices are the best way to make sure that we dont have a sudden shortage shock that results in anarchy on the streets. We need to be forced away from our wasteful consumption of oil... gradually

Re: OIL AGAIN!

ShareIt said:

Exactly! Third trial and look what has happened... it has failed to close above each time..... that says "for now" that there is enough supply at those levels i.e. demand is being met.... having said that, we might see a close above $120 as a possible up fake.... another thing, when we are extremely bullish (which we are now), this makes a bearish bias because everyone has probably bought already....

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Technical merit = nil.
Fundamental merit = nil.
Humour = top points.
Our esteemed former Premier, Joh, could not have put the case more succinctly.

Oil now at $122 - another record high.

Re: OIL AGAIN!

rederob said:

Technical merit = nil.
Fundamental merit = nil.
Humour = top points.
Our esteemed former Premier, Joh, could not have put the case more succinctly.

Oil now at $122 - another record high.

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I like the humour bit

But the challenge of the market is what I love... and I still think something is on the horizon.... this article is every contrarians dream

http://biz.yahoo.com/ap/080506/oil_prices.html

I also like to monitor the DUG (is a short stock of oil & gas).... todays action was a sell off climax near a double bottom which held... possible reversal?

Re: OIL AGAIN!

kransky said:

I wasn't considering short turn localized shortages of oil.. I was thinking more from a long term global perspective.

I'll think aloud here for a second and see where I get.

Say there was some supply interruption to Australia that meant there was only 20% of the usual oil supply for a month. This is a pretty bad short term shortage scenario.

The Govt steps in and temporarily sets the price of oil at $10/litre.. people get off their fat @rses and get the bus/train/bike to work and walk to the local shops..

Sure the buses/trains will be pretty damn full but so what if some people get to work late and home late..

I think the bigger issue is the whole economy and society learning to live without oil.. which is why I automatically look at the issue from a long term perspective.

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Crikey! If fuel went to $10 litre overnight with supply of oil to OZ cut to only 20% for a whole month, our economy would damn near collapse, mate! Do you really think the train and bus fares wouldn't quadruple overnight as well? What about the more than quadrupling of every food item in the supermarkets?

Your over-simplistic assertion that "people get off their fat @rses and get the bus/train/bike to work and walk to the local shops.." should be amended to add .."only those left who can afford it!" If only the world WAS so simplistic.


AJ

Re: OIL AGAIN!

kransky said:

Say there was some supply interruption to Australia that meant there was only 20% of the usual oil supply for a month. This is a pretty bad short term shortage scenario.

The Govt steps in and temporarily sets the price of oil at $10/litre.. people get off their fat @rses and get the bus/train/bike to work and walk to the local shops..

Sure the buses/trains will be pretty damn full but so what if some people get to work late and home late..

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The trains are already full! I don't see how the system would cope with a sudden 400% increase in patronage.

$10/litre petrol would be catastrophic, even if it was only for a month.

Re: OIL AGAIN!

hey wavepicker,

I think we can load up on stocks

Re: OIL AGAIN!

Junior said:

The trains are already full! I don't see how the system would cope with a sudden 400% increase in patronage.

$10/litre petrol would be catastrophic, even if it was only for a month.

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You'd be surprised how people would cope. During the petrol rationing that was in place during WW2 people soon learnt to cope. The black market price was well above $10/litre in relative currency. We managed on 2 gallons a month. A lot of walking, push bikes etc and when the car was used it was loaded with people. Car pools were the order of the day. Divide $10 by 5 persons and it becomes $2 litre per person.

A lot of cars quickly converted to gas with gas producers running on coke attached to the vehicle. If you want to cash in on the situation then buy shares in a company selling gas conversion kits, we have plenty of gas.
Question; which companies are they. My pick is ACE.

Re: OIL AGAIN!

nioka said:

You'd be surprised how people would cope. During the petrol rationing that was in place during WW2 people soon learnt to cope. The black market price was well above $10/litre in relative currency. We managed on 2 gallons a month. A lot of walking, push bikes etc and when the car was used it was loaded with people. Car pools were the order of the day. Divide $10 by 5 persons and it becomes $2 litre per person.

A lot of cars quickly converted to gas with gas producers running on coke attached to the vehicle. If you want to cash in on the situation then buy shares in a company selling gas conversion kits, we have plenty of gas.
Question; which companies are they. My pick is ACE.

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Well, those living closest to the CBD's would cope best. The further out, the harder to cope. There's not much point comparing apples with oranges either. In 1944 Australia's population was a mere 7.3 million - with a great proportion of those being relatively self-reliant rural folk on farms. Heck, most motors back then could run on chip oil or pig fat! Try doing that with a modern beast? Of course people coped better back then than they would today - with 21 million mostly all crammed into our major population centres today, it would be a chaotic scramble. Outer suburbs back in 1944 were only half the distance to the CBD's compared to todays fringe dwellers!

If demand for LPG conversions went up over 400% what price on a conversion then? Might have to wait 5 years in a queue? Also, back in WW2 people were far more sociable than todays insular society. I can remember car pooling being trialled in WA years ago when I was living there. Guess what. Even with financial incentives it barely made a difference (only a few percentage points).


AJ

Re: OIL AGAIN!

ShareIt said:

Exactly! Third trial and look what has happened...

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in my limited experience, after the second try there's a large downward correction as people lose hope, and this happened to oil at the same time as there was a brief rally in $US. For oil to keep parity while $US rises in value, oil price must fall. Once $US stopped rising, oil was again free to rise and less resistance at $120 than the previous two times. I'd expect a consolidation and next breakout from the $122 to $125.

Re: OIL AGAIN!

I wonder what the rising AUD will do for fuel costs . It should ease the bowser price , but it seems to have just held costs at bay .

I think of the companies like WPL that are producing and selling the oil in AUD and relish in the fact . Their coffers are in overflow due to this , as they are achieving a higher price for their oil .

The last time we went into parity mode on the USD was in the 70's , I remember an oil problem then too , but this was before Skippy had been floated , not that I see any real difference that could sway an arguement out of me in relation to then and now comparisons .

The elusive correction in the oil price that's spruiked about the media may have come and gone ........... first , assuming that there is a $10-$20 premium built into the current price care of hostilities Inc. , perhaps it's higher , are we clear on developing events that the future holds ?

No

Are the analysts quite sure they know what they are dealing with in relation to oil demand and supply , with the variables that affect both ?

No

What can we be sure of then ?

Well , I'll stick to a law somewhat pertaining to the physics of a market , instrument or asset price . Bull markets see higher highs , with corrections supported by higher lows .

Bear markets see lower lows and this evaporation effect , known as completely disappearing , real bad bear markets see disintergration .

Oil just needs the FWs to stop invading countries that hold major percentages of the worlds oil and gas reserves .

A simple change in law by Congress with regards to retaliatory powers of a President would have saved the USA billions of dollars . Left 13% of the globes reserves operating and could have had a ceiling for oil placed in the $80's .

Now they will end up with higher welfare payments at a time they needed to restructure them . All in the name of oil .

If we want to really know what oil is going to do , we just need to follow certain countries policies and their administrations agendas .

The second run of the problem is that inflation has swung about from demand-pull to cost-push , this can be seen as a by-product of oil , but not entirely , as other contributing factors have also projected , then brought about the rise in costs .

The bowser prices have dealt a heavy blow to industry and consumers , but if , and I say if , Iran was to be strategically hit , by whatever party/ies , the oil price would tap $200 on the shoulder real quick , not to metion the gas price , which Iran has a massive reserve of ............

At the moment the US admin is now miraculously focussing on Zimbabwe and Muganybody , whilst I applaud it , it's decades late .

Our focus should be PNG and Timor ( Acheh ) .

But I do wonder what the backroom chaps in the US and Israel are upto .

As per the regulations I'd best show my holdings , looking for a couple of good gas plays ( suggestions welcome )

WPL , BHP , ABB , GNC , IPL , NUF , DXL , ORI , MCC , CEY and ASX since Feb.

Re: OIL AGAIN!

ithatheekret said:

As per the regulations I'd best show my holdings , looking for a couple of good gas plays ( suggestions welcome )

WPL , BHP , ABB , GNC , IPL , NUF , DXL , ORI , MCC , CEY and ASX since Feb.

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FWIW itha, you know I've been very bullish nat gas lately, before all this ORG stuff... when I was setting up the options for Nat Gas, I was looking at a price target for oil at about 130. With a shorter term price target at 116. Was a few dollars off with that resistance, so I'd be looking between 130-135 for oil.

In regards to gas stuff, I don't really understand why people would be buying now. Nothing has changed in 18 months apart from BG making a bid for ORG. I thought last year was the time to buy the sector - my bullish posts from then look good now .But conditions might actually be worse for the next little while, given the prices for gas turbine generators are getting ridiculous.

Having said that, gas is the obvious transition product out of peak oil. And like I've said to you, canadian peak gas is just around the corner as well, which is around 60% of the US' gas. A double whammy effect is probably going to be felt best in gas.

So you want to be looking at producers/ suppliers, rather than those trying to get into generation. IMO at least. Stay as close to the raw product as possible.

It also depends on which location you want to choose. NSW gassies are perhaps the way to go with the de reg. So ESG and MEL will probably be the biggest winners. From memory ESG has a forward looking PE below 1 with MOU's. But with cap raisings, that might be nearer 3-4 in the end. The market has never seemed to like MEL, and I've never found out why.

AOE is still my favourite long term gas play. The biggest danger for them is that their LNG proposal gets refused, but with such large international prospects - India, China, Vietnam, Indonesia, it remains my favourite. MPO is another if you like international plays.

I don't know why QGC is a market darling, but it is. Personally, I think their management are lazy. They tried to sell 20% off at 1.50 for chrissake! I was waiting for them to dip to 2.50 to load up again recently, got that wrong, but have made a lot from them in the past. I just can't see why anyone would buy them now given they are at least 4-5 years away from really making any decent dough. And that even hinges on their LNG plant approval. Considering most others I know are 12-24 months away from really cranking it on, I just can't see the value in that.

SHG and PES are the two others worth a look. I know there are others, but these are the ones I know well.

Disclosure: hold a bucketload of AOE and ESG and am long options on Nat Gas once more.

Cheers,