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Oil price discussion and analysis

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Re: OIL AGAIN!

Smurf1976 said:
Yet another attempt by the Saudis to talk down the price of oil.
Click to expand...

Agree with you Smurf, clearly diplomatic posturing for the West. Chart suggests another swing low is in place although the proportions are a bit uneven overall, might suggest the a very strong bull run as open interest is high too on up days but some down days have seen high volume too, not quite sure how to interpret OI yet.
 
Re: OIL AGAIN!

This should be in the bears den, but:

http://money.cnn.com/2006/01/27/news/international/pluggedin_fortune/index.htm

Ready for $262/barrel oil?
Two of the world's most successful investors say oil will be in short supply in the coming months.
Fortune Magazine
By Nelson Schwartz, FORTUNE senior writer
January 27, 2006: 4:24 PM EST


DAVOS, Switzerland (FORTUNE) - Be afraid. Be very afraid.

That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.

The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.

"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.

Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.

Hermitage's Bill Browder doesn't yet have the stature of George Soros. But his $4 billion Moscow-based Hermitage fund rose 81.5 percent last year and is up a whopping 1780 percent since its inception a decade ago. A veteran of Salomon Bros. and Boston Consulting Group, the 41-year old Browder has been especially successful because of his contrarian take; for example, he continued to invest in Russia when others fled following the Kremlin's assault on Yukos.
Doomsdays 1 through 6...................
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Re: OIL AGAIN!

michael_selway said:
hehe thx

"The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online."

Thansk interstign actually, so he isnt really a bear then
Click to expand...

Ummmm....well he is actually:

http://today.reuters.com/business/n...56_RTRIDST_0_BUSINESSPRO-ECONOMY-SOROS-DC.XML

;)

NEW YORK (Reuters) - Billionaire financier George Soros told CNBC television on Friday U.S. consumer spending would slow sharply next year as a slowdown in housing hurts purchasing power.

"There's (a) problem that I think is brewing, and that is the end of the housing boom in the United States and the ability of households to spend more than they earn because the value of their house is rising," Soros said in the interview.

"So I expect that by '07 there will be a significant decline in U.S. consumer spending and I don't see what will take its place because it's so important as a motor of the world economy," he said.

Soros argued that a veneer of relative calm both in the United States and international financial markets masked some troubling patterns in the global economy.

"Everything looks to be just hunky-dory but I don't think the outlook for the next two years is very good," he said. "The downside risks are bigger than the upside potential."

Speaking at a the World Economic Forum in Davos, Switzerland, Soros said global leaders appeared overly optimistic.

"The conference is remarkable for its complacency. It's a bit like dancing on the Titanic. They're having a very good time and there's a very cheerful atmosphere."
Click to expand...
 
Re: OIL AGAIN!

Worldwide, there's quite a lot of new oil coming online over the next 18 months. This ought to be sufficient to offset declines in existing fields and allow for the likely demand growth. As Soros pointed out, much of that seems likely to come online in the first part of 2007.

However, beyond mid-2007 there doesn't seem to be much at all. That's when the real trouble is likely IMO since there's the declines in existing fields, demand growth and not enough new supplies to offset it.

Of course all this is complicated by:

1. The rate of demand growth. If you're a bear then you're probably expecting an economic slowdown which ought to at least slow the growth in demand if not reverse it. This could lead to a surplus of supply over demand lasting longer than expected, and being larger than expected, once it emerges. This could lead to a substantial price fall unless OPEC gets its act together again with quota enforcement (their track record is patchy to say the least).

2. Weather which influences demand both for heating and cooling (via power generation which at the margin in the US in particular affects oil demand).

3. Natural disasters, technical problems and the like affecting production.

4. The actions of various countries to boost strategic stockpiles, plus the refilling of emergency stocks drawn down in 2005, could add significant demand depending on the extent, rate and timing of refilling. The US has mooted a 300 million barrel increase in the size of the Strategic Petroleum Reserve. Add this to refilling of existing stocks and the potential for other countries to do likewise and it's a lot of oil.

5. Iran. I'm no expert on things concerning the military, wars etc. but quite clearly the situation has deteriorated over the past year and seems to be continuing to do so. Likewise there's always the threat of political / military strife in a number of other key producing countries.

Overall the key theme I see is volatility. There are scenarios which lead to sharp price rises and others which lead to substantial price falls. That said, oil does seem to be in a bull market. :2twocents
 
Re: OIL AGAIN!

http://www.aireview.com/index.php?act=view&catid=8&id=3499

General Analysts believe Oil will drop in the next few yrs

"...the broker is now forecasting a barrel of West Texan Intermediate to average US$60 throughout 2006. For 2007 the new forecast is US$53.50/bbl, for 2008 US$48/bbl and for 2009 US$45.00/bbl. The broker’s long-term oil price forecast remains at US$40/bbl from 2010...."

However others are forecasting $100 and higher a barrel i.e Peak Oil?

Who is right then? They both seem to be the opposite direction

Thx

MS
 
Re: OIL AGAIN!

Having studied the subject in considerable depth my opinion is that production will rise over the short term (this year and next) and then peak and fall. The "peak" is likely to be somewhat bumpy rather than a nice smooth curve IMO.

In this context of a largely fixed production base which does not meaningfully respond to conventional price signals, the actual price over the short term becomes largely a function of economic growth and hence oil demand. A forecast is complicated by the feedback of higher oil prices into that very economic growth which caused them. If the economy booms then oil prices should rise. But if the economy slowed over the next 18 months then that combined with rising production could give the oil price a decent hit. And then there's Iran etc... Longer term there's the issue of unconventional oil development (tar sands, bitumen etc) and end use substitution. An eventual frenzy to develop such things and a resultant oil price slump is plausible but many, many years away IMO.

You just can't keep taking oil out of the ground many times faster than it's being found and the actual level of planned new capacity after 2007 suggests that the game is over. Not surprising given the near total lack of major oil finds in the recent past. It really says it all when enough oil to run the world for literally a month or even a week is touted as a major discovery since it's bigger than anything else found in recent times.

For those who doubt the reality of a peak in production, I respectfully point out that it has already occurred in more than half of all major oil producing countries. It is incomprehensible how it wouldn't at some point occur globally and as the dominos keep falling one by one the date draws nearer. Timing is, of course, the question but even the optimists have trouble stretching the numbers beyond another 3 decades. And they are the optimists relying on unsubstantiated "political" claims of reserves rather than proper geology. The geologists tend to be somewhat more concerned.
 
Re: OIL AGAIN!

I can't see the price dropping to $40 a barrel because the more China grows the more demand for oil. The price of oil is simply supply and demand(and speculation) Even if we find and drill more oil China will out grow what ever production is found, the result is the price never falling. The graph will be an upward trend.

Oil price is seasonal depending on what time of the year it is in the States. Mainly summer will increase demand for energy because of the huge amounts used for air conditioning. Just thought I would chuck that in.

Back to peak oil. I really don't believe that it will be the end of the world because the more expensive the price the less people can afford it. What it will do is cause an economic slow down. My :2twocents
 
Re: OIL AGAIN!

mime said:
I can't see the price dropping to $40 a barrel because the more China grows the more demand for oil. The price of oil is simply supply and demand(and speculation) Even if we find and drill more oil China will out grow what ever production is found, the result is the price never falling. The graph will be an upward trend.

Oil price is seasonal depending on what time of the year it is in the States. Mainly summer will increase demand for energy because of the huge amounts used for air conditioning. Just thought I would chuck that in.

Back to peak oil. I really don't believe that it will be the end of the world because the more expensive the price the less people can afford it. What it will do is cause an economic slow down. My :2twocents
Click to expand...
In every bull market there are downturns from time to time. Look at the ASX...

The seasonal demand for oil is due to both heating and cooling use in the Northern Hemisphere countries, most notably the US. The extent to which oil ends up fuelling heating and especially cooling partially depends on the price and availability of natural gas in North America since to a large extent (but not totally by any means) oil is used as a substitute for natural gas in power stations when it's cheaper than gas. Individuals use gas for heat so power generation switches to oil if there isn't sufficient gas. About 15% of US power generation is from gas (roughly) and typically 3% from oil (coal is dominant followed by nuclear then gas then hydro then oil then the minor sources). There is substantial direct use of oil for heating however. Some industrial plants also switch fuels according to which is cheaper - there has been quite a bit of oil used in the UK recently with the gas shortage (due to depletion of North Sea reserves) there. Even New Zealand falls back on oil for electricity when hydro and gas falls short (NZ's largest gas field is all but empty...). Under very high demand scenarios there is a small amount of oil used for power generation to the main grid in Australia - via peaking plants in Queensland and to a much lesser extent New South Wales and South Australia and via fuel substitution (away from gas) mostly in WA but under some circumstances also in SA and under rare circumstances in Vic. The absolute volumes of oil used for main grid power generation in Australia aren't large however but remote communities rely almost exclusively on it.

Peak oil isn't the end of the world I agree. But it likely is the end, at least for a period of time, of unconstrained growth, mass tourism as a major growth industry and food flown in from the other side of the world at low cost. Not the end of the world but a significant change which will be somewhat painful since the world economy just isn't set up at present to cope with zero or negative growth in use of the products and services derived from oil, most notably transport.

Personally I can see a scenario where constrained oil supply forces the price up until the economy contracts which then lowers demand and hence oil prices. Then the economy grows again, oil prices rise again to new highs and the cycle repeats. Just one possible scenario... :2twocents
 
Re: OIL AGAIN!

http://www.bloomberg.com/apps/news?pid=10000100&sid=aI_eLD3AFz0s&refer=germany

Commodity Strategists: Oil May Reach $96 a Barrel (Update2)
Feb. 7 (Bloomberg) -- Oil may rise to a record $96 a barrel in August, when hurricanes typically cut U.S. output, said Mitsui & Co., Japan's second-largest trading company.

Crude oil prices, which have tripled since 2001, may gain 50 percent this year as storms add to supply concerns amid rising global demand, said Tetsu Emori, 39, a commodities strategist at Tokyo-based Mitsui. Oil, which traded at $64.90 today, may average $74 a barrel in New York in 2006, he said.

Oil reached a record $70.85 on Aug. 30 the day after Hurricane Katrina made landfall on the U.S. Gulf Coast, wrecking oil platforms, pipelines and refineries, and cutting production in the world's largest energy market. Global oil demand may rise 2.2 percent this year, almost twice as fast as in 2005, the Paris-based International Agency said last month.

``Oil may peak during the hurricane season in August or September,'' Emori said in a telephone interview yesterday. ``Economic growth will add to tightness in supply.''

Global growth, led by China and the U.S., will quicken to about 4.5 percent in 2006, the International Monetary Fund's Managing Director Rodrigo de Rato said on Jan. 30.

Oil on the New York Mercantile Exchange has risen 6.2 percent this year after Iran, the world's fourth-largest producer, pressed ahead with its nuclear research program, defying the U.S. and European Union. Rebel attacks on oil facilities in Nigeria cut shipments from Africa's top exporter.

Oil in New York averaged $56.70 a barrel in 2005. It traded 21 cents lower at $64.90 a barrel at 3:54 p.m. in Singapore.

Iran Dispute

Traders are concerned that the Iranian dispute may escalate, prompting the Middle East nation to cut its 2.5 million barrels a day of oil shipments, said Emori, who works at Mitsui Bussan Futures Ltd., the trading company's commodities futures unit. That equals almost 3 percent of daily global production.

``It's geopolitical risk that's sustaining the market at these prices,'' said Emori, who started at Mitsui in 2000 and previously worked at Sumitomo Corp., Japan's third-largest trading house, and German commodity trader Metallgesellschaft AG. ``As long as the Iran issue is unresolved, it's hard for traders to sell,'' he said.

Katrina, one of 26 named storms in the worst Atlantic Hurricane season on record, closed almost every production platform in the U.S. Gulf, where about 30 percent of the country's oil is produced. Hurricane Rita, almost a month later, did the same thing.

On Jan. 26, a quarter of production, or 373,407 barrels a day, remained shut because of storm damage, the U.S. Energy Department said.

Atlantic storms are becoming stronger and more frequent because ocean temperatures are rising, the Miami-based National Hurricane Center said last year. The hurricane season starts on June 1 and ends on Nov. 30.

Rising Supply

Not all analysts agree prices will increase. Rising supply may cause oil to fall this year, the Royal Bank of Scotland, the U.K.'s second-largest lender, said last month. Oil in New York may average $52.50 this year as global output increases, it said.

``While traders and investors have focused on strong demand growth, sizable additions to supply have largely been ignored,'' Thorsten Fischer, a senior economic adviser at the Edinburgh- based bank said in a research note published on Jan. 13.

U.S. oil inventories are 11 percent higher than their five- year average, according to the energy department.

Still, concern about global supply is supporting investment in oil futures. Last week, hedge-fund managers and other large speculators increased their net-long positions in New York oil futures to the highest since September, according to U.S. Commodity Futures Trading Commission data.

``Technical problems in Iraqi oilfields and ongoing concerns over production in Nigeria remain,'' said analysts led by Kevin Norrish at London-based Barclays Capital in a note to clients yesterday. ``Oil market participants will be extremely reluctant of being short crude oil.''

Barclays Capital, a unit of the U.K.'s third-largest bank, expects crude oil prices to average $68 this year. Norrish and his colleague Paul Horsnell were the most accurate forecasters of prices among analysts surveyed by Bloomberg last year.
 
Re: OIL AGAIN!

Gold tanks....

.....meanwhile, so does oil, down ~3.2% and breaking key support.

This usually would be a positive for the US indecies...but alas and alak they're down too!

What IS the world coming to :D
 
Re: OIL AGAIN!

Ouch I'm getting really punished today. I was expecting a correction after a constant run of gains but not this much :cautious:
 
Re: OIL AGAIN!

u aint seen nothing yet...

this may be a correction similar to october, in which case more carnage is coming..

dont worry abt it, think of it as buying opportunity
 
Re: OIL AGAIN!

With peak oil on the way, I think that oil has one direction to go. I was looking for crude oil in the CMC instruments list and it has disappeared.

MIT
 
Re: OIL AGAIN!

wayneL said:
Gold tanks....

.....meanwhile, so does oil, down ~3.2% and breaking key support.

This usually would be a positive for the US indecies...but alas and alak they're down too!

What IS the world coming to :D
Click to expand...

Yep, all at once, that key support level going is the issue for me with oil. Nothing to do but trade the plan. Interesting times.
 
Re: OIL AGAIN!

Oil retains its bullish status by holding above its 200dma.
Hopefully this WTIC chart link http://stockcharts.com/def/servlet/SC.web?c=$wtic will show readers that oil is not acting in a way it typically does: Note the significant number of gaps and reversals in the past 2 months, let alone some very narrow daily trading ranges.
It's a market decidedly indecisive with potential to break quickly and sharply either way.
I am with mit and many others in the longer term - there is not a compelling case right now for oil to be much lower in price going forward, unless a recession suppresses demand.
Even then, we need to realise that the dominance of America as a commodities consumer is being gradually broken down, commodity by commodity, by China specifically and Asia generally.
It does not take a genius to work out that as more and more vehicles hit the road, they need to be juiced up, and will burn more oil.
So while a global contraction of industrial production may occur in the next few years, it may not be enough to knock the stuffing out of the oil bull.
 
Re: OIL AGAIN!

rederob said:
I am with mit and many others in the longer term - there is not a compelling case right now for oil to be much lower in price going forward, unless a recession suppresses demand.
Click to expand...
That could be taken the next logical step to argue that any sharp fall in the oil price could be the first warning of impending recession. So oil might be a useful indicator as well as a commodity given the constrained supply. :2twocents
 
Re: OIL AGAIN!

Smurf1976 said:
That could be taken the next logical step to argue that any sharp fall in the oil price could be the first warning of impending recession. So oil might be a useful indicator as well as a commodity given the constrained supply. :2twocents
Click to expand...

Well...

< $60

< 200 dma

Getting close to breaking major support

If your argument is valid then this is certainly a shot across the bow.
 

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