Oil price discussion and analysis

[Aussiejeff]

Re: OIL AGAIN!

Long term, I'm absolutely bullish on oil given the geological fundamentals and the inherent problem of energy - we just don't have any real alternative anywhere near ready for mass implementation.

But short term, I keep hearing everyone from funds managers to the local council work crew saying oil's going up, up and away. That's a sell signal IMO if you're a short term trader (which I'm not by the way). Everyone bullish, who's left to buy?

Ahhh, Smurf... but being a Peak Oil pundit, wouldn't you say gizmos such as market "signals", "fundamentals" and "charting T/A" might fly out the window under that scenario?

This is the nub. AFAIK humankind has never reached THIS point in it's history of energy DEMAND vs SUPPLY before. So it's really not going to be much use looking into the past for market direction, statistical patterns etc, IMHO!

 

[Trembling Hand]

Re: OIL AGAIN!

So it's really not going to be much use looking into the past for market direction, statistical patterns etc, IMHO!

Well then I'm throwing T/A out the window.

 

[Tysonboss1]

Re: OIL AGAIN!

I would like to make a bet that oil will not trade a $80 ever again,...

I would like to raise the stakes in this bet to oil never falling below $95

 

[haunting]

Re: OIL AGAIN!

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3980797.ece

- They're wrong about oil, by George

Now consider the situation today in oil markets: the Gulf, according to Mr Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for “financial derivatives” that allowed investors to bet on the future value of these bonds.

The disconnect between "real" supply/demand and virtual supply/demand will break the "system" eventually, depending on how soon the law makers decide to act.

 

[Uncle Festivus]

Re: OIL AGAIN!

I would like to raise the stakes in this bet to oil never falling below $95

That is indeed a brave call, one too good to pass up - put me down for one of whatever you are wagering .

Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically."You can also anticipate that [the bubble] will eventually correct but that is unlikely to happen before the recession actually reduces the demand.
"The rise in the price of oil and food is going to weigh and aggravate the recession."

http://www.telegraph.co.uk/money/ma...08/05/26/cnsoros126.xml&CMP=ILC-mostviewedbox

"I think this is probably more serious than anything in our lifetime," he says. In short, his feeling is that the United States and Britain are facing a recession of a scale greater than the early-1990s, greater even than the 1970s.
"I think the dislocations will be greater because you also have the implications of the house price decline, which you didn't have in the 1970s - so you had stagflation and transfer of purchasing power to the oil producing countries, but here you also have the housing crisis in addition to that."

And some insight about contango and what it may be foretelling?

http://www.hussman.net/wmc/wmc080527.htm

 

[wayneL]

Re: OIL AGAIN!

FWIW:

The view of one Mr George Soros.

George Soros: rocketing oil price is a bubble

By Edmund Conway, Economics Editor
Last Updated: 12:53am BST 27/05/2008

Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.

The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.

In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation..... FULL TELEGRAPH ARTICLE

 

[wayneL]

Re: OIL AGAIN!

FWIW:

The view of one Mr George Soros.

... and the Germans want to ban Oil Speculation. Hands off my income you bastids!!!!

Germany in call for ban on oil speculation

By Ambrose Evans-Pritchard
Last Updated: 12:53am BST 27/05/2008

German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.

It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.

Car lights are seen streaking past an oil rig extracting petroleum
Speculators are split, with some betting that oil will fall

Uwe Beckmeyer, transport chief for Germany's Social Democrats, said his party would call for joint measures by the G8 powers to prohibit leveraged trading on energy contracts. "It's an extreme step but it has to be done," he told the Berlin media. FULL ARTICLE

 

[Temjin]

Re: OIL AGAIN!

Long term, I'm absolutely bullish on oil given the geological fundamentals and the inherent problem of energy - we just don't have any real alternative anywhere near ready for mass implementation.

But short term, I keep hearing everyone from funds managers to the local council work crew saying oil's going up, up and away. That's a sell signal IMO if you're a short term trader (which I'm not by the way). Everyone bullish, who's left to buy?

I am in the exact position as Smurf. Extreme bullish on oil for the long term but short term wise, there are way too many "contrarian" and "technical" signals that SHOULD NOT BE IGNORED. It's all in the front news now, even mums and dads are talking about it. Technical wise, it is way overbrought and similarly correlated commodities such as natural gas is showing negative divergences. All these are pointing me to a potential short term bearish view on oil/energy stuff. Nothing go straight up forever anyway. Oil need to take a breath before it tries to hit for $200.

For those who just want to buy and hold for the long term, just ignore us.

For those who want to trade in a shorter time frame, it's time to tighten the stops.

 

[haunting]

Re: OIL AGAIN!

http://internationalnews.over-blog.com/article-19853375.html

- The real reason behind high oil prices by William Engdahl

At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.

Goldman Sachs again in the middle

The oil price today, unlike twenty years ago, is determined behind closed doors in the trading rooms of giant financial institutions like Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Deutsche Bank or UBS. The key exchange in the game is the London ICE Futures Exchange (formerly the International Petroleum Exchange). ICE Futures is a wholly-owned subsidiary of the Atlanta Georgia International Commodities Exchange. ICE in Atlanta was founded in part by Goldman Sachs which also happens to run the world’s most widely used commodity price index, the GSCI, which is over-weighted to oil prices.

If I have to point my finger at someone and blame them for the current high oil price, I would point it at GS. They have every self-interest to see the oil price reaching 200. Still remember when sub-prime based CDO was at its "prime", GS was selling the deadly product while shorting the heck out of the stuffs they were selling?

The $200 call coming from them stands out like a sucker rally cry, while the rest of the speculators are pushing hard for the target, they are all set, ready to dump the whole crap on the late comers.

 

[wayneL]

Re: OIL AGAIN!

At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.

Sorry to be such a pedagogue, but the above statement is nonsense.

The point about leverage of course is accurate, but could equally create a panick sell-off as well as drive prices higher. Such leverage is available at all times in every futures market, yet prices can be extremely depressed, as well as have a blue flame coming out of it's @rse. Leverage is not the reason oil prices are high.

Never forget that for every long contract that is leveraged to this degree, there must be a corresponding short contract, leveraged to the same degree, otherwise the long cannot exist.

My main challenge however, is the assertion that a futures trader "borrows" $120. This is nonsense.

If a trader goes long on 1 futures contract, he/she is not, at that point in time, buying oil in any way, shape, or form; therefore is not borrowing money. S/he is not buying an asset.

All a futures trader is doing is entering into a contract to buy a quantity of oil at a specific price. Oil is only purchased at the expiry of the contract, IF the trader has not closed it out (this happens in the absolute minimum of cases).

The $8k is purely a performance bond to cover the broker's @ss should the trader default. It is not a deposit. The 120k is NOT a loan.

The effect may be similar, but in actual fact, it is incorrect and should not be printed in an allegedly "authoritative" article.

 

[ithatheekret]

Re: OIL AGAIN!

Well I saw oil fall back to $129 , now just back above $130 , we've had a small drop back in the lead upto Memorial Day , after that is the US summer fun time ......... , but , I am interested to see if oil holds $130 , dipped under already and just recovered to it . I see $130 as "the" support area , if it gets shoved below it and closes , I would assume it would eventuate in a lower price action again ......... IMHO ........

But Summer fun time is almost on us ........ is it worth another $12 from here ? pondering ............

 

[Uncle Festivus]

Re: OIL AGAIN!

Well I saw oil fall back to $129 , now just back above $130 , we've had a small drop back in the lead upto Memorial Day , after that is the US summer fun time ......... , but , I am interested to see if oil holds $130 , dipped under already and just recovered to it . I see $130 as "the" support area , if it gets shoved below it and closes , I would assume it would eventuate in a lower price action again ......... IMHO ........

But Summer fun time is almost on us ........ is it worth another $12 from here ? pondering ............

All together now..............who's your oil daddy??

Well you knew all along
That your dad was gettin wise to you now
(you shouldnt have lied now you shouldnt have lied)
And since he took your set of keys
Youve been thinking that your fun is all through now
(you shouldnt have lied now you shouldnt have lied)

But you can come along with me
cause we gotta a lot of things to do now
(you shouldnt have lied now you shouldnt have lied)

And well have fun fun fun now that daddy took the t-bird away
(fun fun fun now that daddy took the t-bird away)

May 23 (Bloomberg) -- U.S. motorists, who are paying record prices for gasoline, drove 4.3 percent less in March for the biggest monthly drop ever, a government estimate showed.

U.S. fuel consumption averaged 20.3 million barrels a day in the four weeks ended May 16, down 1.3 percent from a year earlier, the Energy Department said last week.

 

[MRC & Co]

Re: OIL AGAIN!

Just saw a talking head make a good point on the 50% increase in iron prices this year, despite no futures markets and hence, speculation.

With oil prices increasing and speculation being blamed, where is the excess supply?

While I think we will get some kind of correction, this trend is up and bullish is the only way to be for long-term investors.

As a trader, I am still looking for my entry

 

[Smurf1976]

Re: OIL AGAIN!

Ahhh, Smurf... but being a Peak Oil pundit, wouldn't you say gizmos such as market "signals", "fundamentals" and "charting T/A" might fly out the window under that scenario?

This is the nub. AFAIK humankind has never reached THIS point in it's history of energy DEMAND vs SUPPLY before. So it's really not going to be much use looking into the past for market direction, statistical patterns etc, IMHO!

Agreed that it's possible. But I still think we'll see dips along the way rather than a constant, relentless rise. There will still be other economic factors influencing the market as well as stagnant then declining oil production. Just my opinion but I can't see a situation where oil goes up, say, another 10 cents or even $10 literally every day and does that consistently and forever. Possible I suppose...

On the other hand, there's a little voice in the back of my head questioning the recently popular notion that some OPEC countries are hiring tankers to store oil they can't sell. I see two possibilities:

1. The tankers aren't being used for that at all. They're simply queued there waiting to be filled because those countries can't pump any faster than they already are. With a lack of alternative suppliers, the tankers might as well wait on the doorstep of a major producer rather than sit somewhere else - they're empty either way.

2. OPEC governments are hiring the tankers, thus taking them off the market for actual shipping of oil, simply to hide the reality that they can't fill them.

3. It's short term storage only so that an apparent increase in exports can arise at some point in the future, thus hiding the reality they're flat out already.

I personally see the notion that they can't sell the oil as the least likely scenario. When something's in short supply, and it's hard to argue that oil isn't at least moderately scarce at the moment, it's generally not too hard to sell at the market price. They had no trouble selling at a tenth of that price in a flooded market a decade ago so the "no buyers" argument doesn't really stack up for me.

That's unless the credit crunch is far worse than we think and the likes of Exxon etc literally can not pay for crude oil. If that's the situation then we're headed for production cuts when they run out of storage and physcial shortages of petrol etc no matter what happens with the price. The refineries have no choice but to close once their crude oil tanks run dry and it's only a short step from that to outright shortage in first world countries.

 

[barney]

Re: OIL AGAIN!

Just a bit of tangental thinking, and happy to be shot down in flames here, but ............

Is it feasible that the large funds/buyers etc who have been pushing the POO up lately are also buying discounted shares in Companies directly affected by the POO ....

For eg. I notice this morning that a large US fund has just completed a 5+% share position in Qantas ... That equates to about $350,000,000 worth of stock ................. So with the POO going ballistic, they have possibly picked up what might turn out to be very cheap shares down the track .......

And that is just one stock .......... Makes me wonder how many other "discounted" stocks suffering from the POO are being snapped up?

If the above is the case, would it not be reasonable to expect a fairly healthy retrace in the POO once the required shares have been accumulated?

Just thinking out aloud... but Oil looks more like a short than a long atm.

 

[Tysonboss1]

Re: OIL AGAIN!

Some of the so called speculaters are probally refining companies or companies working on behalf of refiners trying to hedge the cost of there feedstock or lock in contracts for oil supply

 

[ithatheekret]

Re: OIL AGAIN!

All together now..............who's your oil daddy??

@ $1.60 / litre he can have the keys to the Astra too

If it keeps it up I might move to Venezuela just for the subsidised fuel , which works out to be around 20 cents a gallon , but then I'd have to listen to Chavez TV all day , second thoughts , I'll pay the $1.60 and make do with the Kev show .

 

[rederob]

Re: OIL AGAIN!

Seems that oil is struggling to break into "expected correction" mode, instead correcting higher overnight after a brief dabble around $126.
No sooner had it bottomed than it added another $5, before eventually closing the day around the high $130 area.
At least we have some price volatility, suggesting the speculators have returned with thoughts of driving the market one way or the other.
Whatever the outcome in weeks to come, the scene is set for medium term prices to rise from a substantially higher platform than most readers would have dreamed of.
Tysonboss, you are a chicken playing with a $95 downside bet.... surely there's room to wind it higher!

 

[wayneL]

Re: OIL AGAIN!

Seems that oil is struggling to break into "expected correction" mode, instead correcting higher overnight after a brief dabble around $126.
No sooner had it bottomed than it added another $5, before eventually closing the day around the high $130 area.
At least we have some price volatility, suggesting the speculators have returned with thoughts of driving the market one way or the other.
Whatever the outcome in weeks to come, the scene is set for medium term prices to rise from a substantially higher platform than most readers would have dreamed of.
Tysonboss, you are a chicken playing with a $95 downside bet.... surely there's room to wind it higher!

To me it looks as though the dip buyers have taken control, the pattern is very much like stocks through most of 2007, with one very pleasing difference for those of us daytrading the contract...

VOLATILITY!!

But there is more and more talk of the speculative component of the crude price. It's a daily feature on the Beeb at the moment. I have no idea what that means for the price in the medium term, but for now it seems it means up!!!

 

[CamKawa]

Re: OIL AGAIN!

@ $1.60 / litre he can have the keys to the Astra too

If it keeps it up I might move to Venezuela just for the subsidised fuel , which works out to be around 20 cents a gallon , but then I'd have to listen to Chavez TV all day , second thoughts , I'll pay the $1.60 and make do with the Kev show .

I dunno are you sure Chavez TV is *that* bad?