Oil price discussion and analysis

[Smurf1976]

Re: OIL AGAIN!

The first two articles are basically about geology and actual investment in oil production. That is, how much oil will be produced over the coming years.

The last article assumes that the geology and investment issues are unchanged and will reflect the past. Like saying that stock xyz went up 10% in each of the past 10 years and therefore must go up 10% in each of the next 10 years.

Since the geological constraints are different now to those in the past, by virtue of conventional oil being a relatively limited resource (at least in terms of known and suspected recoverable deposits) ther two approaches will produce very different results for production volumes. Since the latter article focuses on price only, it's possible that an economic slowdown (ie global recession) could also have been assumed thus lowering demand and likely price.

Hence two very different forecasts from two very different methods. Without knowing exactly what assumptions have been made it's difficult to validate the latter article. They may be aware of the geological issues but simply predicting an economic slump. Or they may be totally unaware of the geological issues and predicting business as usual economic growth. They don't give enough detail in the article to say which is the case.

 

[mime]

Re: OIL AGAIN!

$42 a barrel by 2010?? Are they drunk? Did they factor in inflation, growth of Asia? I recon it will be at least $70 a barrel by then.

 

[nizar]

Re: OIL AGAIN!

$42 a barrel by 2010?? Are they drunk? Did they factor in inflation, growth of Asia? I recon it will be at least $70 a barrel by then.

agree 100%..

"It's not a matter of when oil is going to touch US$100 a barrel -- though obviously it's going to do that some day -- it's to get people realizing this is not a spike, not like past developments like the Yom Kippur War or the invasion of Kuwait," Mr. Coxe said. "What we've done is transformed the demand side of the equation for oil permanently."

"When, not if, the residents of the coastal cities of China, that's 165 million people, have the same percentage of automobiles as South Koreans have today, we'll need two new Saudi Arabias operating flat out."

above taken from:

http://www.canada.com/nationalpost/news/story.html?id=e1184a08-779d-4427-aeab-be4c04268e59

 

[wayneL]

Re: OIL AGAIN!

Very quietly and without much ado, April oil slipped under the $60 mark last night. Trading at $60.02 at this precise moment.

Without some sort of supply shock, I can see Oil range bound between $55 & $65 for some time (a guess)

Comments?

 

[professor_frink]

Re: OIL AGAIN!

just had a quick look at the oil chart, and it looks like it might find some support(at least for the short term) around $58-$59. Could be interesting if goes below that!

 

[nizar]

Re: OIL AGAIN!

http://www.aireview.com/index.php?act=view&catid=8&id=3691

 

[professor_frink]

Re: OIL AGAIN!

Without some sort of supply shock, I can see Oil range bound between $55 & $65 for some time (a guess)

Comments?

looks like oil's on its way to the upper end of your range wayne. Will be curious to see how far it gets.

 

[wayneL]

Re: OIL AGAIN!

looks like oil's on its way to the upper end of your range wayne. Will be curious to see how far it gets.

Yes indeed, a strong move! Somebody probably read my comments and thought, what a load of cobblers...lets take it to 70

 

[professor_frink]

Re: OIL AGAIN!

Yes indeed, a strong move! Somebody probably read my comments and thought, what a load of cobblers...lets take it to 70

ha! don't be modest- you should say that everyone read your post, noticed that it was in the lower half of the range and decided to jump on board
watch for them all to take profits at 65

 

[pharaoh]

Re: OIL AGAIN! - Futures?

Hi guys

What do you guys think of buying futures in oil?
I went to a seminar today, at the Masonic club in sydney, and the guy presenting on futures was really compelling.

I want to buy heaps of contrtacts for oil, seems a bit of a no brainer at the moment, with global uncertainty on supply etc, and China's thirst.

I am going to post a futures question along these lines also, but wouldn't mind a few opinions or guidance...

Any thoughts?

I have never bought futures, but am starting to learn.

 

[nizar]

Re: OIL AGAIN! - Futures?

Hi guys

What do you guys think of buying futures in oil?
I went to a seminar today, at the Masonic club in sydney, and the guy presenting on futures was really compelling.

I want to buy heaps of contrtacts for oil, seems a bit of a no brainer at the moment, with global uncertainty on supply etc, and China's thirst.

I am going to post a futures question along these lines also, but wouldn't mind a few opinions or guidance...

Any thoughts?

I have never bought futures, but am starting to learn.

Hmm...

i dont know much about futures either...

Global uncertainty on supply? Hmm.. the Iran issue yeh they provide 4million barrels per day which is significant... US demand is about 25million per da....i think u have to look at Tar Sands in Canada, this is the largest oil field in the world after saudi arabia, at 175billion barrels. Thats the reserves. Some estimates reckon that in total can be more than 1trillion.

Tar Sands will add maybe 3million barrels of oil per day to the supply side of things by 2010. Problem lies with the cost. Tar Sands oil costs almost us$20 to produce per barrel as its much harder to extract as its heavier than the middle eastern type which costs less than us$2/barrel...

As to demand from asia, this has the potential to be much higher. I was reading from one economist that the coastal people of china number 165million, and when they have the same % of automobiles as korea, then we will need 2 more saudi arabias!

I think to do sumthing like this u have to know alot about oil, which u already may. If u havent already, try reading Jeremy Leggett's "Half Gone", i heard its a good read. This guy was former professor of geology, and used to work for oil companies and runs a renewable energy company and and is on the board of some UK energy regulatory body... seems to know his stuff better than most

Personally, i reckon oil seems to be heading down in the near future and is reliant on a one-off random attacks in saudi or nigerian militants to push it up. Its also good to keep in mind that higher oil prices, by default, mean that deposits that were previously subeconomical to become profitable, so more supply comes on line without new discoveries being made.

Good luck

 

[wayneL]

Re: OIL AGAIN! - Futures?

I want to buy heaps of contrtacts for oil,

I hope you have deep pockets

http://www.nymex.com/CL_spec.aspx

1 contract = 1000 barrels = 42,000 gallons

A $5 dollar move against you will see you down $5,000.00 PER CONTRACT

There is more supply coming on line over the next year and the world is creeping towards recession. It may or may not race up as fast as you think. It could dribble down to $45-$50 over the next year before it eventually takes off. Could you hold on to several contracts in those circumstances?

There are very credible oil bears.

A great contract to trade but not something to staple to the bottom drawer.

 

[Sir Burr]

Peak Oil

The oil is going, the oil is going!

Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.

http://www.salon.com/news/feature/2006/03/22/peakoil/

Interesting read, you have to view an advert to read the whole article.

The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?

SB

 

[michael_selway]

Re: Peak Oil

The oil is going, the oil is going!

Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.

http://www.salon.com/news/feature/2006/03/22/peakoil/

Interesting read, you have to view an advert to read the whole article.

The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?

SB

dude ist not over yet, there slots of supplies atm (esp US) as all the oilers are increasing production

wont run out yet also as some eg WPL has 1 billion in reserves i think

Prices may go high but not dangerously high yet

thx

MS

 

[markrmau]

Re: OIL AGAIN!

Iran.

Any thoughts here? If we loose Iran's supply, forget about oil below $100US. We are looking at $300-$500US/barrel. The demand side of the equation is VERY innelastic.

Perhaps, we are turning full circle. The ultimate arbiter of our moral dillemas (should we kill people to further our own needs?) will be decided using market place economics - world growth would collapse if we lost iranian oil. Hahahaha.

Pity how many Iraqis were collaterally damaged in order to protect oil supplies.

 

[nizar]

Re: Peak Oil

The oil is going, the oil is going!

Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.

http://www.salon.com/news/feature/2006/03/22/peakoil/

Interesting read, you have to view an advert to read the whole article.

The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?

SB

Read "Half Gone" by Jeremy Leggett

A compelling read, this guy is former Prof of Geology, consultant to big oil companies, and adviser on energy to UK government. He interviews top geologists and execs from Shell, Exxon, Saudi Aramco, Iranian and Kuwait oil officials and other government officials and experts in the field... He clearly knows his stuff, and speaks with heaps of credible references... His view is that peak oil is very close, but he actually speaks of 2 types of people, early toppers and late toppers, early toppers believe peak oil will come in this decade 2009-2010, while late toppers believe it will be 2025-2030...

MS: As of last count, WPL has 1.3billion barrels

 

[Smurf1976]

Re: Peak Oil

MS: As of last count, WPL has 1.3billion barrels

1.3 billion barrels of actual recoverable oil? Or are they including condensate, LPG etc?

Or is it oil equivalent including natural gas and everything else?

In financial terms it may not matter too much depending on the basis of their gas sales contracts but it matters hugely when it comes to assessing world oil supply since gas is not directly interchangeable for oil in most applications. This is a very common problem which leads to overestimation of oil reserves - effectively counting gas as "oil".

 

[nizar]

Re: OIL AGAIN!

sorry, oil equivalent

 

[Smurf1976]

Re: OIL AGAIN!

sorry, oil equivalent

No worries.

I wasn't making a point about your post by the way. Just wanting to draw general attention to the manner in which companies report oil reserves.

It's reasonably common practice to report "oil equivalent" which basically means every flammable substance they have expressed in terms of the equivalent amount of oil that would provide the same energy when burned.

If we only used oil in furnaces or to generate electricity there would be no problem - butane, propane, methane, ethane or whatever will still fire the furnace as will oil. But those things aren't oil as such and in the context of the way oil is actually used they aren't a great deal of use as a replacement, at least not a "drop in" one. This is particularly the case with methane, which tends to be the dominant component of non-oil "oil equivalent" reserves.

(Methane is "natural gas", ethane is petrochemicals industry feedstock, straight propane is household and commerical LPG, butane mixed with propane is automotive LPG).

It's a bit like a gold mining company including silver, iron, zinc and copper and reporting it as "gold equivalent" with all metals treated equal on the basis of weight. Since their uses aren't generally interchangeable it would be misleading to say the least. It would, however, give a nice big number for gold reserves and likely help the share price somewhat.

One of the great problems in the oil business is that it's virtually impossible to get accurate data. Even the oil majors themselves struggle with data beyond their own operations. Different companies report different things as "oil", they use different criteria for defining "proven" reserves, some intentionally understate discoveries to keep a "reserve" to announce if the share price starts to slide, others overstate their reserves and pray, some simply quote the same figures year after year to the point that they're meaningless, sometimes governments simply decree what the reserves will be with no scientific basis whatsoever. All of which makes serious forecasting and analysis somewhat difficult.

Be careful with oil stocks - is it REALLY oil or just gas? Depending on where it's located, gas can be highly valuable or literally worthless whereas oil is universally valuable. In the Australian context, gas is moderately valuable (but nowhere near as valuable as gas in the US or UK) provided that it is within economic distance of existing infrastructure or consumers.

 

[nizar]

Re: OIL AGAIN!

One of the great problems in the oil business is that it's virtually impossible to get accurate data. Even the oil majors themselves struggle with data beyond their own operations. Different companies report different things as "oil", they use different criteria for defining "proven" reserves, some intentionally understate discoveries to keep a "reserve" to announce if the share price starts to slide, others overstate their reserves and pray, some simply quote the same figures year after year to the point that they're meaningless, sometimes governments simply decree what the reserves will be with no scientific basis whatsoever. All of which makes serious forecasting and analysis somewhat difficult.

Be careful with oil stocks - is it REALLY oil or just gas? Depending on where it's located, gas can be highly valuable or literally worthless whereas oil is universally valuable. In the Australian context, gas is moderately valuable (but nowhere near as valuable as gas in the US or UK) provided that it is within economic distance of existing infrastructure or consumers.

Thanks for the info above Smurf...

Tend to agree with what you are saying about hard to find accurate data, apparently i read that Shell got fined a massive amount $100million+ a few years back for overstating reserves and a few of their execs had to quit over it saying they were ordered/pressure by the board to report the highest figures they could... surely other companies do the same thing...?

ANyway, which oilers are u holding at the moment?