Bloomberg: Oil may be headed toward $50?

OilFinder2 · **Posted:** Sun Oct 19, 2008 8:29 pm

What do you think? Vote!

--> Bloomberg <--

Quote:

OPEC Plans Supply Cut as Crude Oil Heads Toward $50
By Grant Smith and Margot Habiby

Oct. 20 (Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends crude toward $50 a barrel.

Options contracts to sell oil at $50 by December soared 28- fold in the past two weeks on the New York Mercantile Exchange. Goldman Sachs Group Inc. and Merrill Lynch & Co. analysts say crude, which fell more than 50 percent from a record high in July to a 14-month low last week, may drop another 44 percent should the world economy slip into a recession.

The Organization of Petroleum Exporting Countries, which meets Oct. 24 in Vienna, three weeks earlier than planned, is facing the weakest growth in demand since 1993 just as new fields come on line from Angola to the Gulf of Mexico. Members may cut daily output by as much as 2 million barrels, President Chakib Khelil said yesterday.

``OPEC is going to try to prevent some of the price decline,'' Francisco Blanch, head of global commodities research at Merrill in London, said in a Bloomberg television interview. ``It's going to be very difficult to stem a price fall.''

Options contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3. Oil rose a second day today, gaining 0.8 percent to $72.45 a barrel at 7:50 a.m. in Singapore.

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ColossalContrarian · **Joined:** Tue Jun 20, 2006 12:00 am **Posts:** 892

I just don't think OPEC will allow the price to go that low. You never know, $50 oil will really limit where the world gets its oil from. With the price that low a lot of other producers will go broke which could mean less oil on the market in the long term.

my WAG is that oil will eventually find a buoyancy level around $75 but get down to $60

ReverseEngineer · **Joined:** Wed Jul 16, 2008 12:00 am **Posts:** 3584

Clearly a mirror of the financial world. In the banking business, the interest rates are lower than the inflation rate, the Gooberment is effectively PAYING banks to take money from them.

Similarly with Oil, its getting to the point where the Saudis will PAY J6P to fill up his gas tank. LOL.

Yeesh. When will they give it UP already?

Reverse Engineer

mos6507 · **Posted:** Sun Oct 19, 2008 8:45 pm

I think we're at a point where we can start betting eachother over how long oil will remain low before it shoots back up again. I seriously doubt it can stay low for more than another six months, depression or no depression.

ReverseEngineer · **Joined:** Wed Jul 16, 2008 12:00 am **Posts:** 3584

mos6507 wrote:

I think we're at a point where we can start betting eachother over how long oil will remain low before it shoots back up again. I seriously doubt it can stay low for more than another six months, depression or no depression.

The Plan for the NWO is to pay people to keep eating.

Reverse Engineer

Tyler_JC · **Posted:** Sun Oct 19, 2008 9:45 pm

We bottomed out at $50 in early 2007...we ended the year at nearly $100.

I wouldn't dare bet against oil prices in this environment.

Plantagenet · **Posted:** Sun Oct 19, 2008 10:05 pm

What are the chances of a significant geopolitical disruption in the ME between November and January affecting a certain oil-exporting state?

Fair to good, I'd say.

dohboi · **Joined:** Mon Dec 05, 2005 1:00 am **Posts:** 2096

OK, I'll bite, Tyler. What are the red lines on your chart supposed to indicate, and why, besides the obvious wild fluctuations in prices, would you not want to "bet against oil prices," whatever exactly that means?

Sorry to be so dense, but someone has to ask the stupid questions. :oops:

JJ · **Joined:** Tue Aug 07, 2007 12:00 am **Posts:** 1168

didn't Hal Lindsey say something to the effect that when oil went back down to $50 a barrel the world would end?

JJ · **Joined:** Tue Aug 07, 2007 12:00 am **Posts:** 1168

I do have a legitimate question. How does hyper-inflation happen? Does everything all of a sudden go up? Is it gradual?

yesplease · **Joined:** Tue Oct 03, 2006 12:00 am **Posts:** 3654

mos6507 wrote:

I think we're at a point where we can start betting eachother over how long oil will remain low before it shoots back up again. I seriously doubt it can stay low for more than another six months, depression or no depression.

Iono, a near 10% drop in world demand is predicted over that time period. We would have to have ~6-8mbpd off the market for oil prices to climb.

OilFinder2 · **Posted:** Mon Oct 20, 2008 5:39 pm

Quote:

I've given up trying to predict the price of oil 46% [ 12 ]

I had a feeling that would be a popular selection.

Dezakin · **Joined:** Wed Feb 09, 2005 1:00 am **Posts:** 1430

Honestly, it would be terrible news in my opinion if the price of oil dropped below $50 in the next two years. I believe we're headed for a deep recession followed by a gradual recovery. If we see oil maintain price during a recession, then we have an established market floor that investment capital can trust well enough to invest in higher production price fuels. This includes more deepwater oil, CTL, tar sands, and the rest. When the capital markets recover then these sectors will soak up a bunch of it as a safe bet.

If price drops below this, when the recovery hits increased demand will drive the price all over the place and still no one will want to risk money on expensive fuel production for fear of another price collapse.

RSFB · **Joined:** Sun Aug 03, 2008 12:00 am **Posts:** 313

In a big recession anything could happen, but I'm sure OPEC will do their best to not let oil go that low. That's why I voted for "never".

Ayoob · **Joined:** Thu Jul 15, 2004 12:00 am **Posts:** 1312

It's all relative. As production declines, a certain percentage of oil consumers have to be priced out of the market. Whether that's oil at $300 a barrel which we can't afford or whether a bunch of consumers lose their jobs and can't afford $50 oil, it doesn't matter. It'll be one or the other or some point in between.

If the price stays high, then we'll probably extract more oil out of the ground. If the price crashes, where does the investment come from that will allow us to ramp up shale production, hard to get oil, etc?

I think the most likely near term is some confluence of events that takes the 15 million barrels the US imports, and reroutes that to China as they can absorb the import. Maybe they'll "dump dollars" on the Middle East and buy the oil they way with treasuries.

The US is the simplest target. A spare 15 million barrels means the rest of the world is flooded with cheap oil and they can have the Happy Motoring world for another ten years or so before it drops out from under them, too.

Bloomberg: Oil may be headed toward $50?

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