THE Price of Crude pt 4 (merged) Archived

[mermaid]

Europe's leaders were asking to pump more oil, they asked for it last week, and maybe the Saoudi's are pumping up more crude.
but you all are right about the temporary situation and that the prices will go up soon. it is an artificial way to calm-down everyone and to delay a panic. still, there are just a few getting very rich by this all.....

[LadyRuby]

How the hell are these countries going to fill up their strategic reserves again?

[JustinFrankl]

How the hell are these countries going to fill up their strategic reserves again?

They won't, at least not all of them. Those that do will do so by either out-bidding the competition or by force.

[Michael_Layden]

How the hell are these countries going to fill up their strategic reserves again?

They won't, at least not all of them. Those that do will do so by either out-bidding the competition or by force.

Its hard to imagine the Chinese who have just finished (or soon to finish) their first stage of their SPR not starting to fill it with cheap oil at the moment and get turn some of their mountain of dollars into something useful.
Anyone know what the status of the Chinese reserve is?

Cant help but feel this concerted release of oil is really sending a bad signal to consumers. i.e by dropping oil prices the feeling is that everything is alright again. People were starting to worry which is precisely what they should be doing, this deflects attention till it really is a disaster. Hope its a warm winter!!!

[shakespear1]

I stumbled onto the following web site which gives a very intersesting picture of trading activity.

Positions

It appears that the Big Boys are Long on crude where as the rest of the crowd is Short. What's up is beyond me.

CRUDE OIL, LIGHT SWEET - NEW YORK MERCANTILE EXCHANGE Code-067651
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/13/05 |
--------------------------------------------------------------| NONREPORTABLE
NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS
--------------------------|-----------------|-----------------|-----------------
Long | Short |Spreads | Long | Short | Long | Short | Long | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 1,000 BARRELS) OPEN INTEREST: 1,515,053
COMMITMENTS
122,746 81,576 454,069 848,029 889,734 1424844 1425379 90,209 89,674

CHANGES FROM 09/06/05 (CHANGE IN OPEN INTEREST: -10,507)
-22,232 3,529 -12,878 19,179 3,651 -15,931 -5,699 5,424 -4,808

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
8.1 5.4 30.0 56.0 58.7 94.0 94.1 6.0 5.9

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 292)
91 97 120 80 91 233 257

To understand the above there was this note

** COT reports come out on Friday every week for every commodity, and for currencies and major indexes as well
** By the time you click on the above link, a new report might be out, so don't expect to match the table below after Aug. 18, 2005
** Although the report comes out on Friday, it is based on data from the preceding Tuesday; in this case, Aug. 9, 2005
** Nonreportable positions are the small specs (you and me)
** Noncommercial positions are major players (hedge funds)
** Commercial positions are the producers (forward selling of oil delivery) and hedgers (e.g., airlines, having a vested interest in hedging oil costs)
** The producers will always be net short
** Shorts and longs always balance out to zero.

Hope this gives a clue.

[PhebaAndThePilgrim]

Good day From Pheba From the Farm:
I have just one thing to say about all of this:
"Home Heating oil, Northeast United States. November, 2005"
Pheba

[Ardalla]

I read last week that only 11m barrels from the spr had actually been sold. The article said the market just doesn't need more crude right now.

[aflurry]

well, first - didn't $63 seem pretty high just a few weeks ago? seems like we have short memories. Now all asudden it's dirt cheap.

also, sorry if this sounds stupid, but if more refining capacity was knocked out than production capacity, wouldn't that cause a temporary glut of crude until the refineries go back online and are ready to buy the crude again?

why do i keep hearing statements that limited refining capacity is causing crude prices to rise? it should have the opposite effect. right?

and similarly, what was the point of opening the SPR if there's no one to refine the stuff? what's the consensus here? was that a good idea?

[richardmmm]

like i said, Buy on Rumor, Sell on News.

Futures anticpate the prices and the disaster was already built into the price on speculation.

once the disaster happens traders unwind positions.

read Remisnance of a Stock Operator, the story of Jesse Livermore, the greatest trader ever. he explains everything.

notice also that the media's reasons for high oil prices keep migrating, yukos, chavez, nigeria, shell reserves, russian politics, iraq pipeline, iran nuclear, hurricane ivan. one excuse after another but nothing really changing. now they start running these refinery stories, whilst gasoline is being exported from california in large quantities. it's all a price fixing scheme.

[bbadwolf]

why do i keep hearing statements that limited refining capacity is causing crude prices to rise? it should have the opposite effect. right?

and similarly, what was the point of opening the SPR if there's no one to refine the stuff? what's the consensus here? was that a good idea?

Consider this: the high price of crude that we see displayed all the time (ie. $70) is the price of the premium light sweet crude. Of course, that's the grade that's in short supply. OPEC is reacting by trying to flood the market with heavy/sour crude, which cannot be processed due to lack of more advanced refineries that can handle it. This has rather little impact on the price of the light/sweet, different stuff altogether. Until enough refineries build on capacity to handle the heavy/sour stuff, that scary headline price will keep going up and so will the price of gasoline. With improved profit margins on refining heavy crude (because of the gasoline prices), more refineries will be tempted to add on heavy/sour capacity. When enough refineries have updated to take up the 1.5 million bbl/d of spare capacity...hmmm.

And then they'll need a new excuse to say "no, no, we're not running out!". It's also about the time when the fun really starts stopping!

They released from the SPR because they were under pressure to "do something". For lack of good options, they choose mediocre ones. It has probably helped calm the market a bit, as well as allowed the administration to claim that they're "doing something".

-bbad

[Graeme]

Crude Oil, Heating Oil Fall as Mild Weather Curbs Demand in U.S. Northeast

Crude oil fell and heating oil touched a four-month low as warm weather in the eastern U.S. reduces fuel consumption, pushing inventories higher.

Heating demand in the Northeast, where 80 percent of the nation's heating oil is consumed, will be lower than normal this week, Minneapolis-based forecaster Meteorlogix LLC said. U.S. crude oil and heating oil supplies in the week ended Nov. 18 were above the five-year average, the Energy Department said.

Bloomberg

[BabyPeanut]

http://tonto.eia.doe.gov/oog/info/hopu/hopu.asp
Residential heating oil is up 40 cents from same time last year.

[frankthetank]

If nat gas could just drop to about 6-8 bucks for a month or 2, that would be great. I really need some time to get my wood heating system installed.

I have a feeling the draws on heating stocks are really going to drop with all the cold weather as of late (today is 55F here, but not for long!)...

[DantesPeak]

Simmons mentioned as 'bull market oil guru', Saudis target weekly US oil inventories.

Five Who Laid the Groundwork For Historic Spike in Oil Market

As chief of the world's largest producer, Mr. Naimi was OPEC's de-facto leader, and he had a strategy. The cartel needed to start behaving like a central bank -- united, technocratic and driven by data, not internal politics. Because OPEC producers had a swath of idle oil fields, they needn't develop new ones. To prevent gluts, OPEC should limit crude flowing into customers' stockpiles.

In the late 1990s, Mr. Naimi began targeting the amount of oil held in commercial inventories in the U.S. Midwest, a key segment of the world's biggest market. If Midwest inventories fell below a certain level, Mr. Naimi believed, prices tended to rise and OPEC needed to open the spigot. If they rose above a ceiling, OPEC had to cut. "You have to watch that like a hawk," he told journalists in early 2004 when discussing U.S. inventory levels.

The Prophet

Matthew Simmons, a veteran petroleum-industry banker, visited Saudi Arabia's vast oil fields in 2003. The kingdom has almost a quarter of the planet's reserves, which the world is counting on to meet ever-mounting demand. But Mr. Simmons came away disturbed. On a red-eye flight home, he tossed out a troubling thought to his companions on the visit: What if those fields weren't as healthy as the Saudis claimed?

Back in Houston, the 62-year-old Utah native followed up on his hunch, digging into scientific papers and writing a book on his conclusion: Saudi fields appeared pooped and might soon go into irreversible decline. He hit the lecture circuit with a provocative presentation, "Saudi Arabia's Oil: A Reality or a Mirage?"

Bull markets often have a guru who helps crystallize a belief that prices have nowhere to go but up. Mr. Simmons has played such a role in the oil boom. His scholarship has been criticized by Western oil-company executives and petroleum engineers. The Saudis say they can boost output another 50%, and some experts think they can go higher.

Since the oil industry's birth in the 19th century, people have been forecasting that crude output was about to peak and decline. Mr. Simmons made waves because he focused on specific Saudi fields. Mr. Simmons "stirred quite a debate among our clients" last year, says Raymond Carbone, chief executive of Paramount Options Inc., a New York-based energy brokerage firm. "By casting doubt about Saudi reserves, he contributed to bullish sentiment."

His influence illuminates a new factor in this oil crunch: big investors and speculators. The New York Mercantile Exchange introduced an oil-futures contract in 1983. Ever since, investors outside the industry have been able to buy and sell oil without taking delivery of a single barrel. Instead they buy and sell contracts for delivery of oil at a future date, which can be traded like other financial instruments.

Even conservative investors such as pension funds have targeted energy as an alternative to low-yielding bonds and pricey stocks. Goldman Sachs estimates investors have put close to $70 billion into instruments that track commodity-market indexes this year, up from under $10 billion in 2000. Jeffrey Currie, head of commodity research at Goldman in London, says nonindustry players now make up 15% of the financial markets tied to the world's crude-oil supplies. When oil markets are tight, the added demand from new investors can further boost prices.

Earlier this year, Mr. Simmons published his book, "Twilight in the Desert." So far it has sold 90,000 copies, but he says his influence still isn't reflected in oil prices. "If people listened to me," he says, "the price would be three times higher."

More in the Wall Street Journal, paid subscription may be required
http://online.wsj.com/article/SB1135031 ... age_one_us

PS - I will update with free link should I find one in the next day or so.

[donshan]

Quote from the same WSJ article:

There are now more than 27 million vehicles on Chinese roads, up from just 10 million in 1995. The government projects the fleet will double by 2010. China accounted for about 40% of the world's oil-demand growth over the past four years, according to the U.S. Department of Energy. Part of that surge last year came from emergency use of oil to generate electricity amid blackouts, but the car craze will continue straining oil markets, as will demand from Chinese industry.

And I hear people saying oil prices are going back to $35/bbl!

[Seadragon]

Rrrrrrrrright, it's Simmons and his damn book that caused this "spike." I guess the WSJ can talk all around the issue and make it seem like just a semi-normal price fluctuation instead of the dry run that it really is. You want high oil prices? Just wait a little.

[Leanan]

It's these reckless peak oilers who are causing high oil prices by talking about it. If they'd just shut up, oil prices would go back down.

[DantesPeak]

It's these reckless peak oilers who are causing high oil prices by talking about it. If they'd just shut up, oil prices would go back down.

The WSJ and others in the business media keep their focus on price and speculative activity, and almost never get to the real issue of whether there is really enough oil to go around. The question of whether there will be enough energy supplies is not usually discussed.

However let's give them some credit for putting it on the front page and not calling Simmons a kook.

[DantesPeak]

Here's the link where you can read the story for free:

http://www.post-gazette.com/pg/05354/625356.stm

[fluffy]

It's these reckless peak oilers who are causing high oil prices by talking about it. If they'd just shut up, oil prices would go back down.

Now, what do we traditionally do to the messenger.. [smilie=qright5.gif]