THE Price of Crude pt 4 (merged) Archived

[Leanan]

From CNN: http://money.cnn.com/2005/04/19/markets ... /index.htm

The surge in oil prices during the past year is backed by the economics of supply and demand rather than the result of a short-lived bubble, the global head of commodities research at Goldman Sachs said Monday.
"The fundamental shift is not a bubble generated by speculation, but that of a systematic upward shift in the long-term price of oil," Jeff Currie, a managing director at top energy derivatives trader Goldman, told an energy conference.

Then there's this gem:

Indeed, the world exhausted its supply of cheap oil several years ago, he said.
"I'd like to argue that we actually have a bear market right now at $50 per barrel of oil," Currie said.

[DriveElectric]

Indeed, the world exhausted its supply of cheap oil several years ago, he said.

"I'd like to argue that we actually have a bear market right now at $50 per barrel of oil," Currie said.

You beat me to that article. I was just getting ready to post it. Goldman Sachs made the "Super Spike" news a few weeks ago. Those guys seem to be the Wall Street firm to watch in the coming years. They are doing the research in the right direction on what is really going on.

[Antimatter]

Seems Goldman has known whats going on for a while:

The rig count over the last 12 years has reached bottom. This is not because of low oil price. The oil companies are not going to keep rigs employed to drill dry holes. They know it but are unable and willing to admit it. The great merger mania is nothing more than a scaling down of a dying industry in recognition that 90% of global conventional oil has already been found. - Goldman Sachs, bankers (August 1999).

From http://www.bigwig.net/sergey/hubbert.htm

He was wrong about the rig count though - its now almost maxed out.

[JohnDenver]

It should be noted that Goldman Sachs is itself deeply invested in oil, so these comments may not be 100% objective. In fact, they themselves are one of the leading speculators in the crude market. So what we have here is a speculator claiming that speculators aren't influencing the market.

http://business.timesonline.co.uk/artic ... 05,00.html

[linlithgowoil]

yep - although they may well be somewhere near the truth about oil prices, they are still saying these things in order to make themselves money. so - i dont entirely trust them, because i dont think people/organisations that only chase money and nothing else can be trusted.

[DriveElectric]

The rig count over the last 12 years has reached bottom. This is not because of low oil price. The oil companies are not going to keep rigs employed to drill dry holes. They know it but are unable and willing to admit it. The great merger mania is nothing more than a scaling down of a dying industry in recognition that 90% of global conventional oil has already been found. - Goldman Sachs, bankers (August 1999).

If that quote was in 1999, then that was back when oil was below $20. The oil that is profitable to drill below $20 was likely all gone. But now? With oil at $50+, there are quite a few projects that are in motion for expensive oil. But it will take years to start seeing the results of that activity, and it will only delay the decline slightly.

[Roy]

I get these Marketwatch Bulletins every day. The message is confusing from day to day. They can't make up their mind what's going on in the crude market. Funny how they refuse to see the elephant in the living room!

20/05 Crude heads higher after U.S. supply data By Lisa Sanders
DALLAS (MarketWatch) -- Energy futures added to gains Wednesday morning after the Energy Department reported an unexpected drop in U.S. crude and gasoline supplies. Inventories of distillate fuels, including heating oil, were unchanged. May crude rose 1%, or 51 cents, to $52.80 per barrel; June crude gained 1.4%, or 73 cents, to $54.30 per barrel; May gasoline added 0.79 cent to $1.578 per gallon; and May heating oil was up 0.6 cent at $1.499 per gallon.

Source Big Surprise>?? I don't think anyone here is surprised that inventory levels are dropping. I'm not.

[DriveElectric]

This article was on the front page of http://www.bloomberg.com/ under "Insight and Commentary".

It is basically a summary of the major oil gurus who have predicted $100 oil in the past few months. This is as mainstream as it gets for media coverage.

Are You Ready to Sign Up for the $100 Oil Club?

The bulls may be right. This surge looks very different from the oil shocks of the 1970s, which were driven by a politically motivated reduction in supply. Now the market is driven by a supply-demand imbalance. And we have little certainty about oil availability. We may already have passed peak production -- unless there's a lot of it down there that we don't know about.

If nothing else, the $100 Oil Club is fighting complacency. It is pushing traders into thinking about whether the oil wells are running dry, and what the long-term consequences of that might be. Oil may never reach $100, yet the club is reviving the debate on a global economy with finite resources.

[frankthetank]

Read this yesterday...i find it just another reason to be prepared for expensive oil...

[MicroHydro]

Yet oil for delivery in 2011 is still available for under $47. The long futures market is still in backwardation. The $100 oil club will not be mainstream until long futures go contango.

[bobbyald]

It's good to see the price of oil getting so much coverage but most people still don't see the whole picture. Currently this is still traders, investors, economists etc. talking about just another resource - Oil is not just another resource it is the foundation on which we have built everthing.

Oil may never reach $100

If you truely understand PO and what oil represents in the society we have created you must know that it is EXTREMELY unlikely that oil will not one day reach $100. The real economic question is how many hundreds of dollars a barrel will be required to sufficiently reduce demand.

The French say $380.

Personally I think this is far too low!

[bobbyald]

Yet oil for delivery in 2011 is still available for under $47. The long futures market is still in backwardation. The $100 oil club will not be mainstream until long futures go contango.

I agree.

This may well be a good indicator of how well the PO message is getting through.

I was hoping for further pull backs before I buy a few.

[RonMN]

Think if you were a major oil producer...knowing about PO you know it will soon come to having 6 major countries pointing a gun at you saying "sell that barrel to ME or i'll shoot you"...

Every barrel you sell there will be 1 happy customer & atleast 5 very pissed off customers.

NOT a good situation to be in.

[Sgs-Cruz]

Yet oil for delivery in 2011 is still available for under $47. The long futures market is still in backwardation. The $100 oil club will not be mainstream until long futures go contango.

I've been graphing a bunch of stats on NYMEX light sweet for a couple months now, and it's already heading that way. In March the contango market extended about 130 days out (it fluctuated, obviously, but that was the average). It's sitting about 230 days out now.

http://home.cogeco.ca/~dump/OilFuturesTimeTimePrice3D.xls download it here.

[bobbyald]

Especially when you know that if you could sell it to no one and avoid invasion then you would rule the world.

So what's the tactic here?

Tell everyone you have loads of oil while selling what you have as fast as you can before it peaks - I wonder.

[arretium]

Yet oil for delivery in 2011 is still available for under $47. The long futures market is still in backwardation. The $100 oil club will not be mainstream until long futures go contango.

Hmm.. That's a real gamble. But one I might be willing to make a wager on. How could I plop down $5K on a bet like that? If I wanted to bet that oil would be at $100. Do I buy a future's contract? If so how? How do I buy one for $47 when I think it will be worth $100? Do I just put down $4700 now for 100 barrells and then sell it in 2011? If oil rose to $200 in 2008, would that make my investment worth more? In essence, how does this market work?

[bobbyald]

Sgs-Cruz

Thanks for the Excel workbook, I will study it tomorrow.

I'm not an expert on futures but something odd does appear to be happening:

http://www.thestreet.com/_tscrss/option ... 19629.html

[Tanada]

If todays gas prices are based on May oil futures contracts at $37.00 per barrel what happens when we hit the string of price swings from April 8-May 8? It has stayed at or above $49.00 for the entire period, sometimes much higher.

[k_semler]

I really have no idea what you are talking about. Closing price on LSCO was $50.96. It has not been at $37.00/bbl LSCO since late June 2004.

[Tanada]

I really have no idea what you are talking about. Closing price on LSCO was $50.96. It has not been at $37.00/bbl LSCO since late June 2004.

It was something i heard on Rush between services at work yesterday, he stated that oil in refineries this week was only costing $37.00 per barrel to the refiners because they bought it long term on the futures market before the current run up. Long term futures markets are just now heading up to $50.00