Oil – Down, Down, Down.

Oil_barrel No comment needed, but….  Seems like this is a predicted Black Swan.  Musta been dumb luck on the "Casenova the Turkey" model. pl

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17 Responses to Oil – Down, Down, Down.

  1. Shoot, you’re looking pretty prescient right now. Hope you’re wrong about Obama’s chances though. I’ll pray some more. Not that I should be telling Certain Entities their business.

  2. b says:

    OPEC Says it Will Cut Oil Production

    In an unexpected decision made after a six-hour meeting that lasted well into the night, the OPEC oil cartel said it would reduce its oil production by about half a million barrels a day in a bid to stem a rapid decline in oil prices in recent weeks.


  3. David Habakkuk says:

    A bright lady called Yves Smith who runs a most useful blog on finance called ‘naked capitalism’ linked to a Bloomberg story on the oil production cut announcement, and commented: ‘Now we know what the target is.’
    (See http://www.nakedcapitalism.com/)
    I am curious as to whether she is right, and, if she is, whether it is possible for the oil producing countries to prevent prices going below such a target level in current conditions.

  4. Matthew says:

    Another perspective: When President Bush went to Saudi Arabia in January, he said $100/barrel was unsustainable for US consumers; now we seem to be relieved for that price.
    Win/win for the Saudis.

  5. Nicholas Weaver says:

    Remember: When you are in a supply constrained market, very small shifts in either supply or demand can result in wild price swings up AND down.
    The only bet I’d make on oil prices is that long term (>3-5 years) they will average significantly higher, and until then, volatility will be very high.

  6. Patrick Lang says:

    DH et al
    My current Casanovian prediction would be somewhere in the 60-70 dollar range.
    I think the Saudis and the others will try to halt the slide in the neighborhood of 100/barrel, but, as you say, the present fundamentals are likely to keep them from succeeding. There is also a certain momentum to a market like this. Investor money is exiting the market. pl

  7. I argue that any price decrease within the 60 day period before a US Presidential election should be discounted as to where the long term price will end up. If I recall correctly one of the PL post’s asked for guess 6 months later and that was in July. But I could be wrong, and often am.

  8. Curious says:

    I think OPEC will hold it at around $100. (+/- $10) Russia is in for the game too.
    Libya obviously just say FU to Condi and agree to lowering production quota.
    We’ll see what happen when Iran lit up their reactor. Will Israel launch an attack before hand?
    I for one think Iran will try to start building several new reactor site first before starting Busher.

  9. Curious says:

    Duh…I could have written that report.
    the big questions:
    1. Such big money can only come from big investment houses, and the transaction is very visible. (eg. Paulson & crew knew)
    2. Next question: where does such big loose hot money come from? (it’s the easy lending money from bank bail outs.)
    so.. where is the outrage against the administration?
    The sharp rise in oil prices and subsequent drop was caused by investment funds speculating in the market, a new U.S. report says.
    The report by Masters Capital Management and White Knight Research & Trading said prices rose as investment funds poured money into the market early in the year, and fell as they withdrew their investments.
    “These large financial players have become the primary source of the dramatic and damaging volatility seen in oil prices,” the report said.
    It said big investors put $60 billion US into oil futures markets early this year, but then pulled out $39 billion.
    The investment corresponded with a rise in oil prices to a peak of $145 US a barrel in July. As the money was withdrawn, prices fell. Oil futures closed down 68 cents at $102.58 on Wednesday.

  10. different clue says:

    I found a couple interesting articles about oil price movements. The first is called Bottoming Out by Dave Cohen. I found it at the Energy Bulletin site.
    The second is by Jeff Vail, a retired (I think) Air Force intelligence officer who now has a blog. He titles it: Predator-Prey Dynamics in Demand Destruction and Oil Prices.

  11. Curious says:

    The monthly trade gap swelled to $62.2 billion, the largest since March 2007, from an upwardly revised estimate of $58.84 billion in June. Wall Street analysts had forecast the deficit to expand to $58.0 billion from the original June tally of $56.8 billion.
    As crude oil prices surged in July, the volume of oil imports jumped 15 percent to 342 million barrels, the highest since June 2004 even though prices were almost double the average of last July.
    Total petroleum imports hit a record $51.4 billion, helping lift overall imports of goods and services 3.9 percent to a record $230.3 billion.
    “The deficit increased quite a bit, but it is all in petroleum. There is a lagged effect from those price increases. We had a $6.3 billion jump in the cost of crude oil and that will certainly put a dent in your trade deficit,” said Kevin Logan, senior U.S. economist with Dresdner Kleinwort in New York.

  12. Curious says:

    The world’s currency system is swivelling on its axis. Central banks in Asia and Europe have stopped raising rates, and some have begun to cut aggressively. The Federal Reserve is no longer nakedly exposed. Indeed, investors are already starting to look ahead to the next round of Fed tightening.
    The 18pc slide in oil prices from a peak of $147 a barrel in July has added juice to the dollar rally. Russia and the Middle East petro-powers tend to recycle a high proportion of their vast earnings from oil into the eurozone, either by purchasing European bonds or expensive imports.
    A Bundesbank study found 40 cents of every dollar spent by eurozone countries on oil imports comes back again one way or another. The figure for the US is just 10 cents. This trade bias has given oil a new character as a sort of anti-dollar driving the currency markets.

  13. Clifford Kiracofe says:

    “WASHINGTON — Federal regulators have uncovered evidence that oil speculators operating in unregulated “dark markets” may have helped drive the price of crude oil to record highs this year, McClatchy has learned.
    “The Commodity Futures Trading Commission is expected to issue a long-awaited report before Monday, perhaps as early as Thursday, on what role oil speculators played in the 50 percent rise in oil prices earlier this year. The report isn’t expected to declare that speculators are the main cause of the price rise, a conclusion the agency rejected in an interim report in July.
    One CFTC commissioner, Michael Dunn, signaled in a speech last Friday in Switzerland that the pending report would be inconclusive, noting, “I doubt it is possible to come up with a definitive answer one way or another at this time” about the role of speculators.
    However, unregulated markets account for about two-thirds of oil trading on financial markets, and they could be used to manipulate oil prices on the regulated exchanges that account for the remaining oil trading.”
    Can/does CFTC tap into the US intelligence community capabilities?
    If not, should it be empowered to where appropriate?
    Is such speculation a threat to US national security? Economic security? Energy security?
    Or do we believe in childrens’s fairy tales about “free markets”?

  14. David Habakkuk says:

    It seems to be deeply unclear what oil price the Saudis want to see.
    From the New York Times:
    ‘Hours after suffering a rare setback in a negotiating session at OPEC’s headquarters, Saudi Arabian officials assured world markets on Wednesday that they would ignore the wishes of other cartel members and continue to pump plenty of oil.
    ‘The late-night bargaining session ended early Wednesday morning with a surprise declaration that OPEC would cut production to shore up sagging prices. Saudi negotiators publicly endorsed that position, but then spent much of Wednesday privately spreading the word that they did not feel bound by it.’
    (See http://www.nytimes.com/2008/09/11/business/worldbusiness/11oil.html?_r=2&ref=worldbusiness&oref=slogin&oref=slogin.)
    My — ignorant — inclination would be to believe this, rather than earlier suggestions that there was agreement within the cartel on trying to keep the price around $100.
    But I suppose it is possible that this NYT story is disinformation, designed to avoid conflict with the U.S. and others who are desperate to see oil prices fall further.

  15. zanzibar says:

    Your prediction of $60/bbl is in the illustrious company of James Montier & Albert Edwards – macro analysts at Societe Generale. They also predict S&P at 500 and 10yr TBond yields at 2% and a major global recession. My own feeling is that if the SocGen forecast comes to pass it would mean that we have been flattened by a Cat 5 hurricane!
    Its very difficult to predict anything when we have such massive government intervention in the capital markets. Hanky Pank happily used the bazooka after assuring everyone he wouldn’t and James Lockhart the new “conservator” of the GSEs was the guy who was in charge to ensure they would not become a ward of taxpayers – and only a few weeks earlier publicly stated that the GSEs had adequate capital and removed any restraint on their ability to expand their balance sheet.
    Between Hanky Pank and Helicopter Ben it seems they are determined to substitute private balance sheets with the publics and I believe its only a matter of time that the Fed will directly monetize the public debt as the marginal buyer shrinks away. We are well on our way to trillion dollar deficits. Of course the “4th branch” believes that deficits don’t matter as long he gets his take of the “spoils”. We have unprecedented corporate welfare and wealth transfer from those least able to provide and the public seems rather sanguine. I have no explanation for this phenomenon.

  16. Curious says:

    Ike Forces Shutdown of 19% of U.S. Refining Capacity
    Almost 20 percent of the nation’s oil refining capacity was shut after Hurricane Ike slammed into the Gulf Coast today, limiting fuel deliveries and prompting analysts to predict gasoline prices may again reach $4 a gallon.
    At least 13 refineries in Texas including plants operated by Exxon Mobil Corp., Valero Energy Corp. and Royal Dutch Shell Plc shut 3.64 million barrels a day of refining capacity as Ike approached Texas. Exxon and Shell said today they would begin assessing damage of Gulf facilities as soon as weather permitted. Gulf refineries and ports are the source of about 50 percent of the fuel and crude used in the eastern half of the U.S.
    “If these refinery outages go three weeks or more, most of the nation could see $4 gasoline again,” Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas, said in an telephone interview. “If they are back up in a week, it may be a 15- or 20-cent-a-gallon increase.”

  17. Curious says:

    Price of oil is potentially critical
    Relationship with venezuela ha turned to worst. Chavez really wants to find a reason to break oil supply to US. Russia gladly help too. (they supply some oil)
    With that, this is the combination: Iran, Russia, Venezuela. add Iraq, Mexico, Angola, Nigeria which territory can easily be accessed for some “pipe action”
    see list of oil importer here
    I wonder how long Columbia will last.

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