Meanwhile, crude inventories rose 3.3 million barrels last week, more than the 1.4 million barrels expected by analysts surveyed by Platts. At 356.6 million barrels, stocks are at the highest level since July 1993.
Crude oil for May delivery dropped $1.21, or 2.2%, to end at $52.77 a barrel on the New York Mercantile Exchange. It ended the previous day's trading at $53.98, the highest closing level for a front-month contract since Nov. 28." MW
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I suppose that some of you would like to bet that crude will continue to rise in price? pl
Well my understanding is that almost 200 tankers are under charted leases betting on a rise in oil prices in next year. I could be wrong of course.
I’ll take that bet Colonel.
I’m putting my own money down that the economy will start a slow recovery in Q2 of 09.
The result of the recovery will be oil will slowly start it’s rise once again. My personal guess is to the $80 to $90 range.
As to this rise being due to “oil peaking” or simple manipulation by the major oil producers and companies, I don’t know. Maybe we could ask the King of Saudi Arabia or the President of Exon. I wouldn’t put too much faith in the geniuses at the CIA on this one.
Moreover, the NYT reports that natural gas has dropped a third since its high of july ’08. Domestic roduction is down b/ supply is ample due to LNG from fresh new foreign terminals.
Some of these new LNG production facilities & terminals were slated for the now slowed down Asian market.
HWGA. You cannot predict the price of crude oil with any accuracy. Several months ago WTI was in the $35/bbl range because there was a surplus in the US only. Lesser grades of oil were in short supply in the US so the traditional price spread between grades was not evident. Brent(North Sea) was actually higher than WTI. Most US Gulf Coast refineries use poorer grades of crude oil.
We also have another interesting market phenonemon going on called “cotango”.This is where the future price of oil is higher than the current price.Check the April 2010 and the 2016 price.
http://www.dailykos.com/story/2009/3/26/713129/-Bernie-Sanders-Temporarily-Blocks-Obama-Nominee-as-Goldman-Sachs-Deregulator-(with-poll)
Quote:
Independent Senator Bernie Sanders of Vermont is attempting to block President Obama’s nominee–Gary Gensler–to head the Commodity Futures Trading Commission by putting a senatorial “hold” on the nomination (along with a second, as yet unnamed senator).
….
AMY GOODMAN: So, what would his job be now, if he gets confirmed?
SEN. BERNIE SANDERS: He would be head of the Commodities Future Exchange Commission, which is a very important regulatory body. You may recall that when, among other things, the price of oil went up—the price of gas went up to $4 a gallon, there was a lot of belief on Congress and among the American people, and among the oil industry, I should tell you, that one of the reasons for this rapid increase in gas prices had to do with speculation coming from Wall Street. The Commodities Futures Exchange Commission under Bush was very, very weak in taking a look at that. And obviously we want somebody to be very strong and to look—looking at futures trading and excessive speculation. That would be, among other things, the job that Gensler would have.
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Any connection between oil prices and these events?
Doesn’t a devalued dollar mean oil prices will go up for US?
Oil pricing seems caught in a bit of a tug of war between contracting economy (deflationary) and a devalued dollar (inflationary).
Who knows which way this will go as I believe the markets are so distorted and manipulated these days.
However — this from 3/25 Bloomberg is quite puzzling and disconcerting:
” Exxon Mobil Corp. and Chevron Corp., their coffers swollen by last year’s record oil prices, are maneuvering to preserve a combined $40 billion in cash amid a global financial crisis that roiled the banking system.
Exxon Mobil Chief Executive Officer Rex Tillerson says he checks in every night with Treasurer Don Humphreys to make sure the money is still there. The largest U.S. oil producers won’t say where they’re putting cash, even as both acknowledge going to greater lengths than in the past to protect their funds.
“Relative to the financial markets, the biggest challenge we’ve had is making sure all the cash is there every morning,” Tillerson said in a presentation this month to investors and analysts in New York. “I tell Don he has to count every dollar before he goes to bed at night, and he tells me he does.”
Re R Whitman “We also have another interesting market phenonemon going on called “cotango”.This is where the future price of oil is higher than the current price.Check the April 2010 and the 2016 price.”
Gold and gold futures markets have succumbed to a similar phenomenon, and it is an indication that whatever the price now, betting is supply will not keep pace, and that other investment vehicles, eg, stocks and real estate will not retain and increase their value. This puts more pressure on the other investment vehicles.
Perversely, when the future price is higher than the current price, there is both a scramble for futures and a future reduction in production as margins slow or mothball new anticipated production THAT HAS ALREADY BEEN FACTORED into the global commodity and capital markets. So when the physical shortages from that slowdown occur, price spikes are the inevitable result, and the producers and refiners, having already factored all this in, reap the benefits. Which can be reinvested in the best vehicles.
There have already been several occasions in the past year when there was simply no gold to be had on open markets, and analysts wiser and better informed than I predict more of this cycling.
What people need to watch out for is that once all the bailout cash has been handed over to the financial sector, and not loaned out, INTEREST RATES WILL RISE TO ENSURE THE PROFITEERS GET THE GREATEST RETURN FOR YOUR CASH.
Of course interest rates will effect present and future production.
I have been out of the markets, aside from some very attractive long held Hydro Quebec bonds for more than a year and half.
As a result, I’ve made about 17% on that wad of cash and pile of gold in that time. Quebec, god bless it, is initiating further hydroelectric generation in the James Bay watershed and I urge you all to ignore any of their future bond issues! An earlier series went at a now astounding 11%.
The Tata $2000 car is now on the market in India. China is making energy investments all around the planet, including in our Canadian oil sands, oft touted as the largest single reserve of albeit messy and expensive dirty oil. The oil sands would certainly be much easier for the US. to seize than the Iraqi fields anyway!
Bottom line – the price will go up.
Hello, Colonel. I just read something in the Asia Times that i found extremely disturbing, and i would like to hear your take on it:
http://www.atimes.com/atimes/Middle_East/KC27Ak02.html
Specifically:
“Obama’s decision to go along with the military proposal for a “transition force” of 35,000 to 50,000 troops thus represents a complete abandonment of his own original policy of combat troop withdrawal and an acceptance of what the military wanted all along – the continued presence of several combat brigades in Iraq well beyond mid-2010.”
There appears to be enough oil available at the current level of consumption to drive the price down. The price also reflects strength or weakness in the dollar. A third influence on price is the risk of supply disruption. Much of the world’s oil comes from regions in conflict, the Middle East or sub-Saharan Africa. The price of oil tends to rise as talk of Israel and/or the US attacking Iran becomes louder or when internal conflict disrupts African production..
It is critically important that we make it through the summer without a gasoline price spike. The American consumers need relief in order to pay down some of their personal debts.
I would like to go out on a limb and suggest that one possible (non-productive) use by our oh so responsible large banks of all the stimulus funds flowing into them could be to create a new oil bubble. Such a bubble would likely be blamed on falling dollar, and woudl of course burst.
Can anyone explain why, with world oil prices falling for months and inventory surpluses, why pump prices in the US have risen steadily over the past 4 months? Is it the same in Europe?
Col. Lang,
It would appear that your suspicions about the oil market last summer rising due to non-fundamental factors was accurate. Take a look at this recent Forbes article alleging manipulation by Goldman Sachs:
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html
Given all that Goldman’s footprints are all over the AIG bailout as well as the financial rescue (look at the backgrounds of who staffed the Treasury department under Paulson along with Geithner’s ties) when will the public demand an investigation?
After all, Paulson’s policies made no sense unless they are viewed through the prism of ensuring that Goldman (along with Morgan Stanley) remain solvent.
It has been stated in numerous articles that Paulson called in Goldman’s derivative group (which I can confirm though friends who work there) to look at AIG’s book right before they received the first $80 billion. Any coincidence that they stood to lose the most if AIG was put into Chapter 11?
In addition, why has AIG kept losing money on the derivative book since then (requiring two further injections of taxpayer money)? Could it be that Goldman is trading against their book too, much like Semgroup in the Forbes article?
Anyone who believes that something like this couldn’t possibly happen, should read Roger Lowenstein’s classic account of Long Term Capital Management’s downfall, “When Genius Failed”. In it, he shows how Goldman traded against LTCM’s book even while the other banks were attempting to stitch together a rescue plan.
Fool me once…
Actually predicting the price of oil is beyond me. But I do wonder how two different processes feed into what the price will be.
Even if the price stayed “the same” in units of constant value; the price in each currency would rise and fall in that currency as that currency fell and rose against other currencies and also against whatever “constant value units” the price of oil was staying the same in. So if the dollar falls to half its current value, won’t oil
cost twice as many half-size dollars even if the “constant value price” of oil stays the same?
Also, I have read that the current low price of oil and the current semi-unavailability of huge amounts of credit needed to pre-pay for multibillion dollar development efforts have combined to reduce exploration and development below their normal ongoing levels. That leads people to predict that the amount of oil being found and extracted will be less over the next few years than it otherwise would have been if
oilfield investment had not shrunken down the way it has. If that’s true, and if
the big oil-user economies recover strongly in the next few years; won’t rising
demand meet lowered supply to make oil cost more even in “constant value units”?
My inability to keep track of all those moving Xs
and Os is what stops me from
even trying to predict the future price of oil.