Crude Oil Expected to Hit 115.00

[Clove]

http://money.cnn.com/2008/04/15/markets/oilprices/index.htm?eref=rss_topstories

NEW YORK (CNNMoney.com) -- Crude oil prices rose to a new record high above $113 a barrel Tuesday as the U.S. dollar weakened further against the euro.

Light, sweet crude for May delivery rose to a new trading high of $113.93 a barrel in early morning electronic trading. The previous high of $112.21 was set April 9.

Oil settled at a record closing high of $111.76 a barrel on Monday.

"The path to $115 is cleared," said Stephen Schork, publisher of the oil trading newsletter The Schork Report.

Ringing dollar bell
The latest surge in crude prices is partly due to weakness in the U.S. dollar, analysts said. As the dollar has dropped versus the euro, many investors have flocked to commodities such as oil and gold to preserve the value of their assets.

"Those Pavlovian dogs are barking. Until someone breaks them out of that paradigm, they're going to keep trading that way," said Schork.

The euro bought $1.5865 early Tuesday, up from $1.5808 the previous session. The euro hit an all-time high against the dollar last Thursday.

Traders are also trying to get ahead of rising demand for crude as refineries finish their maintenance cycles and begin gearing up for fuel production over the next few months, Schork said.

Petrobras fizzle
Surprisingly, traders are not taking into account Monday's news that Brazilian oil company Petrobras (PZE) may have made the largest oil discovery in 30 years. According to Harold Lima, president of Brazil's National Petroleum Agency, the off-shore find could contain the equivalent of 33 billion barrels of crude, the world's third-largest oil reserve.

A find that large would normally put pressure on crude prices, said Omar Nokta, managing director of energy and commodities investment bank Dahlman Rose & Co. But the time and technology takes capitalize on new deep-water discoveries may be mitigating its affect on the markets.

"It's not going to happen overnight like it did 10 years ago," said Nokta. In a best-case scenario it would take a "good 5 years to fully develop a find," he added.

The new record for crude comes as both refined gasoline and diesel fuel reach record prices at the pump. According to a AAA survey, regular unleaded gasoline hit $3.386 a gallon, and diesel reached $4.119.

In other Nymex trading, heating oil futures rose slightly to $3.2029 a gallon while gasoline prices rose more than a penny to $2.8218 a gallon. Natural gas futures gained more than 15 cents to $10.053 per 1,000 cubic feet.

In London, Brent crude futures rose $1.79 to $111.63 a barrel on the ICE Futures exchange.

First Published: April 15, 2008: 9:03 AM EDT

--
Remember, you heard it here first. Current crude oil spiking is due (largely) to the dropping US dollar. As an aside the supply/demand cycle for oil should have crude at around 80-90 dollars a barrel, right now the stock market is driving the price up over what its demand price should be. What seems to be happening is a bubble effect and eventually a market correction will occur (assuming demand in Asia doesn't push it up over 100 anyway).

[Stanley Burrell]

I was um, bored, so I decided to see how much it would cost to go from 1/16 of a full tank to F in my Uplander. The answer is almost $70. I really, really, really need to get Town Faire to take off the Glacial Grip IIs. And I've made a retarded habit of leaving the air on.

After LMingrone hooks me up with wood-paneling and pyrite spinners, I think I'll turn this heap of soccer mom shit into a convertible. Prolly around 2-5 thousand pounds less of metal, then.

Fucking A, man. I actually have to plan my driving, it's an adjective/noun that gets edited by Snapp.

I need someone to crash their car into my folks' garage and savagely attack my minivan with a sledgehammer. I'll pay you 1/10th of the deductibles on my insurance replacements for a lighter car. Try and make it reach its way onto the news. A sympathy whatsit would be good too to make the replacement process work; like, etch swastikas on the husk with a katana. I'm Jewish. PM me, this is totally legal.

[Clove]

Ah a visit from Stanley, Threadslayer.

[Gan]

Good article Clove.

Thanks for posting it.

And I agree with your oil cost bubble, I'm just afraid its sustainability will have some endurance.

On the plus side, this will definately put pressure on the market to start producing reasonable alternatives (substitute goods).

In the meantime, I would advise folks to adjust their standards of living (and travel) accordingly.

[TheEschaton]

Can you guys explain how the stock market is, in Clove's terms, creating artificial demand? Do you mean by the stock market driving down the dollar against the Euro?

-TheE-

[Stanley Burrell]

Ah a visit from Stanley, Threadslayer.

It's not exactly like, uh, this is the first "here's the oil index quote" let's pat-ourselves-on-the-back for talking Wall Street thread.

I mean come on, you guys have already stated your opinions on why there will be a $120 and $130 thread, lick each other's asses in the exact same fashion while reciting exactly what you have been (pertaining to these threads) and won't even dare to spice it up at all. Do something cool and not we-just-did-this. Because it's kind of what the sexual term used as an adjective or noun is that Snapp edits out of my posts. I mean look at the pattern, it really is the sexual slur noun/adjective that Snapp edits out of my posts.

I mean, it can become a flame war, anti-Columbian. We've done all this shit. Time to move on. To not drowning in a whirlpool of almost-the-same posts.

[Keller]

Can you guys explain how the stock market is, in Clove's terms, creating artificial demand? Do you mean by the stock market driving down the dollar against the Euro?

-TheE-

He said the price is above where the demand price should be. And yes, it's because oil is indexed on the dollar and the dollar is going down. I might be wrong though, as I've not taken an econ class since my senior year of high school.

[longshot]

Can you guys explain how the stock market is, in Clove's terms, creating artificial demand? Do you mean by the stock market driving down the dollar against the Euro?

-TheE-

I don't have the time or the energy to explain this to you...

[Stanley Burrell]

Can you guys explain how the stock market is, in Clove's terms, creating artificial demand? Do you mean by the stock market driving down the dollar against the Euro?

-TheE-

You have to wait until the oil reaching $120.00 thread. Sry, d00d.

[longshot]

One factor of oil prices that I've rarely heard discussed is the use of real options when determining oil supply (and prices).

While it's really expensive to store oil once it's pumped out of the ground, there are no real storage costs incurred when you leave it in the ground.

You can look at in ground oil as a call option with a strike price equal to the marginal cost of getting the crap out of the ground.

A major component in options pricing is volatility. The fluctuation in oil prices make the option more valuable, and so people are less likely to supply oil now. Simply put, from an options perspective, the oil in the ground is worth more when vol kicks up.

I'm not suggesting that this is the sole reason for oil prices being high. I'm just adding something that I think many people don't consider... or are even aware of.

[Stanley Burrell]

Auto industies could be more flexible.

We could also use public transportation.

And most importantly, not buy from all the Arab fucks who want us dead ... Just after after we buy black gold from them. I buy from Shell because I've heard it isn't tied into the Arab syndicates. Still though, I want some fuck to globalize their crude so that I may laugh, and laugh, and laugh, and laugh.

I <3 Saudi Arabia.

[longshot]

I mean come on, you guys have already stated your opinions on why there will be a $120 and $130 thread, lick each other's asses in the exact same fashion while reciting exactly what you have been (pertaining to these threads) and won't even dare to spice it up at all.

....

I mean, it can become a flame war, anti-Columbian. We've done all this shit. Time to move on. To not drowning in a whirlpool of almost-the-same posts.

If you don't like it, there's no need for you to look at the thread. That's usually why they have titles.

If you seek entertainment, there are always hard drugs. It's worked for you before.

[Stanley Burrell]

If you don't like it, there's no need for you to look a the thread. That's usually why they have titles.

If you seek entertainment, there are always hard drugs. It's worked for you before.

Yeah, but see, I can post in them.

Voila.

[Gan]

Can you guys explain how the stock market is, in Clove's terms, creating artificial demand? Do you mean by the stock market driving down the dollar against the Euro?

-TheE-

1. Speculation: Fear over supply shortages in the US due to increased world demand and low US inventories. Add to this speculative behavior is the conflict in Iraq and other unrest in the middle east and how it pushes speculation on future inventories and availability.

2. Increased demand due to investors pulling out of the housing market and investing in oil and other commodities.

3. Low US dollar value: pushes up speculative buying as investors try to hedge their losses in other domestic areas.

Interesting thing is that #3 is affected by inflationary pressures and effects of fiscal/monetary policy brought about by its very existance at such a high price. #2 will correct itself eventually. #1 can only ease through moderation of consumption or a sudden increase in supply (outside of OPEC monopolized production).

[Gan]

It's not exactly like, uh, this is the first "here's the oil index quote" let's pat-ourselves-on-the-back for talking Wall Street thread.

I mean come on, you guys have already stated your opinions on why there will be a $120 and $130 thread, lick each other's asses in the exact same fashion while reciting exactly what you have been (pertaining to these threads) and won't even dare to spice it up at all. Do something cool and not we-just-did-this. Because it's kind of what the sexual term used as an adjective or noun is that Snapp edits out of my posts. I mean look at the pattern, it really is the sexual slur noun/adjective that Snapp edits out of my posts.

I mean, it can become a flame war, anti-Columbian. We've done all this shit. Time to move on. To not drowning in a whirlpool of almost-the-same posts.


Auto industies could be more flexible.

We could also use public transportation.

And most importantly, not buy from all the Arab fucks who want us dead ... Just after after we buy black gold from them. I buy from Shell because I've heard it isn't tied into the Arab syndicates. Still though, I want some fuck to globalize their crude so that I may laugh, and laugh, and laugh, and laugh.

I <3 Saudi Arabia.

You should really stop posting in these types of threads. For the most part, your posts (the ones that are comprehensible) are comedy relief... here you're just being plain stupid. :(

[longshot]

Yeah, but see, I can post in them.

Voila.

http://images.amazon.com/images/P/B000002G7C.01.LZZZZZZZ.jpg


I can post too.

Why don't you try track 7...

[Stanley Burrell]

http://images.amazon.com/images/P/B000002G7C.01.LZZZZZZZ.jpg


I can post too.

Why don't you try track 7...

They have some Warhols in a new exhibit on the top floor of the Yale museum and it is absolutely indescribable. The exhibit is brilliant.

Don't go posting existential bananas and expect seriousness.


You should really stop posting in these types of threads. For the most part, your posts (the ones that are comprehensible) are comedy relief... here you're just being plain stupid. :(

There's a lot of economics threads and I got evicted by the City. I'm very spiteful towards those in the know-how.

[Arkans]

One factor of oil prices that I've rarely heard discussed is the use of real options when determining oil supply (and prices).

While it's really expensive to store oil once it's pumped out of the ground, there are no real storage costs incurred when you leave it in the ground.

You can look at in ground oil as a call option with a strike price equal to the marginal cost of getting the crap out of the ground.

A major component in options pricing is volatility. The fluctuation in oil prices make the option more valuable, and so people are less likely to supply oil now. Simply put, from an options perspective, the oil in the ground is worth more when vol kicks up.

I'm not suggesting that this is the sole reason for oil prices being high. I'm just adding something that I think many people don't consider... or are even aware of.

Heh.. Learn something new everyday.

- Arkans

[Daniel]

One factor of oil prices that I've rarely heard discussed is the use of real options when determining oil supply (and prices).

While it's really expensive to store oil once it's pumped out of the ground, there are no real storage costs incurred when you leave it in the ground.

You can look at in ground oil as a call option with a strike price equal to the marginal cost of getting the crap out of the ground.

A major component in options pricing is volatility. The fluctuation in oil prices make the option more valuable, and so people are less likely to supply oil now. Simply put, from an options perspective, the oil in the ground is worth more when vol kicks up.

I'm not suggesting that this is the sole reason for oil prices being high. I'm just adding something that I think many people don't consider... or are even aware of.

I think you're overly complicated the issue here.

The demand and supply for Oil has remained relatively steady but the price has risen dramatically. The oil suppliers thus have no reason to supply more oil because they know it will eventually correct itself and doing so would shoot themselves in the foot.

In the mean time they get to pocket assloads of money.

Sounds like a no brainer to me

[Clove]

I think you're overly complicated the issue here.

The demand and supply for Oil has remained relatively steady but the price has risen dramatically. The oil suppliers thus have no reason to supply more oil because they know it will eventually correct itself and doing so would shoot themselves in the foot.

In the mean time they get to pocket assloads of money.

Sounds like a no brainer to meIronically (though Gan and Longshot made good observations) this is my favorite analysis.

Tremendous speculation in oil commodities has spiked up price even though supply and demand remain stable. Usually this happens when speculators expect a commodity's value to go up in the near future due to an impending decrease in supply or increase in demand but it really doesn't look like either of these conditions are in oil's immediate future. So we have a bubble effect where speculators create a paper demand for the commodity temporarily raising the price artificially high until a correction occurs.

Like Daniel said, those that bought barrels at the beginning of this frenzy and are sharp enough to sell before the bubble bursts will pocket a crapload of money.

The question is, if the supply and demand of oil is staying steady why all the sudden speculation? Now it's my turn to speculate. There have been some developments such as Russia's recent drop in supply and I think there was a pipeline problem recently- both things that might effect supply and could cause investors in ordinary times to focus on oil but I think it has more to do with the falling dollar and the ongoing subprime mortgage collapse.

As the dollar falls more investors will be converting their dollars to commodities. I should point out that this could effect other commodities too, but since oil is the most traded commodity in the world, investors are going to hit it first and most. Coffee by the way is the second most traded commodity in the world (watch those coffee prices).

Gan made a good point, not only is the dollar falling but we have a mortgage collapse. This is going to cause people invested in those to want to move to a safer investment. The dollar is falling so they shift it to a commodity- oil.

My hunch is that unless a big development in the oil world sharply effects supply or demand that the bubble will burst somewhere between 115.00-120.00 a barrel. Only time will tell.

[Gan]

A 33 billion barrel supply oil field was just found in Brazil (first reported in November 07). But its at a depth that will take time to get the equipment and technology in to extract it. Just like the huge field found in the Gulf of Mexico thats below 15k feet. It will take time surpass the drilling limits currently seen by our existing equipment/technology in the field.

http://afp.google.com/article/ALeqM5i8D0lsdbNpSpvYTchpGVfOzHX14A

[Clove]

A 33 billion barrel supply oil field was just found in Brazil (first reported in November 07). But its at a depth that will take time to get the equipment and technology in to extract it. Just like the huge field found in the Gulf of Mexico thats below 15k feet. It will take time surpass the drilling limits currently seen by our existing equipment/technology in the field.

http://afp.google.com/article/ALeqM5i8D0lsdbNpSpvYTchpGVfOzHX14AYeah I read about that too. I think they're expecting that oil to be available in 5-10 years. It's definitely a boom for Brazil.

[TheEschaton]

I heard though, that despite the discovery, it wasn't easing speculation on oil.

So I guess my ultimate question is: Is this whole thing predicated on a (possibly irrational) fear?

[Clove]

I heard though, that despite the discovery, it wasn't easing speculation on oil.

So I guess my ultimate question is: Is this whole thing predicated on a (possibly irrational) fear?It depends on how far out you're speculating and the other factors to consider such as:

Where will demand be in the 5-10 years it takes for this oil to be available
How will OPEC quota this oil

Despite those other factors, the discovery should give investors confidence in a strong supply in the coming decade. I don't really think fear is as much a factor as the reaction to the dropping dollar and mortgage crisis.

[Keller]

crisis.


Words like that only perpetuate the psychological recession. Shame on you.

[Clove]

Words like that only perpetuate the psychological recession. Shame on you.My bad. I meant to say the current mortgage market correction.

[Keller]

My bad. I meant to say the current mortgage market correction.

You forgot Daniel you ignorant slut.

[Daniel]

I loled

[Clove]

You forgot Daniel you ignorant slut.
Daniel you ignorant slut... I did and it will go down as one of the regrets of my life that I read your posts in the order that I did.

[Clove]

On a lark I took a look at the price of gold over the past five years. In April 2003 it was just below 350.00 USD an ounce. 5 years later in April 2008 it's around 950.00 USD an ounce. The sharpest increase (in the past five years) occurred between October 07 and March 08 where it went from 750.00 USD an ounce in October to a peak of just over 1,000.00 USD an ounce at the end of March.

I haven't looked at other popular "safety" commodities, but it's just one more hint that people are dumping their US $'s into commodities.

[BigWorm]

On a lark I took a look at the price of gold over the past five years. In April 2003 it was just below 350.00 USD an ounce. 5 years later in April 2008 it's around 950.00 USD an ounce. The sharpest increase (in the past five years) occurred between October 07 and March 08 where it went from 750.00 USD an ounce in October to a peak of just over 1,000.00 USD an ounce at the end of March.

I haven't looked at other popular "safety" commodities, but it's just one more hint that people are dumping their US $'s into commodities.

Uh yeah, what you said. Reading comprehension ftl.

[Clove]

Uh yeah, what you said. Reading comprehension ftl.Basically gold rose about 400 dollars in 4 1/2 years. Then rose nearly 300 dollars in the past six months. People are investing heavily in commodities (in general) right now and it's driving up prices (like oil).

[Gan]

A little bit longer and its going to be a huge short selling opportunity for some commodities.

[Daniel]

If you think people like George Soros don't already know this and have their F3 hotkey set to sell gold short, then I don't know what to tell you.

[Clove]

A little bit longer and its going to be a huge short selling opportunity for some commodities.Ever see Trading Places?

[Gan]

"I had the most absurd nightmare. I was poor and no one liked me. I lost my job, I lost my house, Penelope hated me and it was all because of this terrible, awful Negro." - Louis Winthorp III (Dan Aykroyd)

[Clove]

My hunch is that unless a big development in the oil world sharply effects supply or demand that the bubble will burst somewhere between 115.00-120.00 a barrel. Only time will tell.

Oil price falls on weaker U.S. demand
Last Updated: Tuesday, April 29, 2008

http://www.cbc.ca/money/story/2008/04/29/oilfall.html

The price of oil retreated more than $3 US a barrel on Tuesday amid signs of flagging demand in the United States.

The contract for light, sweet crude oil for June delivery fell $3.12 to settle at $115.63 on the New York Mercantile Exchange, .

A report from the U.S. Energy Department indicated that demand for petroleum products dropped by 8.5 per cent in February from January, while gasoline demand fell by 6.2 per cent over the month.

A slowdown in the U.S. economy is expected to combine with high prices for oil products and gasoline to put a crimp on demand in the U.S. market.

Adding to the downward move in the price of oil was the end of a strike in Britain that had led to the shutdown of a major pipeline there.

A rise in the U.S. dollar against the euro was also leading to selling in oil. Investors have been using oil, and other commodities, as an inflation hedge when the U.S. declines.

Oil peaked at $119.93 US a barrel on Monday, but one analyst said falling demand and rising supplies will push prices down.

"The two combined do not bode well for $120 oil," said Linda Rafield, an oil analyst at energy research firm Platts.

Data due to be released Wednesday by the U.S. government is expected by analysts to show that U.S. crude supplies rose last week.
--
As the dollar strengthens, and supply is proving to meet demand adequately speculators are selling which deflates the bubble and corrects the price to where it should be.

[Gan]

If the Fed manages not to lower interest rates at the conclusion of the FOMC meeting today then we'll see oil drop lower. If the Fed bumps the rate down the previously expected half point then expect oil to run up towards 120 a barrell.

I'm hoping they will hold rates steady with language indicating a wait and see attitude which will help the dollar value slow its continual slide downwards we have seen lately.

Another good news was that GDP did show growth of .6% this past quarter so by textbook definitions we have still managed to avoid the classic definition of 'recession'.

Its also encouraging that lack of demand (US) means that households are adapting and modifying their consumption habits overall.

Money is a great motivator - whether its a surplus of or a deficit of...

*Edited because I missed the news last night:

Fed dropped rates by a quarter of a point and sent the message of holding still on future possible cuts. Not as good as I wanted, but better than expected.