Crude Oil on high note ..is it?

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Crude oil started off on a positive note. It rose to $135 a barrel when U.S stockpiles dropped unexpectedly and traders closed losing trades on bets that prices would fall. Oil has risen 19 percent this month as analysts have increased their price forecasts because of supply constraints and demand growth. Everyone's jumped on the bandwagon and there's agreement that $200 is possible and that's getting more people into the market. They have very little supply cushion going forward and that's playing into the minds of investors. Rising oil prices are starting to affect other areas of the economy, particularly the transportation industry. There are rising concerns it will slow growth as increases in fuel cause costs to surge.
 
Chev,

I suppose it's a question of how much commercial consumers can pass on higher input prices to their customers/how much customers are willing to accept and pay. There must be limits, but where?

Was the reduction in US inventories due to the government releasing some onto the market to try to reduce prices? I reckon it could also be a ploy to get OPEC to increase production. One the reasons the Saudis wouldn't increase production was because they saw the US simply increasing inventories and therefore distorting the supply/demand equation.

Grant.
 
Chev,

I suppose it's a question of how much commercial consumers can pass on higher input prices to their customers/how much customers are willing to accept and pay. There must be limits, but where?

Was the reduction in US inventories due to the government releasing some onto the market to try to reduce prices? I reckon it could also be a ploy to get OPEC to increase production. One the reasons the Saudis wouldn't increase production was because they saw the US simply increasing inventories and therefore distorting the supply/demand equation.

Grant.

yes true... there are no limits as such. Crude oil rose again on supply disruptions and speculation that the the falling U.S. dollar may sustain investor demand for the commodity. May be its ploy to get OPEC increase it production..but whatever may be issue, the production is increasing and OPEC is all set to do it. "People are really responding to longer-term supply issues." We can get more updates from gnuTrade - Daily Market Talk - Being Updated on OIl..
 
Currently 1 person in China and India are consuming less than 2 barrels of oil a year. While 1 person in US and Japan are consuming more than 15 barrels of oil a year.

As China and India economies continue to grow, more and more people in China and India will own cars, refrigerators, TV, air-conditions, and this will raise current consumption of 2 barrels of oil to 10 barrels of oil in the next 5 years.

At that time, oil price could be priced at $250/barrels then.
 
“If China and India were to increase their consumption per person to current US levels, these two countries alone would require 160m barrels per day, more than twice the world’s supply of oil today.” (gnutrade.com).

Prices will not fall as long as demand is increasing. The only way out is to hike US rates to drive up the dollar, thus increasing the oil price for foreigners.

This will weaken the Euro and OPEC will then insist on payment in Euros (long rumoured). This may not be so fanciful as many Gulf states’ interest rates (and currencies via a peg?) are tied to the US’s, thus creating high levels of imported domestic inflation for the Gulf states.

The could be OPEC’s position of strength: sacrifice the US domestic economy for the sake of the international economies and inflation. Will it happen? Of course it won’t.

Incidentally, Europe is more exposed to increasing diesel oil prices, increasing at a greater rate than crude (I stand corrected on this point).

$250 is a very fair assumption. Could be the trigger price for the US to do something.

Grant.
 
A look back to the oil shocks of the 70s may give an indication of what to expect next. High inflation, lower consumption, slowing industrial growth, rising unemployment and recession. The airline industry is in real danger now also. The economy did well soaking up $80 oil but 100 and onwards is starting to bite. This is all boosting profits for the oil majors and making certain projects financially viable which is why we seem to be going beyond fundamentals into hysteria.

Would you pay £3 for a can of coca cola, due to the fact that one day, the Chinese and India will
have more income and will increase consumption? "The years of easy cola are over!" "Coke convoy attacked by rebels!" would be the headlines!
 
Saint,

I think the great unknown here is what happens when (if) the Chinese stop subsidising/capping oil prices? I suppose as long as it's politically expedient. Next, it's a question of which is the strongest - political or economic force? I would say political insofar that the Chinese government can bide time until the benefits of agreements, joint ventures, new pipelines and easier access come forth. In other words, their fortitude is greater than the US's.

Grant.
 
This article is supporting the idea that there is not a speculation of the oil price but the price is really driven by supply/demand and worries about future time.
This article is also highlighting the off limits, for western oil firms, policy of oil country exporters. In fact now it is very expensive to increase new production and to develop new fields

Oil | Double, oil and trouble | Economist.com
 
Profeta,

I've never really had much time for the Economist: buying by speculators does not drive up the price
for future delivery. So buying depresses the price?

"traders seem to be very worried about the future. They recently pushed up the price of oil to be delivered at the end of 2016 to over $145 a barrel". Presumably these traders are sellers, then not buyers.

"They seem to be motivated by the sobering realities of supply and demand, rather than reckless speculation". So they don't speculate on the supply/demand equation? What else is there to speculate on for oil?

"output...is declining". This is probably to keep prices high.

"If the indexed funds were indeed pushing the price of oil beyond the level justified by supply and demand, then they would be having trouble selling their futures contracts at such high prices before they matured.

“leaders of...oil-rich countries (should)...allow foreign oil firms more access”. And of course, they’ll lower the price of their oil because their motives are altruistic.

This is probaly the worst analysis I have ever read.

Prof,

I find far superior analysis in the International Herald Tribune, Wall Street Journal but the best is from here:
Asia Times Online :: Asian news hub providing the latest news and analysis from Asia

Also look here:
Platts
Gulfnews: Business
RIA Novosti - Business

Grant.
 
Open question........

Everyone is citing india/china growth but did they just start growing 4-1/2 years ago ? Cos that's when the momentum really got in OIL .....or is there another reason ...the real reason ?

I suspect that someone decided it was time to flip the switch on higher oil and fed us this stuff about china/indian growth ...sounds reasonable so we lapped it up. Like we did with The New Economy/New Paradigm stuff at the turn of the decade.

When they decide to flip the switch the other way we will probably wonder why we fell for the chindian growth story ...... Almost everyone is citing this as the reason -as this is what we have been fed - so it's probably not totally accurate ....... maybe the Fed and their cohorts are throwing their vast resources at the oil price and extorting a "dividend" from the oil producers ?
 
A few minutes ago:

TAIPEI (XFN-ASIA) - Taiwan's state-owned refinery CPC Corp will raise gasoline and other fuel prices from tomorrow, Premier Liu Chao-shiuan said.

He said that after tomorrow's adjustment there will be no further adjustment until July.
The price of No. 92 unleaded gasoline will rise to 33.9 twd per liter from 30 twd and the price of diesel fuel will rise to 31.9 twd per liter from 27.5.

Liu said the increases reflected only 60 pct of the recent increase in crude oil prices.
He said the government would absorb 20 pct of the crude price increase by adjusting its commodity tax on petroleum products and CPC would absorb the remaining 20 pct.

Crude oil prices surged 43 pct from October 2007 until May 20 this year, the premier said.

Last week the newly installed Kuomintang party government lifted the freeze on gasoline and electricity prices imposed by the previous government last December.

Tomorrow, the mainland.

Grant.
 
Someone start to think that the oil price get the peak, highlighting that the slowdown of economy determines a dropping of fuel demand
The slowdown of economy is confirmed by the consumer confidence falling more than the forecast
Bloomberg.com: Worldwide
 
crude prices

just lookin at a crude chart last couple of days, seriously, its literally a straight lineup the last month and a bit, now if the fundamentals are that theres not enogh itll probably keep going up, but seriously, this has bubble written all over it from a tech point of view.
 

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If the US doesn't start raising rates to curb inflation in the Gulf, OPEC just may cut production to maintain a high price.

Grant.
 
If the US doesn't start raising rates to curb inflation in the Gulf, OPEC just may cut production to maintain a high price.

Grant.

The reason why oil is rising is precisely because the dollar has no value.

Cutting rates will only deteriate the fundamental decline of the dollar, rise of oil and gold and inflation which can and will continue to further reduce the dollars value.

Our survey says... X X !!!!

Solution is to raise taxes. If taxes aren't raised, inflation will erode purchasing power.
 
Atilla,

I said "raising rates".

Grant.

Ooopssy daisy !!! :eek::eek::eek:

Sorry Grant. I have this condition where I mix up words and names... I mixed up raising rates with cutting production... :eek::eek::eek:

You are right but raising rates would altogether kill off industry. Better way to ease off on demand is to raise taxes and keep interest rates modestly low to stimulate investment. This will also help with stagflation.

Doubt powers above will do this as politics is all about being elected into power and not about doing the right thing anymore.

Also, obviously there are some fundamentals too about oil wrt supply and demand, new oil fields and greater energy demand from India and China but fall in dollar value means producers will have to be compensated by higher prices ie more dollars.

Apologies once again... (y)
 
just lookin at a crude chart last couple of days, seriously, its literally a straight lineup the last month and a bit, now if the fundamentals are that theres not enogh itll probably keep going up, but seriously, this has bubble written all over it from a tech point of view.

This week's "File on 4" deals with this point. BBC4

A mass of money trying to find a profit.
 
Open question........

Everyone is citing india/china growth but did they just start growing 4-1/2 years ago ? Cos that's when the momentum really got in OIL .....or is there another reason ...the real reason ?

I suspect that someone decided it was time to flip the switch on higher oil and fed us this stuff about china/indian growth ...sounds reasonable so we lapped it up. Like we did with The New Economy/New Paradigm stuff at the turn of the decade.

When they decide to flip the switch the other way we will probably wonder why we fell for the chindian growth story ...... Almost everyone is citing this as the reason -as this is what we have been fed - so it's probably not totally accurate ....... maybe the Fed and their cohorts are throwing their vast resources at the oil price and extorting a "dividend" from the oil producers ?

Right what looked like a brief counter trend pbk on 27 May (2d after the top) is now at best a longer counter trend pbk...... at worst the end of this bull campaign.

But now we here that india and possibly china will remove price caps ... probly not good news for their economy for those who believed they were responsible for the bullmarket.

Ben B spoke yesterday about dollar and rising inflation .... as if he didn't know that debasing the currency would stoke inflation .....:p Anyway there are now whispers that he wants to raise rates lifting dollar and hurting crude (possibly).

Then there is this CFTC enquiry ..... about hedge funds and commodity index funds manipulating the market - oh so it's not demand from india/china ? :LOL:

Who (probly) controls the worlds biggest "hedge fund" .... which probably never has a down week ....? Rhetorical question .....:LOL:

CASE MADE? No.... perhaps not beyond all reasonable doubt .......... but there is enough circumstantial evidence imo ... :LOL:

So what ? If I'm right the next multiday rally should fail - and that should be good night vienna !!

I have to say though that some part of me wants $144 I don't know why.............
 
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