Oil to $60.....by January?

[metalman]

Re: Oil to $60.....by January?

Gordo - My view (may not be worth much), vs. Henry Groppe's? I think we are not going to break below $75 oil, so you just threw some change away after some other substantial money you already committed.

$50,000 is the better part of the cost of another associates degree or a liesurely budget to get another major certification under your belt - to add to your existing qualifications. Or it's probably the better part of $200,000 in Silver, if you bought it, and had the patience to wait five to seven years.

My two cents is, it's always wiser to stay on the skimpy side of the "hail Mary" bets.

Of course if you win it, you'll have my sincere congratulations, but I don't really understand what you are doing.

If you have a lot of dough to sling around, the best way to get more, is to think as though you were still poor.

no one with 2 brain cells to rub together should claim to "know" where oil is going short or medium term (i learn from grg!). personally, i don't give a shit about oil. i see oil demands stays flat and prices rise while gold goes up later. oil demand can fall and prices too, and gold stays up.

will printing $$$ increase oil demand?

as ali g says... niiiiiiiiice!

[Gordo]

Re: Oil to $60.....by January?

Lukester, Metalman, GRG55, JK and all Itulipers:

Thanks for all your comments. I read every one of them thoroughly and respect all very much but it looks to me like there may be a big move down on oil soon, as Tet and Groppe and Littel predicted in November.

Nobody has a Chrystal ball but see the latest Forbes.com article below, from Robert Hinckley?, predicting oil at $50.

Energy Intelligence
Survive Oil's Slide
Robert Hinckley, Rochdale Research 12.04.07, 4:45 PM ET

Related Quotes CRR 39.02 - 1.28 IO 15.15 - 0.19 OIH 175.95 - 2.75 SU 97.74 - 0.58 WHQ 51.40 + 0.60 XLE 73.00 - 0.75

Surging oil prices reflect strong fundamentals, right? Not from our point of view. Prices have de-coupled from fundamentals, which appear far less robust than markets indicate. The flimsy U.S. dollar and inordinate levels of speculation, not fundamentals, seem to be the primary drivers behind this latest price surge toward the nirvana of $100 oil.
Let's quickly examine the fundamentals. Worldwide oil production is on the rise (OPEC and non-OPEC) while demand is weak and getting weaker. Speculators jumped on the uptrending market, driving prices to extremes, equating inventory draws with strong demand. But declining inventories have more to do with rising prices than strong demand.
In Pictures: 10 Cheap Energy Stocks
We believe current oil prices are $25 to $30 above levels appropriate to fundamentals. In our view, the market is at an inflection point where prices could fall by $20 to $25 a barrel without leaving so much as a skid mark.

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A few key factors relevant to current market conditions:
--Global oil demand should be up 1% this year, but down 1% in OECD countries (57% of consumption). We estimate 2008 demand will be up 0.6%, with gains coming entirely from Asia and the Mid East. The largest markets (U.S. and Europe) are expected to be down 1% or more, barring abnormal weather.
--Worldwide production will be flat this year, but should increase 2 to 2.5% in 2008, as non-OPEC output gains 2 to 2.2% and OPEC production is calibrated to reduce prices to sustainable levels.
--There is no oil shortage, only the perception of shortage created by geopolitical uncertainties, limited surplus capacity and persistent worries about peak oil production in the face of stubbornly growing demand.
--Oil companies typically liquidate inventories as prices rise and rebuild inventories as prices fall. Thus, near-term inventory fluctuations have more to do with price changes than demand changes.
--Extreme oil prices are now impacting demand. We liken high oil prices to deficit spending. Neither matters until an event triggers concern. Consumers have been hit by a housing meltdown and a tight credit market, which have made excessive debt and high oil prices finally hurt.
--Consensus thinking is always dangerous. Right now, the overwhelming consensus is that oil prices will break $100 and remain above $90 for an extended period. That simply won't happen in a global commodity where high supply/demand elasticity is the norm.
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Demand growth has been the driver in this price cycle. The flash point came in 2004, when world demand jumped 4% following ten years of growth between 1.3% and 1.5%. This extraordinary gain spawned the initial ramp-up in crude prices from $30 at the beginning of 2004 to $55 by year's end.
Looking back, 2004 was something of a fluke, as Chinese stockpiling accounted for about half the total annual gain. Confirming this, Chinese demand was up only 1.5% in 2005 and global demand was only 1.3% higher. In 2006 global demand was up a thin 0.9%, partly due to an unusually warm winter in the Northern Hemisphere. Reflecting this, OECD demand was actually down 0.8%.
Today's markets have been glutted since the rebuilding of inventories following hurricane Katrina about two years ago. Since then, oil prices have nearly doubled as market participants chose to focus on growing demand and limited production capacity rather than swelling inventories. Stagnating non-OPEC production, multiplying geopolitical risks and shrinking surplus capacity in both production and refining served to reinforce bullish thinking.
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Recent monthly supply and demand data suggest a deteriorating oil market where supplies are increasing and demand is softening. OPEC has approved adding about 1 million barrels per day to the market since Labor Day. That increase, combined with an expected 1.2 mmbpd increase in non-OPEC production next year, should push inventories to record highs and ensure significantly lower prices by next spring or summer without OPEC scaling back production.
A 1% increase in 2008 demand would require incremental production of about 1 mmbpd, whereas without OPEC cutbacks, an additional 2 mmbpd will be supplied. Thus, OPEC will need to cut production by at least 1 mmbpd next year to maintain market balance. That will bring global surplus production capacity to 4 mmbpd to 4.5 mmbpd, the highest level since oil prices broke above $30 in 2003.
That, in combination with increasingly weak demand, should push prices down sharply. Upstream companies (E&P) are most exposed to a breakdown in oil prices, although abnormally low natural gas prices would probably cushion the blow by declining proportionately less, relative to oil. We recommend avoiding this group until commodities retrace to sustainable levels, i.e., oil at $50 to $70 per barrel and gas at $7 to $8 per 1,000 cubic feet (mcf).
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Oil service companies and drillers also have exposure to weak commodities and that exposure is arguably equivalent to that found in E&P companies. We are not as cautious on service companies, although we would be highly selective. Among service names, we are continuing buyers of Ion Geophysical (nyse: IO - news - people ) and Carbo Ceramics for their leading edge product offerings and dominant market positions. We also like niche player W-H Energy (nyse: WHQ - news - people ) for its exposure to the active gas-prone Mid Continent and Southwest basins of the U.S.
Independent refiners would benefit most from an oil price break, and Valero Energy (nyse: VLO - news - people ) is our favorite. Integrated oils would also be helped, including our favorite, Suncor Energy (nyse: SU - news - people ).
Excerpted from Oil, Money & Markets--Price Disconnect , a Dec. 4, 2007, research report from Robert Hinckley, analyst at Rochdale Securities. Click here for the complete report.

[GRG55]

Re: Oil to $60.....by January?

Lukester, Metalman, GRG55, JK and all Itulipers:

Thanks for all your comments. I read every one of them thoroughly and respect all very much but it looks to me like there may be a big move down on oil soon, as Tet and Groppe and Littel predicted in November.

Nobody has a Chrystal ball but see the latest Forbes.com article below, from Robert Hinckley?, predicting oil at $50...

Good luck with the trade! You have momentum and sentiment on your side right now. There will undoubtedly be more pressure applied in the run up to the Dec 11 FOMC, as the Fed badly needs a falling oil price to provide cover for a 50 bips rate cut (" Future inflation expectations are well anchored, blah, blah). This week's timing of the US annoucement about Iran's nuke program was priceless. Nobody should be surprised if Goldman again plays its part and issues a bearish oil call just ahead of Dec 11 (GS has probably been waiting for today's OPEC announcement so they can pile on and spin it with more authority).

I'm no conspiracy theorist, but having watched this same scenario play out each of the last 4 years, one doesn't need to be particularly attentive to discern the pattern.

OPEC's decision today in Abu Dhabi would have been much easier for them if oil had stayed in the $90's (or already collapsed). Now it's more difficult for the Saudis. They don't want $100. They don't want $50 either.

It depends which the Saudis fear most, a collapsing US$ or a collapsing oil price. Since they feel they can control/correct the latter more than the former, the announcement will be dovish about supply to avoid another run-up into the $90's, or even worse, a breach of $100.

ADDED TO ORIGINAL POST:
OPEC announcement today...

OPEC Agrees to Keep Oil Production Targets Unchanged

By Julie Ziegler and Fred Pals
Dec. 5 (Bloomberg) -- OPEC, the producer of more than 40 percent of the world's oil, agreed to keep production targets unchanged as ministers rejected calls for more supply with prices near $90 a barrel.
The Organization of Petroleum Exporting Countries will meet again on Feb. 1 in Vienna to review today's decision, said Iran's OPEC governor, Hossein Kazempour Ardebili. Iran, Venezuela, Qatar and most other members had opposed a proposal to raise supply by 500,000 barrels a day at the meeting in Abu Dhabi.

Crude oil for January delivery rose $1.73, or 2 percent, to $90.05 a barrel on the New York Mercantile Exchange at 11:10 a.m. London time. Prices had fallen by more than $10 from a record $99.29 on Nov. 21 and ministers including Venezuela's Rafael Ramirez said that decline meant OPEC should reject a U.S. request for more oil.

``The case to raise production is not compelling for OPEC,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. ``The outlook for demand in 2008 is uncertain and raising output may create a supply glut.''

The target for 10 of OPEC's 13 members will remain at 27.253 million barrels a day.

Saudi Arabian Oil Minister Ali al-Naimi and Qatar's Abdullah al-Attiyah had said in recent days that the market has enough crude. OPEC agreed at its last meeting in September to raise output by 500,000 barrels a day starting Nov. 1, a move that failed to prevent last month's rally.

``Technically and fundamentally they've called it right,'' said Michael Davies, an analyst at Sucden (U.K.) Ltd. in London. ``There are some real dark clouds over the U.S. and U.K. economies, and they could spread to the rest of the world.''

[Gordo]

Re: Oil to $60.....by January?

Dec. 5 (Bloomberg) -- OPEC, the producer of more than 40 percent of the world's oil, agreed to keep production targets unchanged as ministers rejected calls for more supply with prices near $90 a barrel.
The Organization of Petroleum Exporting Countries will meet again on Feb. 1 in Vienna to review today's decision

Thanks for the info, GRG55. Not good news for me but my good spin is that oil is only up $1.23 early on the news (still below $90).

Possible scenario, my 29 June puts will at least bail me out of my 71 March puts, if the crude drop does not occur by February 14.

Still hoping for the big drop by February 14.

[GRG55]

Re: Oil to $60.....by January?

Thanks for the info, GRG55. Not good news for me but my good spin is that oil is only up $1.23 early on the news (still below $90).

Possible scenario, my 29 June puts will at least bail me out of my 71 March puts, if the crude drop does not occur by February 14.

Still hoping for the big drop by February 14.

I confess I can't understand the apparent "surprise" at the EIA crude inventory draw this week. With a major supply pipeline from Canada blowing up, and down for a few days for repair, there should be no surprise that inventories are down more than normal for the week.

[BlackVoid]

Re: Oil to $60.....by January?

IEA: oil demand has surpassed supply

http://europe.theoildrum.com/node/3331

I would not short oil. Unless a significant worldwide economic downturn happens very soon, oil prices will remain high. High meaning above $80.
The Forbes article above shows clearly, that they are totally clueless. Oil production is level since 2005. Non-OPEC supply has peaked. OPEC supply is not growing and there is NO spare capacity. If there were spare capacity it would be online now.

Oil exports are falling, because the domestic consumption of oil producers is growing. Demand is not falling at all. If demand would be less, then oil inventories would not be falling. But OECD inventories are going DOWN. US inventories (overall) declined by 4 million barrels just last week.

Mainstream analysts predicted a rise in oil production for 2006. It did not happen. They predicted a rise for 2007. Did not happen. They were calling a top for the price at $40, at $60. CERA a few years ago predicted that the oil price would fall to the mid 30s for around this time. Never happened. Following mainstream analysts in this market is like being led by a blind man in a deadly swamp.

Shorting this market is suicidal. Just my 2c.

[BlackVoid]

Re: Oil to $60.....by January?

From the article at the top.
"Littell says the Saudis realized their mistake and began pumping more oil in May."

WRONG!
Saudis did not increase in May, see data here:
http://www.eia.doe.gov/emeu/ipsr/t11c.xls
Production is flat this year up to August, later data is not in yet. Of course we know that they have increased a little since then.

Are you going to trust an analyst who cannot even get the facts straight? There are many, many errors in both quoted articles. Check the facts, the hard data.

[Spartacus]

Re: Oil to $60.....by January?

did any of the Saudi threats to increase production over the last 4 years ever materialize?

From the article at the top.
"Littell says the Saudis realized their mistake and began pumping more oil in May."

WRONG!
Saudis did not increase in May, see data here:
http://www.eia.doe.gov/emeu/ipsr/t11c.xls
Production is flat this year up to August, later data is not in yet. Of course we know that they have increased a little since then.

Are you going to trust an analyst who cannot even get the facts straight? There are many, many errors in both quoted articles. Check the facts, the hard data.

[Gordo]

Re: Oil to $60.....by January?

Spartacus,

Great Graph of monthly oil production for the last 6 years. You are right, the graph does not show a Saudi increase for May.

They may have been fibbing in May when the price was $65 and they may really be fibbing now when the price is $90. (This fibbing does not refer to the Fibinacci ratio.)

Thanks for the great info.

[Gordo]

Re: Oil to $60.....by January?

Here is another oil analyst (Chuck Kowalski at commodities.about.com)predicting a possible $25 per barrel drop in oil


Crude Oil Futures Under More Pressure

Wednesday December 5, 2007

Crude oil futures rallied early in the day, but closed with a loss by the end of the trading session. The Energy Department released the weekly petroleum inventories, which looked bullish for crude oil on the surface. The stocks of crude oil dropped 7.91 million barrels; unleaded gas increased 3.99 million barrels and distillates (heating oil and diesel) increased 1.43 million barrels.
The main focus was obviously on the increase of the end products – unleaded gas and heating oil. Increases in supplies of those products will weigh on futures prices of the whole energy complex.
News was also released from OPEC that they would not increase oil production again - at least until their next meeting in February. The market rallied from the news this morning, even though that was a likely outcome since the price of crude oil has dropped more than $10 in the last couple weeks. The crude oil market is certainly under pressure, as rallies have not held. Technical damage is being done on the charts, as a short-term trendline and support have been broken. This may be another prolonged drop similar to the second half of last year, where prices dropped about $25 per barrel.

[Tulpen]

Re: Oil to $60.....by January?

I am short on oil right now but what about the Ghawar oilfield, the key oilfield of Saudi Arabia? Is it running dry?

Opinions?

[GRG55]

Re: Oil to $60.....by January?

I am short on oil right now but what about the Ghawar oilfield, the key oilfield of Saudi Arabia? Is it running dry?

Opinions?

I can tell you with absolute certainty that Ghawar is running dry...



...It's been running dry since they took the first barrel out of it nearly 60 years ago.

(unless you are in the abiogenic oil cohort, in which case it's probably being replenished every night when we sleep)

[Gordo]

Re: Oil to $60.....by January?

I am short on oil right now but what about the Ghawar oilfield, the key oilfield of Saudi Arabia? Is it running dry?

Opinions?

Check out the article below on the Ghawar oilfield.

Some Analytical Aspects of the New Oil Market (Part 2)
Professor Ferdinand E. Banks
ferdinand.banks@telia.com
December 7, 2007
The University of Uppsala, Uppsala Sweden
The School of Engineering, Asian Institute of Technology, Bangkok Thailand

According to Dr Fredrik Robelius of Uppsala University, 20 years ago 15 oil fields had the capacity to produce more than one million barrels of oil a day, while today there are only 4 fields: Ghawar in Saudi Arabia, Kirkuk in Iraq, Greater Burgan in Kuwait, and Cantarell in Mexico. Cantarell is the most recent among these to be brought into operation, but even so its output began to fall two years ago. Burgan has also peaked, and at best the output from Ghawar is probably on a plateau.

[rj1]

Re: Oil to $60.....by January?

I don't know what oil will do, it may decrease but I'm not confident on it falling 33% in value.

However, did everyone notice in the recent downturn from $99 to $89 that the price of gasoline never went down?

[jk]

Re: Oil to $60.....by January?

I don't know what oil will do, it may decrease but I'm not confident on it falling 33% in value.

However, did everyone notice in the recent downturn from $99 to $89 that the price of gasoline never went down?

but neither did the price of gasoline rise as you would have expected during crude's run up.