Do we have an oil bubble?

[Guest]

Re: Do we have an oil bubble?

Uh, Metalman, you haven't been quietly selling off some of your PM and energy positions have you? I have been reading you exhorting people to "grow a pair" meanwhile. :rolleyes:

bingo. anyone long oil through disinflation who can't take the short term losses is nuts.

[VIT]

Re: Do we have an oil bubble?

To Lukester:

These pictures like you posted for Ghawar could be very misleading. Be cautious of oil&gas experts working outside real oil&gas companies. Most of the time they know nothing about geology, engineering and production so they just speculate and put everything in a big mess. It is not about their skills as analytics/experts but when they start to talk about reserves, production, decline etc.

It is not too much known about Ghawar, but what I have seen on the plots (1993-2003):
- constant production
- constant water-oil rate

So I can conlcude 2 options: they limit production and/or they have new development in new parts of the field. It means it is not in decline today but if it has a peak or when there will be a peak it is impossible to tell from these limited observations without having real data.

My guess is Saudis best policy is to keep uncertainty on the reserves: this helps to maintain the desired price and prevents consumers from shifting to other energy.

[Guest]

Re: Do we have an oil bubble?

Vit - Look at the net annual production progress in the large Ghawar chart above. This same chart picture is replicated from dozens of sources and public information. Saudi's annual production. Nothing to fudge or guess about there. Rig count is soaring. production growth first stagnated and now is declining slightly. Another one or two years like this will tell you everything you need to know. Here's another picture of ABQAIQ, also and old and tired field. What is there in this data which suggests stable production?

Then look at the global production bell curves. Yes, this is from Colin Campbell, a source that is "suspect" to you probably. But notice who it's attributed from - Sadaad Husseini (Saudi Aramco). Besides there are dozens of bell curve plots from dozens of sources and they all fall into this general time window. Conclusion - iTulip has hashed out this topic extensively. Dozens of others have hashed it out extensively. People who have been reading here for two years have no interest to go over all of this again because we went over it all in excruciating detail and debate a year and a half ago.

There is no discussion that the decline of global production is right here, two years, four years, six years away max. Anyone who thinks that we will not be getting serious price signals from this five years before the cusp occurs - these are the ones who are engaging in the real speculation. The rest of us who expect the price signals to appear quite soon are the realists if you accept this data as roughly correct. So this question is very plain and very simple. Short of a catastrophic global industrial GDP collapse, the world consumption just nets out to keep rising, 2%++ year after year after year.

What part of this picture suggests to you guys that this puny absurdity called a 'STRONG US DOLLAR" under the onslaught of the reflation which the Fed is subjecting it to, is going to be keeping a lid on this oil price, eh? This is where I read all these "financialized" analyses of why "oil is a buy" and "oil is a sell" and how "it's all due to dark matter on the OTC markets" and I ask myself what the hell these people are thinking. You are anything from two to six years away from the biggest energy squeeze of the past 300 years and dinking around examining OTC markets?


SOARING RIG COUNT - DECLINING PRODUCTION - SAUDI.jpg

ABQAIQ IS ALSO AN OLD AND TIRED OIL FIELD.jpg

DOES THIS CHART SUGGEST OIL PRICES WILL BE FALLING MUCH LONGER.jpg

[VIT]

Re: Do we have an oil bubble?

Vit - Look at the net annual production progress in the large Ghawar chart above. This same chart picture is replicated from dozens of sources and public information. Saudi's annual production. Nothing to fudge or guess about there. Rig count is soaring. production growth first stagnated and now is declining slightly.

I do not argue about peak oil - it is natural thing which you can do nothing about. But the timing is a difficult question. What about Ghawar all these plots are inconclusive: increase in the rig counts - they have horizontal wells drilling program, decrease in production - they might have field maintenence, what you do not know how many new well locations they have in this field and what is the potential for developed areas. I can show you dozens plots when the field oil procution goes up and down sigificantly. This is especially true for big fields and when you constraint the production.

My point is to avoid pointing out on the chart or picture especially which you might read wrong and saying "look we have a peak there". I said before when the giant fields like this would start to decline we will feel the real shortage without having any spare capacity as today. But it is not so bad in overall energy prospective: we still have some giant gas fields (even Ghawar has the untaped gas reservoirs in deeper horizons) to come on production so in the next decade there will be continues shift from oil to gas.

The important thing is that we have steady increase in proportion of oil coming from expensive enviroments like unconventinal fields or deep water. So even when the world wide production is constant the cost structure shifts to expensive oil. And world wide we are just in the begining of this cycle.

P.S. I joined iTulip after the discussion about peak had ended here so did not read all zillions posts there.

[c1ue]

Re: Do we have an oil bubble?

What I hear is that symbols made bank. This is about making money: the rest is crap.

What I hear is a lot of talk with zero concrete commitments posted before/during action.

Then a lot of talk afterwards on being 'right'.

There's lots of easy ways to show your credibility - I see very little of that going on here.

Its easy to put forward a technical argument then say afterwards "See, I was right!".

But again, there is right because your thesis is correct, and there is right because some macro conditions are temporarily in your favor.

Just as when I beat up Lukester constantly about his gold/PM views, so now I beat up $#* for a lot of yakety yak.

Deleveraging was talked about months ago in at least one eminent iTulip interview - so far it is quite unclear to me that ETN/ETF machinations are the prime driver in present commodity price behavior.

Is it perhaps possible instead that the due the the credit crunch, that the inability to leverage up plus the reduction of existing leverage is what is really causing prices to fall?

I think this is very possible.

The question now is what is more fundamental: economic demand or market behavior? And when does one switch to the other (or vice versa).

I see nothing about that either, just more "Mine's bigger than yours"

[Supercilious]

Re: Do we have an oil bubble?

Epilogue: It's over. There is now a 60 Minutes episode about it



(Direct link for those with difficulties in seeing embedded clips: http://www.cbsnews.com/video/watch/?id=4713382n )

[sishya]

Re: Do we have an oil bubble?

Symbols -
You have gained a lot of respect in this forum for taking the Oil Bulls by their horn, especially when you were predicting an Oil Bubble in July 2008, contradicting what everyone was saying and investing. your style maybe flamboyant, but your words do carry more weight than others and everyone knows it.

[metalman]

Re: Do we have an oil bubble?

Symbols -
You have gained a lot of respect in this forum for taking the Oil Bulls by their horn, especially when you were predicting an Oil Bubble in July 2008, contradicting what everyone was saying and investing. your style maybe flamboyant, but your words do carry more weight than others and everyone knows it.

i'll second that. as added evidence, symbols is still here while the lukester is on hiatus.

that said, when oil goes back up to $100 will that mean the bubble is back? bubbles don't typically 'come back' as you know.

[sishya]

Re: Do we have an oil bubble?

i'll second that. as added evidence, symbols is still here while the lukester is on hiatus.

that said, when oil goes back up to $100 will that mean the bubble is back? bubbles don't typically 'come back' as you know.

If Oil does go back to $100 within 2 years, I would assume that Oil was not a Bubble and there was no speculation. But if it happens in like 3 or 4 years, then I would assume it is a monetory phenomenon(money value is cheapened due to recent fed policy and monetization of debts).

[metalman]

Re: Do we have an oil bubble?

If Oil does go back to $100 within 2 years, I would assume that Oil was not a Bubble and there was no speculation. But if it happens in like 3 or 4 years, then I would assume it is a monetory phenomenon(money value is cheapened due to recent fed policy and monetization of debts).

there was no oil bubble. the dollar fell, commodities went up. dollar goes up, commodities crash. if oil bubble then nickel, wheat, milk, copper, etc. were bubbles, too. why focus on just one? oil? on, that's right. that's the one that symbols focused on. that was the real bubble. copper? if oil was a bubble then copper was a bigger bubble.

now everyone is waiting for the dollar to crash. they may have a looooong wait.

[Supercilious]

Re: Do we have an oil bubble?

Thanks sishya and metalman. You are very kind. I'm glad you enjoyed my posts on this thread.

[xander]

Re: Do we have an oil bubble?

Peak Oil is a political reality only, not a physical one.

[sishya]

Re: Do we have an oil bubble?

How about a new title for Symbols $#* either : Matador-in-chief (or) Conspiracy theorist :-)

[Supercilious]

Re: Do we have an oil bubble?

How about a new title for Symbols $#* either : Matador-in-chief (or) Conspiracy theorist :-)

Tinfoil hat matador