$150 /barrel Oil anyone?

[AlexandreH]

The record peak of US$145 was reached in July 2008.

 

[Tsotne]

Ooh I meant today it reached $125. But

The record peak of US$145 was reached in July 2008.

If you searched some sites there you can find many saying different prices
http://en.wikipedia.org/wiki/2000s_energy_crisis $147 here
http://en.wikipedia.org/wiki/Price_of_petroleum $145 stated here

Not very important difference. But in the following image you can see that such sharp upward trend is not in place while 2008 crisis. That was overall financial and economic crisis. What happens now is a pure Oil crisis. (you understand what I mean)

 

[Tsotne]

So I wanted to say that, if such trend keeps on going, then none of high quotes can be excluded.

 

[Tsotne]

But in the following image you can see that such sharp upward trend is not in place while 2008 crisis.

I didn't find any large scale graph quickly, that;s why it is not clear from the given graph that the current upward trend is much sharper than the same time length from 2008.

 

[amanda.jayne]

1973 - all good things come to an end, as it were.

Thats my conspiracy theory anyhow.

 

[Tsotne]

1973 - all good things come to an end, as it were.

What do you mean? Good things come to emerge that time in finance . Black-Sholes was written in 1973

 

[amanda.jayne]

... There was also an oil crisis following a market crash. It was also a good year for Champagne

 

[goldski]

Oil was 125 today?

around $125 as I remember today.

Oil was 125 today?

 

[darth]

http://ftalphaville.ft.com/blog/2011/02/23/496331/nomuras-220-a-barrel-crisis-oil-call/

 

[Tsotne]

If Libya and Algeria were to halt oil production together, prices could peak above US$220/bbl and OPEC spare capacity will be reduced to 2.1mmbbl/d, similar to levels seen during the Gulf war and when prices hit US$147/bbl in 2008. This could also result in a temporary demand destruction of some 2.0mmbbl/d globally/

That what Im talking about

 

[Tsotne]

3rd time already when Saudi Arabia took responsibility of recovering oil deficit for Europe by almost doubling its production and exports and failed again. It was once in 1989 during the stock market crash of US. And donno when another time but for sure oil doesn't have an upper limit. One interesting point arises: What if the oil deposits run out??? It cannot happen at one particular moment. It's a process which is not promising good future. As scientists say (and it is not a news) in 50 years, there will not be oil deposits on earth.

 

[Tsotne]

I couldn't short oil ETFs... no shares were available for shorting or something. That pissed me off. Oil prices WILL dip back down into the 86-90ish region sooner or later (I'd give it a month or so...) once the paranoia and frenzy die down. The most annoying thing is that I can't take advantage of this to make money because (as a grad student...) I don't have the bank account balance to trade futures

My advice: don't pay too much attention to all the people who suddenly realized that oil exists again now that it's hit a period of higher volatility, ignoring the past year or three of historical data...

This is of course, my personal opinion and potentially wrong. However, I put money on my opinions and they typically make decent profits.

The above post was about very long term horizon but I see you point. You should be considering short term speculation to trade futures and take advantage of price decrease in a month. The people shorting oil ETFs are actually betting against time, so they try to guess how much this destabilization is gonna last. Pessimistic people are (only for short time, very short, maybe for 3-4 days or a week) betting on it. You are talking about a month perspective when everything calms down then the price drops. Well there are investors who think so also but if the price now climbs to $250 for example (which wouldn't be a big surprise at all) then it might decrease and stay on $180 in a lucky case and not

86-90ish region

as you say.

 

[amanda.jayne]

I'm not a fan of using ETFs to play the oil market, as you know, but rather than shorting a long ETF, why not trade inherently short ETFs like SZO or SCO? Would minimize your margin requirements and sidestep the availability issue. That aside, my conspiracy theory-based magic 8-ball agrees with you

@Tsotne Again: Wikipedia the 1973 oil crisis. The analysts you cite give a doomsday scenario with low probability of occurrence. As for there being no upper bound, some analysts have long been calling for a $2000 price target for Google. I challenge you to find Wall Streets biggest oil bear and chew on their prophecies for a while.

 

[Tsotne]

@amanda.jayne I fully agree with you in everything you said except one. Have you analyzed the rates at which the oil price was decreasing during the 2008 crisis or increasing during 1973 oil crisis? There is not surprise for me that today's events are having greater impact than the above two dates. To drop more or less unimportant date 2008 crisis let's quickly say that it was a complete process started much earlier and oil was responding adequately along the way. In 1973 OPEC refused to supply oil to US and this was also a process which was predicted and stated in the ultimatum of OPEC members. So oil again was responding on parallel. That possibility was being reflected in the market periodically. But what happens now is a completely different since there was no any indication of such sudden outbreak of revolts in numerous countries including non-OPEC members also causing deficit not for USA alone (as happened in 1973 mainly) but mostly for Europe. And what happens to European economies now regarding to any economic variables are being reflected in US market. We'll turn into pure economic issues but I also hope the price will not reach the disaster but the speed of increasing is in place.

 

[amanda.jayne]

The common traits found in the past and current oil shocks are political uncertainty, fear and speculation.
1973 had the added complexities of a true oil shortage, direct ties to the US dollar, and unavailability of information.
Today oil prices are, primarily dictated by the commodities markets.

It is certain that the current uncertainty in the middle east will not continue in perpetuity <feel free to insert your own conspiracy theory on how this will happen here> With this in mind, and in the absence of a true shortage, I believe the market is consumed with fear and speculation and believe the correct pricing is overshot (as it was during the housing crisis). When dropped from a high enough level, all dead cats will bounce and a correction is overdue. Could oil hit $200? sure. Google could hit $2000 as well but I don't believe either price would be representative of a sustainable level.

To quote Public Enemy "Don't believe the hype"

 

[DominiConnor]

The "price" of oil is not a single thing...

It now seems improbable that Suez might close, but even if it did then all it does is cause a short spike in price caused by the delay in having to go around, + a couple of dollars per barrel for the extra shipping cost.

US based oil like Texas is actually being pushed the other way since more is ready to come out of the ground than there is easily accessible refining capacity.

The big variable is Saudi. The consensus is strongly that Saudis are too fat and corrupt to take on their government, but the same experts never predicted what happened in N. Africa so my weighting of their analysis is lower. Ironically it makes the regime stronger, since by increasing oil production it sells more oil at a time when the price is high, but also shows western leaders the advantages of a cooperative regime on top of so much oil, with the most gentle of threats that if they fall, almost any regime would be less helpful.

On political domino that hasn't made the media (as far as I've seen) is the vulnerability of Iran to trouble in neighbouring states.
Iran is an oil exporter of course, but doesn't have anything like enough refining capacity to serve even it's own internal needs, and also has an artificially low price for fuel. If 'local trouble' cut off access to refineries, it would grind to a halt very quickly, which might spur it's population to acquire spines with the short term downside of it ceasing production as well.

The worst case in these areas is not psycho religious regimes but long term internal conflict. Iran exports oil not because it wants to help us, but Islam is such a shit way of running a country that they needs the cash else it's population would starve because nothing there really works properly. But Iraq demonstrates that putting armed evangelical Christians into a country just encourages everyone to fight everyone else.

 

[Tsotne]

It is certain that the current uncertainty in the middle east will not continue in perpetuity <feel free to insert your own conspiracy theory on how this will happen here>

Sure it won't last for long. But after these events calm down, there will be found a new equilibrium which might be higher than the pre - revolt prices. Oil's gonna go down soon-it's clear, but the question is: By what amount? Will it be as low as it was 2 months ago?!

Google could hit $2000 as well

As for Google, there is no such a reason for such a rapid increase(approx 320%) so it's completely excluded. But the comparison seems unreasonable even from your point of view. "Some economists expect that oil's gonna pass $200, but economists also say that Google's gonna pass $2000". This motivation of comparison is not correct.

As for Saudis, Mr Dominic raised an important and interesting point. Now it is not up on Suez canal fear whether it's gonna be closed or not. That could be the judgment matter for Egypt. Now 35% of oil supplies in region go from Libya. And taking into account other oil exporting countries which does not use Suez as an only path of export, Suez looses weight in determining the deficit and therefore the overall oil price. The focus now is on the long-lasting revolt series and investors do not bet on Suez fear, but on how much the overall situation's gonna last.

Allow me to repeat myself
Saudis failed 2 times when taking the responsibility of recovering the deficit in previous oil shocks. The cannot enlarge oil production area but simply try to generate more with the existing ones which they cannot fulfill, at least up till now.
As for price fairness again:

Google could hit $2000 as well but I don't believe either price would be representative of a sustainable level.

Nor I think it would be sustainable and it's very obvious. Things generally causing harm to oil supplies will and MUST end sometime in future whether it's one month or one year. Prices will definitely drop but the new equilibrium might not match the old one and sustain on "slightly" higher level.

Well again, I don't see any upper bound on the ground that they (angry people) begin attacking oil production sites since they believe the money generated from oil goes to the governors' families and situation is worsening every time.

 

[DominiConnor]

Tsotne rasies an interesting point.
Most of the suffering in the middle east is caused by regimes that we support, be it a theocracy like Saudi, a brutal military regime in Egpyt or racial supremacists in Israel. Ordinary people not only get little benefit, but they realise that if there was no oil then we'd just leave them to sort their lives out. It's not possible yet to work out who (if anyone) will emerge as the new leader of Libya, but some of the people we get to hear talk openly of just blowing up their oil pipes and leaving them broken, and part of me doesn't see that as wholly irrational.
Mineral wealth is a particularly corrupting factor, even without external forces poking you.

To run a manufacturing economy, or even one based mostly on growing crops you need to maintain stability, and have infrastructure that mostly works. You need to educate people, else you can't run stuff. Making and growing employs people which keeps them out of trouble and provides opportunities to progress in life.

That's not enough to make a country run itself well, but helps the leaders choose to run things competently if only to maximise the amount they can steal.

Mineral wealth requires only that you keep order in relatively few places, and doesn't employ hardly anyone at all.
You then drop cash on your friends and whichever groups you need to keep sweet.

 

[bigbadwolf]

The big variable is Saudi. The consensus is strongly that Saudis are too fat and corrupt to take on their government

The problem in Saudi is the same as in the rest of the region: a growing number of unemployed young, a function of a rapidly growing population. The fat and corrupt Saudi rulers know this, hence the recent measures to bribe the population. The key difference is the unemployed Saudi young are not desperate and starving.

But Iraq demonstrates that putting armed evangelical Christians into a country just encourages everyone to fight everyone else.

The evangelicals are armchair warriors; the ones actually out there getting blown up in 110 degree heat are a different lot.

 

[amanda.jayne]

Sure it won't last for long. But after these events calm down, there will be found a new equilibrium which might be higher than the pre - revolt prices. Oil's gonna go down soon-it's clear, but the question is: By what amount? Will it be as low as it was 2 months ago?!

Again. Nineteen-Seventy-Freaking-Three. The cat would determine said limit, its preparing for a drop. This has been my sole argument.

As for Google, there is no such a reason for such a rapid increase(approx 320%) so it's completely excluded. But the comparison seems unreasonable even from your point of view. "Some economists expect that oil's gonna pass $200, but economists also say that Google's gonna pass $2000". This motivation of comparison is not correct.

Again, strip away the fear and speculation (and step away from the socio-political framework for a moment) Show me the cause for such a rapid increase?

Saudis failed 2 times when taking the responsibility of recovering the deficit in previous oil shocks. The cannot enlarge oil production area but simply try to generate more with the existing ones which they cannot fulfill, at least up till now.

Could not/would not. Again ,<insert your favorite conspiracy theory here>

... those Athabasca Oil Sands are looking a whole lot more attractive right now, aren't they?

Ref above: The Great Crash, The Oil Price Shock And the Unit Root Hypothesis https://www.princeton.edu/~erp/ERParchives/archivepdfs/M338.pdf