>$50 Oil anyone?

[wayneL]

Hi guys,

Anyone care to speculate on the prospect of >$50 oil and the effect this will have on rthe economy? It is certainly effecting my trading.

Stock traders (who generally want to push the S&P up out of the channel it's in, I feel) have one eye on the oil chart and are as nervous as buggerry...and getting themselves into a bit of a flutter anytime the oil chart starts tracking northward intraday.

November crude has already had a couple of prods at the psychologically important $50 barrier, and some "ex spirts" think this is only the beginning.

Technically, this is not looking toppy at all, but my "guess" is we may see a retracement from here before it blows thru 50.

Cheers

[stefan]

Wayne,

As you would have realised, Oil has closed above $50 for the first time. So things are looking grim.


Anyone care to speculate on the prospect of >$50 oil and the effect this will have on rthe economy? It is certainly effecting my trading.
I've speculated over the effect of high oil prices in other threads and my oppinion remains the same. Oil will have a devastating effect on any economy if it remains above $50. And it just so happens to look like it's going to move higher. On the long run oil will remain expensive. It may be pushed lower every now and then but it will recover. The main reasons are China and the US. They just need too bloody much of that stuff over the next few years to satisfy their economy and (for China) their ever growing hunger for energy.

Now the US economy is at the brink of failure. It's like one of those huge monsters wobbling around tramping onto anything that moves without really knowing where to go. It will at some stage fall to the ground unable to stand up again for a long, long time. Why? Because without oil, nothing happens. And if nothing happens, then an economy already in trouble will come to a stand still quicker than you and I can say CRIKEY WHAT WAS THAT? ;)

I think we have a few more months to get our money in before the storm will hit our shores. It takes a while until the big pictures becomes clear. So far the US has done a good job in hidding the truth behind strange statements form the FED about temporary slow downs and other funny things.

The question is how quick it will affect the Australian economy which at this stage is booming based on resource companies and our strength in this field. If China gets hit (I somehow think they will go for a lot longer than the US) then things are looking VERY bad indeed.

So there you have my view of things to come. I do hope that I am very wrong with that. I really do.

Have a nice weekend

Stefan

[Mofra]

Would just like to add a couple of further points to ponder,

China was a net producer of oil only a few years ago and is now a net consumer. Japan as one of the largest economies in the world imports almost all of its oil. In the slash overheads at all costs economic environment predominent in the latter half of the 1990s transport costs are one area that remained relatively fixed, and as a result for many companies they are proportionally higher now than ever before. Stefan has pointed out the negative effect the prolonged pricerise of oil will have on the economy - I agree however believe the effects are currently being diluted somewhat by stocks with the highest exposure to the oil price having hedged against a rise, for example Qantas having hedged its fuel supplies. I think there is a concern in the general market that transport & petrochemical companies who rely heavily on oil will be forced to purchase supplies at much higher prices than they are currently hedged for and some that are struggling to profitablity will fall behind as time wears on - even if we see a retraction in the oil price.

[ghotib]

Anyone know where to look for information about what proportion of the world's oil use is as a raw material for plastics and what proportion is for transport?

Maybe it's time to look hard at investing in ceramics???

Ghoti

[RichKid]

Remember to keep an eye on the type of oil; I don't know much about oil but from what I recall it's ligh sweet crude that is quoted generally and that's what they use for transport (eg fuel- trucks, planes etc). Correct me if I'm wrong but any figures/research should note that difference.

There is even an article about shale oil (??) in todays Sydney Morning Herald (apparently the govt was trying to subsidise an oil co to sue greenpeace http://www.smh.com.au/articles/2004/10/04/1096741931626.html)

[wayneL]

Stefan,

I agree with you, and it seems most are in denial about this. Check out the s&p chart. I think they want to push it upwards short term, and I'll trade it long while its doing so, but no way would I be holding most stocks long term atm.

[ghotib]

I swear I posted my question about the proportions of oil uses before I saw Monday's profit downgrade announcement from Home Leisure Ltd:

http://www.asx.com.au/asxpdf/20041004/pdf/3n36svtwr9xph.pdf

Then my question was general interest. Now it's getting serious. All pointers to information about oil as an industrial raw material gratefully received.

Cheers,

Ghoti

[stefan]

Ghoti,

It may not be what you're looking for, but there are some interesting articles ont his webpage:

http://www.inkworldmagazine.com/sep002.htm

http://www.inkworldmagazine.com/Sept042.htm

I consider them worth reading as they are an indication of what's at stake and what other stuff is depending on oil prices.

Happy trading

Stefan

[ghotib]

Faasscinating. Thanks Stefan, that's one more effect I'd never thought about.

Heck, if oil stays this tight for much longer we'll have to make sure management takes a very hard look at the cost justification for free annual reports!!

Ghoti

[stefan]

I have a theory regarding high oil prices and interest rates and I would like to discuss it with you guys.

So far we mainly hear that interest rates won't go up as long as oil prices remain high because it would put additional load onto an already suffering manufacturing industry.

I for one don't think that this is the whole story. I believe that rising energy prices have the potential of raising inflation expectations and therefore interest rates will have to go up. I base my theory on what happened in 2000 when oil prices went up. Interests went up as well. The impact is quite simple. As Ghotib already pointed out, it starts having an effect on areas which you wouldn't think at first. If money remains cheap, then things will start to get out of hands. Costs will go up too quick and money is losing buying power as you won't get much for it in exchange anymore. If the US economy can't grow, then the dollar will drop in value, supporting my idea that this will have to lead to an increase in interest rates.

Now the US has released their Strategic Petroleum Reserve (SPR). That will probably have an impact and already oil has dropped a bit. But since the oil released from SPR has to be replaced, the release is simply a timing shift. Without any further action the problem will return. China will only get bigger and so will India. How much room does that leave for the US economy to recover under these difficult circumstances?

Long story short, I believe there is a big problem ahead. Interest rates will have to keep going up, even so the world economies didn't have time to fully recover.

Happy trading

Stefan

[wayneL]

Strike $50...

Make that $51...1:50EST... make that $51.20 :eek:

[wayneL]

Just cracked 52...dusting off my pushbike LOL

[Aussiejeff]

Hit $53 today interday trade. Then settled back to around $52.62.
Dow and Nasdaq fell 1.1%.

Maybe time to tighten those conditional trade triggers!

AJ

[crashy]

why does everyone think oil is expensive?

its CHEAP

inflation adjusted, oil was $90 in 1991

we can easily go to $60-$70 on this run

[wayneL]

why does everyone think oil is expensive?

its CHEAP

inflation adjusted, oil was $90 in 1991

we can easily go to $60-$70 on this run

Very true Crashy, adjusted for inflation, its very cheap.

[wayneL]

Just been doing some digging around the internet and found this chart of oil prices corrected to 2000 dollars.

Whilst agreeing with the thrust of crashy's post, this chart shows a lower adjusted highest high figureof under 60 2000 dollars. At a guess that would be around 70 2004 dollars.

Splitting hairs I know, but it confirms that we have had oil prices this high before, but it aslo shows that at $53 it is certainly not cheap. (I supect thet Crashy is suggesting that it is "cheaper" than it is going to be)

Previous spikes have of course, resulted in recessions and I suspect this one will have the same result, particularly if we go to 60-70 on this run as Crashy suggests.

The scary part is the preponderence of apocolyptic scenarios as a result of surpassing peak oil production...such as this one www.lifeaftertheoilcrash.net

Are they right? Well it is a finite resource, and as always there are countering arguments. But one day oil WILL be exceptionally rare and expensive. WHEN is the only question yet to be answered.

[wayneL]

Oh by the way,

I am a qualified farrier, and I have been known to throw a leg over the odd buckjumper, when your carthorses need some attention, give me a call LOL.

[Aussiejeff]

Nice post WayneL.

One thing to remember with the dramatic recovery of markets from the 1981 peak in oil prices is that there was a comparativley huge buffer of undiscovered or un-tapped oil reserves around the planet.

However, we are now moving into an era when most of the world's oil fields have gone past their peak output - and oil prices keep rising. I'm not sure the planet has enough oil left in the tank to easily buffer or recover from this or any future big price spikes.

My 2c worth!

[stefan]

Hmmmm, oil now at $54... this is surely getting interesting.

Wayne, did you suffer a heart attack using your pushbike or are you still around? ;)

Happy trading

Stefan

[RichKid]

Wayne, did you suffer a heart attack using your pushbike or are you still around? ;)
Stefan

Nah! Wayne's around alright, he's finally left the warm confines of his US forum and is posting all over the site now. Last time I heard he was working on a masterpiece (probably an exotic, multicoloured version of some obscure US stock chart). He's probably just lost his way, should be back soon... he he he he..

[wayneL]

Hmmmm, oil now at $54... this is surely getting interesting.

Wayne, did you suffer a heart attack using your pushbike or are you still around? ;)

Happy trading

Stefan

Hehe...actually, I have been secretly pedalling about for quite a while. No coronaries here :)

It's actually selling off a bit after touching the 54...under 53 atm.

Whats annoying me is that US shares are completely beholden to movements in the oil price and messing up my trading signals. One of those rare times where I have no share positions at all...long or short :(

Here's an interesting presentation regarding peak oil:

http://www.simmonsco-intl.com/files/SPE%202004%20Annual%20Conference.pdf

[wayneL]

Nah! Wayne's around alright, he's finally left the warm confines of his US forum and is posting all over the site now. Last time I heard he was working on a masterpiece (probably an exotic, multicoloured version of some obscure US stock chart). He's probably just lost his way, should be back soon... he he he he..


:eek: Now I'm under pressure to perform! Masterpiece? Perhaps more along the lines of a Ken Done mural :)

[stefan]

Whats annoying me is that US shares are completely beholden to movements in the oil priceAnd then there's this other guy over there who's still telling the world that it won't affect the US economy and that everything is just smooth sailing. In fact, oil prices don't have much of an impact these days anymore. The world is so much more independent from oil than back in the 80s.... Yeah, right... That's why we are all driving around in solar-powered cars (or pushbikes ;) ) and nothing else is based on oil anymore. What a nice world we're living in!

Happy trading

Stefan

[crashy]

Im running on LPG and am laughing at all the 4WD tossers crying about their petrol bill.

Cant wait till oil cracks $70 and unleaded hits $2, the roadsides will be littered with 4WD's for sale. Or maybe they will just be less inclined to use them as a school taxi. Ureka!

[Aussiejeff]

Here's an interesting link to light sweet crude prices over time to the present ....

http://www.oilnergy.com/1onymex.htm

NOT a good price trend heading into US winter IMO!! If the US first Purchaser graph keeps on track, around 2006 will see the historical record broken for all time high price. Then the sky is the limit?

Just as well the wife and I purchased our touring mountain bikes recently ... "ding..ding!"

AJ

[phoenixrising]

:confused: Re LPG

Talking to a Sydney cabbie the other day
His gas was in the low 30 cents a few months ago
Now 46.9....approx 25% rise
He reckons they will keep puting it up even though we produce it here

Trust me ...I'm from the Gov. and here to help you????? :confused:

Cheers

PR

[wayneL]

Hi guys,

Oil up, Stock Market down!!!

Just to show how oil is affecting the market; At market open oil was down to 51.60, So the stock market gaps up strongly...only to come immediatly under pressure as oil starts climbing during the day...closing at nearly 54 again.

Notice the strong inverse correlation.

On the left is the Dow intraday chart and on the right is november crude

[crashy]

re LPG

when petrol rises, more people convert to LPG right? so its a normal supply/demand thing. also, a 4c discount on a 40c product is a 10% discount, 4c off a 110c product is about 3% :)

my LPG bill for the week has gone from $12 to $15 lol

[stefan]

crashy,

I don't want to spoil the party and I was looking into LPG myself not so long ago. There is something that kept me from having my car converted to LPG. The costs for the convertion itself will be offset within a year, depending on usage and how many k's you're driving. So that's something that can be calculated easy enough. However, the bad part is the value of your car should you want to trade it in for another one. This is obviously not a problem if you're driving your car until it's falling apart. There are a lot of studies about LPG efficiency and most of them ignore the fact that the loss you incure when trading in your vehicle will be much higher than the savings you managed to accumulate over the first 3 years. And it just so happens that Australians trade in their cars after 3 years on average.

That doesn't mean that LPG can't be more efficient. All you need to do is driving the same car for a few more years as depreciation will slow down the longer you drive your car while your savings on fuel will increase.

After all, there is also the environmental benefit of LPG which can't be denied. Even so you need more LPG, the emission levels are still lower than with a petrol or diesel engine.

So depending on your personal situation, LPG can save you quite some money or it may actually turn out to be one of those "pay less now to pay more later" things.

There's an interesting study from the Australian National University. They compared LPG to ULP over the lifetime of their car fleet.


The LPG vehicles trialled by Facilities & Services demonstrate in concrete terms that significant environmental benefits are available over the life of a vehicle from using LPG instead of ULP. The added up-front cost of an LPG system is recouped after less than half the vehicle's life through savings in fuel cost, and 3000kgCO2e in greenhouse gas emissions can be saved over the life of the vehicle. However the low resale value in the current market negates the financial benefits for the University.

The study can be found here:
http://www.anu.edu.au/facilities/anugreen/cases/lpgvehicles.html

Happy trading

Stefan

[crashy]

thats interesting.

I wonder why resale is affected. Perhaps it is the storage space? I would have expected resale to be good currently since many people are complaining about petrol costs. Oh well, I can feel all warm and fuzzy about the CO2 emmissions :)

[stefan]

Mind you, this was 2 years ago and you do have a point that interest in LPG cars may grow while petrol is expensive.

So keep feeling warm and fuzzy and just keep that car a bit longer. Then you may well save a lot of money. Oil seems to be poised for $70 if we believe those analysts.

Happy trading

Stefan

[Aussiejeff]

Interesting how Greenspan plays down a 'potentially looming' oil crisis with the big US election barney just around the corner.

Let's see. In early September, Nymex oil was around $40 barrel. In mid October it hits $55. Draw a progression line through THAT graph and it forecasts $70+ by mid November! And that's not BAD?

He also waffles on about how within 50 years world governments will develop alternative sources (obviously, only the RICH DEVELOPED ones!). Hmmmm. I'll bet within 50 months we'll be screaming for that technology to replace the $4.00-5.00 litre unleaded price we may well be forking out!

And besides, how will the mass of desperately poor, oil/coal dependent countries of the world pay for what is likely to be ultra-expensive oil/coal alternative energy technologies? Interesting times ahead indeed...

AJ

[crashy]

but its ok, cos Bush and all his Texas oil buddies will be happy to bleed the country dry...."4 more years!" hahaha yeah bring it on. By 2008 oil will be $100 if the village idiot gets in again. Alternative energy sources? not with a Texan running the show.

[stefan]

By 2008 oil will be $100 if the village idiot gets in again. Alternative energy sources? not with a Texan running the show.That pretty much sums it all up nicely :D

Have a nice weekend

Stefan

[Mofra]

Just a question to add another dimension to this discussion,

Does anyone know a site that provides a guide to what crude oil is actually used for (ie a breakdown with percentages)? The only reason I ask is that all discussions seem to look at oil usage for fuel, without taking into account the use by the petrochemical industries for plastics, rubber, etc.

Is it a significant percentage, and if so do they require higher or lower grades of oil than is usually refined for fuel usage?

Cheers in advance

[stefan]

Does anyone know a site that provides a guide to what crude oil is actually used for (ie a breakdown with percentages)? The only reason I ask is that all discussions seem to look at oil usage for fuel, without taking into account the use by the petrochemical industries for plastics, rubber, etc.
This has already been mentioned earlier in the thread. I guess Ghotib has posted a few things and I've put up a link related to the topic.

You're right. There is much more than fuel. It is actually scary to see what else is related to oil. Haven't seen a complete list but then again I never looked for it either.

Happy trading

Stefan

[wayneL]

Modern Agriculture is totally reliant on oil :eek: from the manufacture of fertilizers to transport, refrigeration, tractors etc

[wayneL]

Disturbing reading.....

http://www.lifeaftertheoilcrash.net/Articles.html
http://www.lifeaftertheoilcrash.net/BreakingNews.html

[GreatPig]

Disturbing reading.....
To put it mildly :(

Perhaps the best avenue for investment now might be to buy a small farm in some arable area like New Zealand; sink a few wells; plant some crops; raise useful animals like horses, bullocks, goats, and chickens; put a big wall around the place; and stockpile an arsenal of weapons.

And hope no one ever thinks the country is worth nuking :D.

GP

[Aussiejeff]

Modern Agriculture is totally reliant on oil :eek: from the manufacture of fertilizers to transport, refrigeration, tractors etc


This *>$50 Oil anyone?* thread made me laugh/cry retrospectively today, with oil now >$83!! :) :(

Just goes to show, panic at $50 barrel back in 2004 - now here we are saying *>$100 Oil anyone?* in 2007! hahaha... :)

Sniff.... :(


AJ

[doctorj]

Good find :)

On the topic of oil at $100+, I think that will largely depend on the performance of the USD going forward. Will the oil price increase in terms of say, euros (or for us, the humble AUD) is another question.

Oil is sitting between A$90-100 or there abouts at the moment - do I think it'll go up to say A$120-130 in the next year or so? Maybe. Do I see it there in 3-5yrs? Probably not. I think high oil prices today are a product of low oil prices in the early 90s, discouraging exploration and incremental development of technologies like horizontal drilling, fracturing and deep sea/sub sea drilling. High oil prices of the last few years has seen an explosion of exploration (try getting a rig in the US if you're not a major) and increases in technology that should help insulate us from further rises in the medium term.

The other great thing about high oil prices is it results in things being economic that once weren't. Look at the Canada Shales, the Canning Basin and some of the super-deep sea exploration going on. Companies are now willing to risk drilling in much deeper water than they ever have in the past which should hopefully help us all in the long run in terms of 'cheaper' oil.

[Aussiejeff]

There's also the recent news that with the melting of the Arctic pack ice around Greenland, the Northwest Passage looks like opening up on a near permanent basis, sending Canada, Russia and US into a frenzy of activity re: ownership/exploration over suspected potentially massive oil/gas fields that are becoming opened up by the Big Thaw.

Hopefully, the US will not invade Canada to grab it's "fair" share!

So maybe you are right. Medium term (a few years away yet) *might* see a longish term reduction in oil prices. Of course, on the other hand the *unknown* factors (disasters both man-made and natural) might rear their composite ugly heads and dampen any prospect of cheaper oil... fingers crossed they stay dormant for a while!

AJ

[doctorj]

Then there's Iran...

[rederob]

Good find :)

On the topic of oil at $100+, I think that will largely depend on the performance of the USD going forward. Will the oil price increase in terms of say, euros (or for us, the humble AUD) is another question.

Oil is sitting between A$90-100 or there abouts at the moment - do I think it'll go up to say A$120-130 in the next year or so? Maybe. Do I see it there in 3-5yrs? Probably not. I think high oil prices today are a product of low oil prices in the early 90s, discouraging exploration and incremental development of technologies like horizontal drilling, fracturing and deep sea/sub sea drilling. High oil prices of the last few years has seen an explosion of exploration (try getting a rig in the US if you're not a major) and increases in technology that should help insulate us from further rises in the medium term.

The other great thing about high oil prices is it results in things being economic that once weren't. Look at the Canada Shales, the Canning Basin and some of the super-deep sea exploration going on. Companies are now willing to risk drilling in much deeper water than they ever have in the past which should hopefully help us all in the long run in terms of 'cheaper' oil.
doctorj
This is a topic where you need to toss in a few facts and figures to get a better idea of what is going on.
Presently there are meagre new oil "finds", and replacement of reserves is difficult and more expensive each year. More importantly, reserve replacement appears to be declining, while demand is showing no letup.
Some simple charts here are compelling:
http://valuesystem.livejournal.com/14190.html

Tar sands are massive in Orinoco and Athabasca, but high costs of production and low output levels will not - on present estimates - bridge the supply gap when peak oil bites.
Those sums might change when oil is priced over $150/bbl.

[rederob]

Now a few figures.
The Saudis produce more oil than any nation on earth, via Saudi Aramco.
Saudi Aramco has estimated that total production capacity from all its fields in 2011 will be 10.15 million barrels a day, which is about what it's capable of producing today.
To meet expected world rising demand the United States Department of Energy’s research arm forecasts Saudi Arabia will need to produce 13.6 million barrels a day by 2010 and 19.5 million barrels a day by 2020.
The Saudis produce roughly one tenth of the world’s needs, so if Saudi production falls short in coming years, the consequences will be dire.
Saudi's Ghawar field is about all that holds the country’s output together, and the first signs of its decline are now apparent: 7 million barrels of salt water are injected each day to draw necessary oil volumes, and this cannot continue for too much longer.
I suggest the moderators rename the thread "$150 oil, anyone".

[michael_selway]

Now a few figures.
The Saudis produce more oil than any nation on earth, via Saudi Aramco.
Saudi Aramco has estimated that total production capacity from all its fields in 2011 will be 10.15 million barrels a day, which is about what it's capable of producing today.
To meet expected world rising demand the United States Department of Energy’s research arm forecasts Saudi Arabia will need to produce 13.6 million barrels a day by 2010 and 19.5 million barrels a day by 2020.
The Saudis produce roughly one tenth of the world’s needs, so if Saudi production falls short in coming years, the consequences will be dire.
Saudi's Ghawar field is about all that holds the country’s output together, and the first signs of its decline are now apparent: 7 million barrels of salt water are injected each day to draw necessary oil volumes, and this cannot continue for too much longer.
I suggest the moderators rename the thread "$150 oil, anyone".


Hi Red, what good Oill Stocks you like atm?

thx

MS

[vishalt]

lol $50 oil, I'd like to see the bears get some balls and come out of the woods and get crushed on their shorts

[wayneL]

lol $50 oil, I'd like to see the bears get some balls and come out of the woods and get crushed on their shorts
<pedantic>
Do you mean oil bears?

Most economy bears are oil bulls. Most economy bulls are your oil bears
</pedantic>

[Whiskers]

Oil just keeps going north. More inflationary pressure particularly for the US.

I thought I heard on the tele that our bowser petrol price has fallen again to a recent low.

Looks like a massive Xmas holiday price rise coming up.

[Smurf1976]

doctorj
Tar sands are massive in Orinoco and Athabasca, but high costs of production and low output levels will not - on present estimates - bridge the supply gap when peak oil bites.
Those sums might change when oil is priced over $150/bbl.
Orinoco is natural bitumen (extra heavy crude oil) and is not tar sand. The stuff is pumped from the ground in a conventional manner. It is a stiff liquid about 10 API, most easily extracted by underground emulsification (with the addition of 0.2&#37; surfactant) though that is not the only extraction option.

For practical purposes there is certainly a lot of oil in the Orinoco Belt. Actually it's the biggest recoverable oil resource on the planet. But due to geology it's highly unlikely to ever flow rapidly. The oil can be extracted but will take a century or more to do it in the same manner as century old heavy oil fields in the US are still (slowly) pumping. These heavy oils just don't flow quickly.

The quality is a bit of an issue too. Conventional refineries can process it only after it goes through an upgrading process which itself requires significant energy. It is 3.85% sulphur and contaminated with significant levels of vanadium and nickel too which are another (not unfixable) problem. Emulsions of Orinoco bitumen can be broken mechanically, thermally or chemically as necessary.

All things considered, I really can't see the combined output from Athabasca tar sands and Orinoco bitumen ever exceeding 20% of present worldwide oil demand. And that would only happen with a military style campaign to develop the resources to the point that even the oil majors couldn't finance it themselves.

Possible for Athabasca but not for the Orinoco reseves while Hugo Chavez is running the place - one of the first things he did was get rid of the intellectual capabilities of PDVSA (ie INTEVEP) and the Orinoco-based division, Bitor, was essentially scrapped in a practical sense. I'm not sure what happened with the other devisions such as Pequiven and Carbozulia but to my understanding at least the later no longer exists, at least not as part of PDVSA. I did hear something about Pequiven going into the shoe making business which sounds rather worrying.

I personally won't count Orinoco bitumen as a petroleum resource until such time as there is a radical political change in Venezuela and either PDVSA is restored to its former technological glory and/or private enterprise has access to the fields and PDVSA's (or their own) technology to recover the oil.

[Aussiejeff]

Oil just keeps going north. More inflationary pressure particularly for the US.

I thought I heard on the tele that our bowser petrol price has fallen again to a recent low.

Looks like a massive Xmas holiday price rise coming up.

US futures touched over $US90 overnight after inventories fell "unexpectedly" by over 5 million barrels. Some US oil futures commentators suggest supply will be very tight (supporting higher futures prices) over the next 4-6 weeks due to the lag time between OPEC increasing output and when the oil actually enters the US system.

So, a significant pre-Xmas petrol price rise here is not out of the question.

AJ

[Aussiejeff]

Just in this morning...

Two PEMEX oil rigs have collided in high seas in the Gulf of Mexico causing 10 deaths so far and possible gas/oil leakage.

That won't help soften prices in the short term either...

AJ

[Aussiejeff]

Wow!

Oil hit $92.81 today after GWB "slapped some more turkey" on Iran and US oil reserves declined once more.

Won't be long before the price per barrel "cracks the ton".

I'm very surprised hthat our petrol prices haven't risen significantly since oil has gone from $75 up to $92 since the last price peak yet pump prices today are at least 10c lower than when oil was at $75 a barrel.


AJ

[explod]

Wow!

Oil hit $92.81 today after GWB "slapped some more turkey" on Iran and US oil reserves declined once more.

Won't be long before the price per barrel "cracks the ton".

I'm very surprised hthat our petrol prices haven't risen significantly since oil has gone from $75 up to $92 since the last price peak yet pump prices today are at least 10c lower than when oil was at $75 a barrel.


AJ

In Australia the price of oil has been cushioned of late by the rise of our dollar.

And; there is an election on

[Kauri]

Something I saw around the traps...
Cheers
..........Kauri


The surge in the price of oil was attributed to a skirmish between PKK
rebels and Turkish troops that left 30 rebels dead, and a report on ABC news'
website that an order to re-fit B2 stealth bombers for a special bunker buster
bomb implies that they are destined for Iran.

[Smurf1976]

Meanwhile here in Australia...

ONE refinery has a few problems. Then we end up with ambulances running out of fuel.

Pretty obviously we don't have much in terms of refined product stocks. And we're so totally unprepared to deal with even a minor shortfall in supply. :eek:

[Aussiejeff]

In Australia the price of oil has been cushioned of late by the rise of our dollar.

And; there is an election on

Good point. Most if not all oil companies / fuel suppliers would be pro-Liberal, so I guess it is in their own best interest to hold prices back as it wouldn't help to add to price pressures right now (especially with the imminent threat of an interest rate rise in the pipeline as it were).

AJ

[Aussiejeff]

Meanwhile here in Australia...

ONE refinery has a few problems. Then we end up with ambulances running out of fuel.

Pretty obviously we don't have much in terms of refined product stocks. And we're so totally unprepared to deal with even a minor shortfall in supply. :eek:

Not to mention the heavy transport industry which is having all sorts of problems sourcing reliable diesel supplies. Apparently there are truckies from Qld etc being stranded in Victorian towns that have unexpectedly run out of diesel and they have to wait until truck loads from other areas can be delivered - whenever that is!

If this is what happens when one refinery has a problem, it doesn't bode well for our National Security now, does it?

AJ

[bvbfan]

$AUD oil price chart (http://stockcharts.com/c-sc/sc?s=$WTIC:$XAD&p=W&yr=3&mn=0&dy=0&i=p43389229026&r=47)

Still not as high as it was in July last year thanks to the Aussie Dollars rise

[rederob]

$AUD oil price chart (http://stockcharts.com/c-sc/sc?s=$WTIC:$XAD&p=W&yr=3&mn=0&dy=0&i=p43389229026&r=47)

Still not as high as it was in July last year thanks to the Aussie Dollars rise

the chart may be better than the bad link bvb

[Smurf1976]

Not to mention the heavy transport industry which is having all sorts of problems sourcing reliable diesel supplies. Apparently there are truckies from Qld etc being stranded in Victorian towns that have unexpectedly run out of diesel and they have to wait until truck loads from other areas can be delivered - whenever that is!

If this is what happens when one refinery has a problem, it doesn't bode well for our National Security now, does it?

AJ
Exactly. Fair enough a bit of a shortage maybe. But when it gets to the point of no diesel fuel at all in some areas with essential services being affected then it shows how totally unprepared we are.

Oil refineries are inherently risky operations. It's not out of the question that one blows up tomorrow due to an accident etc. Given all the fuss we've heard about national security in recent years, I would have thought there would at least be a proper plan for allocation of the available fuel in an emergency situation.

In addition to a proper plan do deal with such a situation, there ought to be a requirement that the oil companies hold decent stocks of refined products near major markets in this country. Obviously that will add slightly to retail prices since storage isn't free, but given the global oil situation it would seem a very worthwhile insurance policy in my opinion.

At present, it's not uncommon that the bulk fuel storage in Hobart is run to literally empty waiting for the boat to arrive. Now, if the tanker breaks down, sinks or something else happens then we're completely stuffed. It's much the same anywhere else that doesn't have a local refinery. Given the essential nature of fuel and increasing risks to supply security I think it's time to review that approach. Even Sydney only has a few days worth in storage most of the time (so I'm told).

[Aussiejeff]

...
In addition to a proper plan do deal with such a situation, there ought to be a requirement that the oil companies hold decent stocks of refined products near major markets in this country. Obviously that will add slightly to retail prices since storage isn't free, but given the global oil situation it would seem a very worthwhile insurance policy in my opinion.

At present, it's not uncommon that the bulk fuel storage in Hobart is run to literally empty waiting for the boat to arrive. Now, if the tanker breaks down, sinks or something else happens then we're completely stuffed. It's much the same anywhere else that doesn't have a local refinery. Given the essential nature of fuel and increasing risks to supply security I think it's time to review that approach. Even Sydney only has a few days worth in storage most of the time (so I'm told).

Good points. You know, we always hear about the huge reserves of oil and gasoline that America has stashed away in all manner of storages - even huge underground caverns - to last them "x" number of weeks in the case of a disaster, catastrophe or war. These emergency reserves are so huge they seriously affect the price of oil worldwide depending on whether they increase or decrease more than market expectations in any one week.

Well, I Googled "Australian emergency oil reserves" and guess what - nada. I guess the only "Emergency" oil and fuel we hold is what is left in the few tanks scattered around the country waiting for export or local refining. This really is a bit of a worry.

Where is "The Plan", as you say? For the sake of our OWN National Security, not having a substantial reserve of crude stashed away in to see us through any unforeseen nasty shocks beggars belief (again I might add - there seems to be so many things that our governments DON'T prepare for).

Oh well, I'm sure our leaders know best....

:)

[Aussiejeff]

Well, I should have Wiki'ed instead, shouldn't I?

According to Wikipedia, apparently Australia has just 10 days strategic oil and petroleum reserves in total. Given the current heavy transport fiasco caused right now by only one refinery running out of diesel, I would bet that those 10 days of supposed strategic reserves would not be spread evenly across Australia! Some areas might last out a bit longer with many others running out within a week. Let's face it - you need mobile fuel tankers to distribute those reserves in a big hurry if some catastrophe or disaster occurs. If you are outta diesel, as we have seen today it's going to be pretty much game over as far as distribution by road transport of unleaded or Lpg goes too, regardless of how much is left in the strategic reserve tanks!

PS: The European Union members are required to hold at least 90 days strategic reserves. The US reserves will last 60 days if full. Even India is listed at 14 days! In comparison with many other Western nations, Australia seems to be running on a knife's edge. It seems clear that one day this substantial lack of strategic fuel supplies to fall-back on could hurt us something chronic, while many other nations seem to have a better chance to weather a major fuel shortage crisis.

AJ

[bvbfan]

Sorry about that
Here's the chart again

[Smurf1976]

Well, I should have Wiki'ed instead, shouldn't I?

According to Wikipedia, apparently Australia has just 10 days strategic oil and petroleum reserves in total.
10 days is outright asking for trouble IMO. There's just so many things that can go wrong and 10 days is nowhere near enough to fix them.

An unrelated example. At this time 5 weeks ago the Myer building was still burning in Hobart. Assuming all goes to plan, it will have taken 55 days to simply reopen a department store using other buildings in the CBD.

And yet we think we'll fix a major fuel supply problem in less than 10 days? Oil refineries are complex and technical. They need the right parts and the right people to fix problems. Same with the whole oil industry. Department stores are relatively simple - but still not able to be fixed in even close to 10 days.:2twocents

[BREND]

With the oil price rising from $86 to $92 in just a few days, a lot of bad news had already priced in. I believe this is a good opportunity to short crude oil futures, place at stop at $96.

[rederob]

With the oil price rising from $86 to $92 in just a few days, a lot of bad news had already priced in. I believe this is a good opportunity to short crude oil futures, place at stop at $96.
True
But the northern winter influence has yet to get its cut.
If climate change brings on a more severe winter than average, then a long to $100 is possibly an even bet.
Although that ignores some of the earlier points in this thread, which indicate that national strategic reserves are not capable of staving off any brief supply interruption of even moderate magnitude.
I am not sure the funds are ready yet to throw in the towel.
I suggest a wait until POG has tipped over $800 before pulling off the shorts.

[Kauri]

Just out of interest...
Cheers
............Kauri



Reuters Sydney, October 28: Reuters reports that Turkish Prime Minister Tayyip Erdogan threatened on Saturday to order an incursion into northern Iraq against Kurdish guerrillas after the failure of talks with Iraq aimed at averting a cross-border raid. The talks collapsed late on Friday after Turkey rejected proposals by Iraqi Defence Minister General Abdel Qader Jassim for tackling guerrillas based in northern Iraq as insufficient and because they would not yield results quickly enough. Turkey has massed up to 100,000 troops, backed by fighter jets, helicopter gunships, tanks, and mortars, on the border for a possible offensive against about 3,000 rebels using Iraq as a base from which to carry out attacks in Turkey.
Army sources told Reuters on Saturday that military planes were making reconnaissance flights along the mountainous border to photograph PKK camps in northern Iraq. Helicopters were patrolling villages and soldiers sweeping roads for mines. According to the Reuters report senior Turkish diplomats say Erdogan has given Washington and Baghdad a limited time to show concrete results or steps to be taken against the PKK. The meeting in Washington on Nov 5 will be the last chance, they told Reuters.

[kennas]

Just out of interest...
Cheers
............KauriYep, combine this with the Iran standoff and oil is set to keep running. And usage of the stuff continues to rise....

[BREND]

Rise in oil price last week is due to short covering by hedge funds, rather than building up new long positions. And OPEC & many oil experts had commented that oil price is driven by sentiment rather than fundamental, there is sufficient oil supply around.

Of course if the war at Iraq blows up into a major warfare, then oil price will stay high.

Futures trading is never safe, stop loss level must be in-placed. When the coast is clear, might be too late to take up a short position. :)

[canaussieuck]

Rise in oil price last week is due to short covering by hedge funds, rather than building up new long positions. And OPEC & many oil experts had commented that oil price is driven by sentiment rather than fundamental, there is sufficient oil supply around.

Of course if the war at Iraq blows up into a major warfare, then oil price will stay high.

Futures trading is never safe, stop loss level must be in-placed. When the coast is clear, might be too late to take up a short position. :)

Sounds like your trading has taken on new dimension Brend, good luck.

Cheers,

[BREND]

Sounds like your trading has taken on new dimension Brend, good luck.

Cheers,

No worries, just place a stop at $94.

[awg]

With regard to oil price, I may be simplistic, but it seems to me virtually impossible but for the price to go anywhere else but upwards, based on the simple law of supply and demand.

The worldwide demand for oil is increasing steadily.

The supply of oil seems definately not to be increasing enough to keep up.

As soon as the lines of supply and demand cross over,(as they are now doing) there will be relentless upward pressure on price.

Any hedge fund or other purchaser will not want to sell if the price is continually rising, and would only do so if forced to by a very short position,(into a rising market).

I am unable to forsee any factor that could:
a) cause demand to fall (more than very slightly and short term)
b) cause supply of crude oil to increase (enough)

I understand that extraction of oil from shale or coal is not feasible until the price reaches at least $120+

If the consensus I read on peak oil is true, price rise will be continous.

I would be very interested to hear from anyone who wants to punch holes in this argument.

regards tony

[BREND]

Crude oil fell from a record on speculation that a U.S. government report this week will show an increase in stockpiles in the world's largest energy consumer.

Oil inventories in the U.S. probably rose last week by 400,000 barrels, according to a Bloomberg News survey of 12 analysts. State-owned Petroleos Mexicanos, or Pemex, will start early today to return to daily production 600,000 barrels of crude shut in by storms in the Gulf of Mexico, spokesman Carlos Rameriez said yesterday by telephone.

``The indications from Pemex are that production will resume so it's not surprising to have some pullback,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``If the crude oil stocks show an increase that should temper the oil futures.''

Crude oil for December delivery declined as much as 95 cents,
or 1 percent, to $92.58 a barrel in after-hours trading on the
New York Mercantile Exchange. It was at $92.69 at 9:48 a.m.
Singapore time.

Yesterday the contract rose $1.67, or 1.8 percent, to close
at a record $93.53 a barrel. Futures climbed to $93.80 earlier in
the session, the highest intraday price since trading began in
1983.

Gale-force winds from a weather system between Florida and the Yucatan peninsula forced Pemex to close in their production. At least 21 workers died last week when a rig hit an offshore platform in the Gulf of Mexico during a storm that produced waves as high as 26 feet and wind gusts of 81 miles per hour.

Brent crude oil for December settlement dropped as much as 73 cents, 0.8 percent, to $89.59 a barrel on the London-based ICE Futures Europe exchange at 9:39 a.m. Singapore time.

[BREND]

With regard to oil price, I may be simplistic, but it seems to me virtually impossible but for the price to go anywhere else but upwards, based on the simple law of supply and demand.

The worldwide demand for oil is increasing steadily.

The supply of oil seems definately not to be increasing enough to keep up.

As soon as the lines of supply and demand cross over,(as they are now doing) there will be relentless upward pressure on price.

Any hedge fund or other purchaser will not want to sell if the price is continually rising, and would only do so if forced to by a very short position,(into a rising market).

I am unable to forsee any factor that could:
a) cause demand to fall (more than very slightly and short term)
b) cause supply of crude oil to increase (enough)

I understand that extraction of oil from shale or coal is not feasible until the price reaches at least $120+

If the consensus I read on peak oil is true, price rise will be continous.

I would be very interested to hear from anyone who wants to punch holes in this argument.

regards tony

I fully agree with u if your time frame is more than 1 years. For the past 2 years, I had focused my investment theme in stocks into 3 areas: growth in oil price, growth in metal resources and growth in China. Those themes have earned a lot of money for me.

I had invested in oil rig companies listed in Singapore and in NYSE, business is good & order book last till 2013.

Whereas for crude oil futures trading, where the time frame can be very short, ie 2 days to 2 weeks, I may not agree with you. Short-term price is driven by sentiment, fear, news, rather than fundamental in the long run. :)

[rederob]

No worries, just place a stop at $94.
Didn't take too long to hit the stop!
It was only ever a gamble while the oil price was trending higher.
And near term there is still a bit more bullishness left in the price - especially if US oil inventory trends don't turn positive.

[BREND]

Didn't take too long to hit the stop!
It was only ever a gamble while the oil price was trending higher.
And near term there is still a bit more bullishness left in the price - especially if US oil inventory trends don't turn positive.

Noted. I know its a big problem after reading that oil inventory in US falls again last night.

[rederob]

Noted. I know its a big problem after reading that oil inventory in US falls again last night.
If inventories cannot pull higher in coming weeks I revise my high side to a possible $120 top beofre this year's end.
Low-ball price to $70 a slight probability.
Probable new base of $80 for oil going forward.

[Tekmann]

Anyone care to speculate on the prospect of >$50 oil and the effect this will have on rthe economy?

Astonishing to think of Oil approaching $100, and can onlyspeculate where it will be another 2years from now...???

Hopefully back down to $50 if alternative fuels take off, namely hydrogen made from clean waste water or better still sea water (countering rising sea levels :p:)

Hope you don't have copyright on this chart below Wayne :eek7:

Tekmann

[Smurf1976]

Hopefully back down to $50 if alternative fuels take off, namely hydrogen made from clean waste water or better still sea water (countering rising sea levels :p:)

Even if you build and operate the hydrogen plant at literally no cost and use the cheapest electricity you can get (coal) then it still costs the equivalent of $120 per barrel of oil.

More realistically in a world where the hydrogen plant doesn't come free, where employees get paid etc and using wind or nuclear energy to run the plant it's more like $400 per barrel.

Oil at $93 is still cheap compared to the alternatives. That's the problem.

[rederob]

Oil at $93 is still cheap compared to the alternatives. That's the problem.
It's cheaper than beer!
It's even cheaper than bottled water.
Let's hope the "hydrogen" powered cars don't use bottled water in the electrolysis process.

ps. oil still over $94, so POG to $800 in near term is still looking a chance

[Tekmann]

It's cheaper than beer!
It's even cheaper than bottled water.

If you compare it by the Litre...then maybe YES, but if you compare the rate of consumption & nesseserty by the week...

Bottled water seems to come as tap water with the bonus fancy bottle, in which case, tap water still being much cheaper.

Tekmann

[Aussiejeff]

Any comments on where you think this graph might be heading? I know why I sense that growing up in the 60's-70's were "good times".... so what if we had no computers then!! :)

AJ

[rederob]

Oil is sitting between A$90-100 or there abouts at the moment - do I think it'll go up to say A$120-130 in the next year or so? Maybe. Do I see it there in 3-5yrs? Probably not. I think high oil prices today are a product of low oil prices in the early 90s, discouraging exploration and incremental development of technologies like horizontal drilling, fracturing and deep sea/sub sea drilling. High oil prices of the last few years has seen an explosion of exploration (try getting a rig in the US if you're not a major) and increases in technology that should help insulate us from further rises in the medium term.

As a long term investor, I make it my business to eliminate as many possibilities that can go against me as possible.
So when I read posts that "buck the trend", I look for the rationale behind them.
This poster suggests it's unlikely that oil prices will be as high as A$120-130 in 3-5 years time.
Are his views supported anywhere?
There's certainly no analysis - not even a long term price chart - just his views.
His principal theme is that technology, combined with "an explosion of exploration" will insulate us from high prices in the future.
So how do they stack up?
I'll give the poster an opportunity to present his case "for".
If he doesn't, I'll do some analysis on his behalf.

[doctorj]

Be my guest.

[Wysiwyg]

From what i`ve read, the chinese/indian growth spurt is also the reason behind oil supply issues.(obvious to most) If this is the case then once their ever increasing infrastructure is established will it not require a constant supply of fuel to maintain?Of course there may be fluctuations in price/bbl but the demand isn`t going to reduce to less than what it was 10 years ago.Not unless the human race slows to a crawl and masses of people experience hardship again.

[Wysiwyg]

Just to add to my post .... in Brisbane at present there is a tunnel being built under the river and another bridge over to address present and future traffic.There may be more examples of present major infrastructure moves within Aus.

[Bushman]

Quite amusing I thought. Now who is going to order me a diamond filled martini?

http://www.marketwatch.com/news/breaking.asp?id=news/features/expensive_things.asp

[Smurf1976]

As a long term investor, I make it my business to eliminate as many possibilities that can go against me as possible.
So when I read posts that "buck the trend", I look for the rationale behind them.
This poster suggests it's unlikely that oil prices will be as high as A$120-130 in 3-5 years time.
Are his views supported anywhere?
There's certainly no analysis - not even a long term price chart - just his views.
His principal theme is that technology, combined with "an explosion of exploration" will insulate us from high prices in the future.
So how do they stack up?
I'll give the poster an opportunity to present his case "for".
If he doesn't, I'll do some analysis on his behalf.
Exploration is all well and good. But the experience of Texas (for example) is that once production has peaked, even a dramatic increase in drilling can not reverse the decline. All it can do, at best, is slow the decline but not reverse it.

Consider the established 45 year trend of declining discovery, that demand has exceeded discovery for over two decades and that we're now seeing an explosion in drilling (with declining production) in numerous once-prolific oil provinces (including Saudi). It all points towards the world being at or near peak in conventional crude oil the way I see it.

Also worth noting that oil production has been on a gently DOWN sloping bumpy plateau for the past two and a half years. Another very telling warning that all is not well.

Even when you factor in tar sands etc the end result is a world drilling more and more just to keep production flat. Running faster and faster just to stand still is another way to look at it.

At best, we're making a vastly greater effort to maintain what is so far a roughly flat oil supply. That isn't cheap by any means. And we're (at best) going to have to scale it all up another order of magnitude if we're going to meet rising demand. Possible perhaps but given the shortage of rigs and people to operate them plus the troubles with Iraq, Venezuela etc putting the best targets off-limits, I'm not at all convinced that we''ll EVER see conventional crude oil production go much higher than it did in 2005.

More to the point, we would require a pretty massive effort just to get conventional (excluding tar sands etc) production back up to the May 2005 peak. As it stands today, the available evidence is we've hit at least a temporary peak if not THE peak.

Putting it all together, I really don't see any means by which demand of 95, 110, 120, 130 or whatever other growth number you choose will actually be met in a sustainable manner. If it's met at all it will be via infill drilling of small targets that rapidly deplete, over production (which does serious permanent damage to fields) and stock drawdowns. In other words, at best we''ll meet rising demand via a "sprint race" that's followed by serious decline not long afterwards.

I'm open to all ideas of course. But I'd like to see some actual evidence, as opposed to economic theory, to back the notion that production will grow from present levels at least as quickly as forecast demand. As it stands now, I haven't found even remotely convincing evidence that it's likely to grow much at all. Lots of nice theories but no proof of them actually working.

Bottom line is the global situation right now looks very familiar to anyone who has studied what happened in any large area that's already peaked and declined. All the tell tale warning signs are there including the classic more and more drilling that isn't finding enough to even stabilise reserves. And now the production data looks ominous too.:2twocents

[Aussiejeff]

Hahaha! Oil now at US$117.48

Oil had just breached the US$90 mark in early Nov 2007 and many wuz gaspin' about that.

It's interesting to go re-visit and review some of the comments made so, so long ago. Gee, isn't 5 months a long time.....

:)

Chiz,

AJ

[wayneL]

Hahaha! Oil now at US$117.48

Oil had just breached the US$90 mark in early Nov 2007 and many wuz gaspin' about that.

It's interesting to go re-visit and review some of the comments made so, so long ago. Gee, isn't 5 months a long time.....

:)

Chiz,

AJ
<pedandtic>

117.48 is the K contract. As it is heading to expiry, the M contract now has 6 times the open interest and qualifies as spot. This means the spot price is actually 116.63. In fact the cash price is $116.69.

</pedantic>

Sorry, just splitting hairs. Either way, our collective shock at $50 oil certainly is laughable. :rolleyes:

[Aussiejeff]

<pedandtic>

117.48 is the K contract. As it is heading to expiry, the M contract now has 6 times the open interest and qualifies as spot. This means the spot price is actually 116.63. In fact the cash price is $116.69.

</pedantic>

Sorry, just splitting hairs. Either way, our collective shock at $50 oil certainly is laughable. :rolleyes:

Oh dear. I stand corrected (pole-axed?) LOL

OK then, lemme put it to ya this way (me being a layman and all that...) this morning, Bloomberg is quoting a WTI Cushing Spot Price of US$119.37!! :rolleyes:

Place yer bets, people. When will the dreaded $US150 per barrel mark be breached? I'll have a stab at approx. Jul/Aug this year. Will we be paying AU$1.65-$1.70 for unleaded by then (diesel would be close to AU$1.90)??

Must check out the lates e-Cycles...... :)


AJ

[wayneL]

Oh dear. I stand corrected (pole-axed?) LOL

OK then, lemme put it to ya this way (me being a layman and all that...) this morning, Bloomberg is quoting a WTI Cushing Spot Price of US$119.37!! :rolleyes:

Place yer bets, people. When will the dreaded $US150 per barrel mark be breached? I'll have a stab at approx. Jul/Aug this year. Will we be paying AU$1.65-$1.70 for unleaded by then (diesel would be close to AU$1.90)??

Must check out the lates e-Cycles...... :)


AJ
... and just keeps grinding upwards. $150 isn't too far away is it? :eek::eek:

[Temjin]

Always love to review thread like this, my money on $150 before this year! Regardless of a global recession, except if there is a depression. :D

[rederob]

Always love to review thread like this, my money on $150 before this year! Regardless of a global recession, except if there is a depression. :D
That's only $30 away, so I will call it a cheap shot.

I'm still looking for some evidence that doctorj's assertions have any substance. Contrarily, increased expenditure (more rigs in more greenfield sites) is seeing the law of diminishing returns express itself. Worse still, more drilling into producing fields to extract greater volumes is now occurring in an effort to satisfy demand. Oil peaks in these fields are being accelerated: The North Sea examples make for solemn reading if you are a consumer. (Google "Matt Simmons" and scroll through some of his recent slide shows for even greater alarm.)

This month sees us achieve 3 years of oil production without breaching the crude output peak reached in May 2005. That means above ground reserves are being strained and every geopolitical or terrorist event ratches prices up another notch.

It is true that profit margins are increasing for most producers, but so too are costs. The main game for them nowadays is reserves replacement (or enhancement) at lowest possible cost. And believe it or not, energy costs are a major cost contributor, and are destined to rise as oil prices rise.

[Aussiejeff]

It is ironic indeed to note the following quote by Caltex MD Des King in todays Herald Sun business section:

"SURGING oil prices and the strong Aussie dollar are eating into Caltex Australia's profits from fuel production."

With Caltex CEO also indicating that US$200 oil is going to occur in the future (at current rate of increase, not THAT far in the future), is it conceivable that fuel processing in Australia might become so unprofitable that they significantly reduce production? MD Des King hints as much - "However, we may consciously choose to reduce production should margins not outweigh the working capital costs". I shudder to think what effect THAT scenario will have on our pump prices, let alone the spectre of $200 oil (ULP pump price about AU$2.60???)

Funny. An old song just popped into my head - "Don't worry - be happy" :)

I guess we better lighten up and enjoy the moment. The near future might just be a tad less cheerful.

[Smurf1976]

Or worse. What happens if (when in my opinion) the likes of Caltex can't actually get enough crude oil to refine? First they can't do it profitably, that seems to be coming, but at some point I think they'll have trouble doing it at all, at least not at full capacity.

I'm convinced that at some point we'll see outright shortages of key oil products. Paying $1.50 or even $5 a litre is one thing, not being able to buy enough fuel to carry on business as usual at any price is a far more serious problem.

I seriously doubt the food industry, ambulances, public transport, police, fire or anything else essential has a workable plan to cope with this. No doubt one will be hastily set up when trouble hits, but that's only going to work if someone else misses out - and that means private motorists.

The day that happens is the day we stop worrying about interest rates, climate change, inflation and so on. It's the day we're faced with an outright crisis of massive proportions and it's coming in my opinion.:2twocents:(

[Aussiejeff]

Hi guys,

Anyone care to speculate on the prospect of >$50 oil and the effect this will have on rthe economy? It is certainly effecting my trading.

Stock traders (who generally want to push the S&P up out of the channel it's in, I feel) have one eye on the oil chart and are as nervous as buggerry...and getting themselves into a bit of a flutter anytime the oil chart starts tracking northward intraday.

November crude has already had a couple of prods at the psychologically important $50 barrier, and some "ex spirts" think this is only the beginning.

Technically, this is not looking toppy at all, but my "guess" is we may see a retracement from here before it blows thru 50.

Cheers


I vote this as one of the best "hindsight" threads on this board.... especially given oil's meteoric rise (280%+) over the subsequent 3.5 odd years since Wayne first created this gem.

Care to update your thoughts based on these original comments Wayne? Looks like those "ex spirts" were right eh? :)

Cheers,

AJ

[wayneL]

I vote this as one of the best "hindsight" threads on this board.... especially given oil's meteoric rise (280%+) over the subsequent 3.5 odd years since Wayne first created this gem.

Care to update your thoughts based on these original comments Wayne? Looks like those "ex spirts" were right eh? :)

Cheers,

AJ

It was a typo, I meant to type $150. :D

But what is interesting was/is the oscillating sentiment with regards to POO/SP500.

[michael_selway]

It was a typo, I meant to type $150. :D

But what is interesting was/is the oscillating sentiment with regards to POO/SP500.

hehe unbelievable :)

What do you think about $USD1500 ber barrel in the next 5-10 years?

thx

MS

[mayk]

http://ap.google.com/article/ALeqM5housrFs-9ventOTJ-7ljHA9m8SIQD91JTOR00

Interesting read. According to the data, provided in this article, Saudia arabia will be oil free in 48 years, if it will output its oil at 15Million barrels per day. Pretty scary...


Well, if I am holding something of value, I will like to sell it at the highiest price possible. Maybe it is a saudia's (OPEC) new trick to sell their oil at a premium rate, not supply and demand, or speculation BS!

Interesting times ahead. I think after this people will start searching for oil in the other unexplored terrority: International waters...

[michael_selway]

http://ap.google.com/article/ALeqM5housrFs-9ventOTJ-7ljHA9m8SIQD91JTOR00

Interesting read. According to the data, provided in this article, Saudia arabia will be oil free in 48 years, if it will output its oil at 15Million barrels per day. Pretty scary...


Well, if I am holding something of value, I will like to sell it at the highiest price possible. Maybe it is a saudia's (OPEC) new trick to sell their oil at a premium rate, not supply and demand, or speculation BS!

Interesting times ahead. I think after this people will start searching for oil in the other unexplored terrority: International waters...

Hey thanks for the article, very interesting and we never knwo for certain howmuch iol reserves they have

...These disagreements came to a head June 22 at a rare meeting of oil producing and consuming nations hosted by Saudi Arabia. In the end, Saudi Arabia said it could increase oil production capacity to 15 million barrels per day if needed in future years. But it gave no indication that step, or an immediate increase in output, was necessary or planned.

If all goes as scheduled, Aramco forecasts more than 50 billion barrels of fresh reserves from the giant fields by 2011. That amount alone would give Saudi Arabia the ninth largest oil reserves in the world, not even counting its existing reserves.

Outside analysts estimate the kingdom's total current reserves at about 260 billion barrels. But Saudi Arabia refuses to provide detailed data to allow independent verification...

thx

MS

[AlexanderPop]

not likely

[jonojpsg]

Having just watched The Crash Course recommended elsewhere on ASF, I have to get some more discussion going on this topic.

Surely if we have reached peak oil which according to the graph shown

http://www.chrismartenson.com/peak_oil

we have been at for the last four years or so, then POO is going to simply continue its march upwards is it not? There is no way that anything else can be introduced quickly to replace it, apart from gas which will have to have a peak as well. As demand starts to exceed supply, price will increase.

[Wysiwyg]

Oil price around US$54 at present with an OPEC output cut introduced 1 November and another output cut suggested for December.

Won`t reach US$50 and expect nearer US$60 / bbl over the next few months.

My opinion on oil price / barrel based upon past output cuts and the northern hemisphere winter rapidly approaching which may overide the recessionary phase noted on the chart in 2001.Let`s face it, it`s inevitable.

[Temjin]

We should change the thread title to "<$50 Oil anyone?" :D

Remember things tend to shoot over or shoot under quite often. But when the mainstream media are being gloom and doom about oil prices and predicting they might go back to $30, i think we can be a little tid more bullish in the medium term and ultra bullish in the long term (not the short term though)

[nick2fish]

Temjin :D Exactly what I was about to post , so I agree wholeheartedly and would like to add with the northern winter here coupled with another impending OPEC cut, oil will be the first commodity to recover(with gold)
Cheers

[Wysiwyg]

Won`t reach US$50 and expect nearer US$60 / bbl over the next few months.


I give up. :flush:



Oil prices tumble under $US50 a barrel

[Smurf1976]

With the current financial crisis I'm going to say we've seen at least a temporary peak for the next few years. Possibly, we've just seen the all time peak.

Why am I making such a huge claim? It's really quite simple.

1. Oil fields gradually lose output as reserves decline. That's a well established fact that nobody with any knowledge of the industry would challenge. It's just what happens in the same way as a battery slowly runs flat.

2. Without ongoing investment into new field development and reworking of existing fields, production will decline several % a year due to decline of exisiting fields.

3. OPEC claims to have cut production by about 1.5 million barrels per day. That means production now is below the peak given there's no realistic prospect that non-OPEC producers have ramped up to a comparable extent.

4. The financial situation would almost certainly be reducing exploration and development activity, especially for fields not viable at present oil prices. Given that the level of such activity in recent years was barely sufficient to maintain flat production, any drop in activity ought to lead to declining production. Same applies to the development of tar sands etc projects being delayed or cancelled.

5. It is generally accepted that the world had little if any spare production capacity prior to the crisis.

6. You join the dots. I can not see any logical conclusion from the above other than to state that we have passed at least an interim peak and that it would require a massive injection of capital, completely replacing all the investment lost amidst the financial crisis, just to maintain overall capacity broadly flat into the future. That strongly implies that total capacity will, in practice, decline. We've thus peaked at least until some new round of massive investment comes through - and that's likely to be years at least. :2twocents

[BentRod]

moved to other thread.:eek7:

[jonojpsg]

With the current financial crisis I'm going to say we've seen at least a temporary peak for the next few years. Possibly, we've just seen the all time peak.

Why am I making such a huge claim? It's really quite simple.

1. Oil fields gradually lose output as reserves decline. That's a well established fact that nobody with any knowledge of the industry would challenge. It's just what happens in the same way as a battery slowly runs flat.

2. Without ongoing investment into new field development and reworking of existing fields, production will decline several % a year due to decline of exisiting fields.

3. OPEC claims to have cut production by about 1.5 million barrels per day. That means production now is below the peak given there's no realistic prospect that non-OPEC producers have ramped up to a comparable extent.

4. The financial situation would almost certainly be reducing exploration and development activity, especially for fields not viable at present oil prices. Given that the level of such activity in recent years was barely sufficient to maintain flat production, any drop in activity ought to lead to declining production. Same applies to the development of tar sands etc projects being delayed or cancelled.

5. It is generally accepted that the world had little if any spare production capacity prior to the crisis.

6. You join the dots. I can not see any logical conclusion from the above other than to state that we have passed at least an interim peak and that it would require a massive injection of capital, completely replacing all the investment lost amidst the financial crisis, just to maintain overall capacity broadly flat into the future. That strongly implies that total capacity will, in practice, decline. We've thus peaked at least until some new round of massive investment comes through - and that's likely to be years at least. :2twocents

Hey smurf,
Totally agree with you - except for the interim bit! The latest IEA report that shows declines of upwards of 5% a year from the worlds existing major fields implies that there is NO way possible that any amount of investment will be able to restore production to above the peak we have already passed. It's all downhill for production and uphill (once demand starts to increase again) for price IMO.

[Green08]

A good thing.

We were paying $1.05 for unleaded yesterday. I don't believe it will stay there with Christmas around the corner.

[aleckara]

Say I wanted to invest in oil quick? How would I go about doing that? I don't have many tools at my disposal (ASX Shares and options atm, might need to apply for another account somewhere) and my cash available to invest is small - but I don't want any leverage whatsoever. I know about position sizing and the like but I'm not sure as to the size of futures contracts (i.e if futures contracts are large for oil then I don't have enough capital to even make up one contract).

Oil will increase soon IMO. With all the commotion in the markets this is one thing that in the long term that will at least hold its purchasing power.

EDIT: I can't seem to find any ETF's that do oil in the local market either

[Temjin]

Say I wanted to invest in oil quick? How would I go about doing that? I don't have many tools at my disposal (ASX Shares and options atm, might need to apply for another account somewhere) and my cash available to invest is small - but I don't want any leverage whatsoever. I know about position sizing and the like but I'm not sure as to the size of futures contracts (i.e if futures contracts are large for oil then I don't have enough capital to even make up one contract).

Oil will increase soon IMO. With all the commotion in the markets this is one thing that in the long term that will at least hold its purchasing power.

EDIT: I can't seem to find any ETF's that do oil in the local market either

Because there isn't. You can only buy oil commodity tracking ETFs from the US stock markets or the London Exchange.

[1Zion]

I'm surprised that there have been no new threads posted lately on this forum. So many opinions have been put forward on the future price of oil to a point in time....Now there are no opinions?
Please be honest about the things all of you have learn't from your own personal experiences, positives and negatives.
I look forward to listening to your thoughts.

[sinner]

I'm surprised that there have been no new threads posted lately on this forum. So many opinions have been put forward on the future price of oil to a point in time....Now there are no opinions?

Hi,

Looks like all the oil speculation has moved to the "OIL AGAIN?" thread. Try there, I just posted an updated chart of USO there.

[Dannyboy80]

Thought l would post something from a while back.

http://www.marketwatch.com/news/story/Story.aspx?guid={19065F21-1BF5-4C0B-ACB8-ADCEE6970B3B}&siteid=

[J.B.Nimble]

Thought l would post something from a while back.

http://www.marketwatch.com/news/story/Story.aspx?guid={19065F21-1BF5-4C0B-ACB8-ADCEE6970B3B}&siteid=

And the defining quote from that article has to be

Now it seems more likely that the "defining price for economic calamity" is somewhere north of $75, Kilduff said, adding that those are levels which seem inevitable, though they won't come "as a consequence of normal economic progression."
"The geopolitical pot ratcheted up to a rolling boil from a simmer just a few months ago," and "some miscalculation on that front could bring prices closer to the mythical $100 level, resulting in an economic slowdown of significance," he said.
Indeed, when oil pushed relentlessly through 120, 130, 140 I truly felt fear for a collapse in just about everything... I just wish I had continued to feel the fear as the price eased...:o

[drillinto]

EIA: Oil Price Chronology

http://tonto.eia.doe.gov/country/timeline/oil_chronology.cfm

[dirty_harry]

It's running out pretty fast now, just a matter of time. 7% depletion per year, won't be long. I suggest buying petrol cars in Australia, because they can be converted to gas which is abundant here.

[quinn123]

It's running out pretty fast now, just a matter of time. 7% depletion per year, won't be long. I suggest buying petrol cars in Australia, because they can be converted to gas which is abundant here.

Newbie question: I assume the current economic crises is to blame for the recent decline in oil prices... But I thought if we are running out of oil and we depend on it so much wouldn't that drive prices higher? So you could expect prices to increase alot once demand picks up?

[dirty_harry]

Yes exactly. We saw what happened last year when demand outpaced supply. Because of the crash demand has dropped off for now. Supply won't be able to be increased enough when demand increases again. Also goes for other commodities.

[rederob]

Yes exactly. We saw what happened last year when demand outpaced supply. Because of the crash demand has dropped off for now. Supply won't be able to be increased enough when demand increases again. Also goes for other commodities.Demand has never outpaced supply that I am aware of.
What happened last year was the potential for demand to outstrip supply, as global inventories started to tighten.
Speculators were betting on a continuation of trend. We know that changed dramatically, and the price of so many things has subsequently collapsed.
Each year roughly an additional 5% of new oil output is required to match present demand. While high oil prices allowed significant investment in new capacity and exploration, present low prices are doing the opposite.
The most probable scenario for 2009 is a continuation of excessive production capacity, and a correspondingly low oil price.
The jury is out in 2010 as various national stimulus packages are yet to get off the ground.
I suspect 2010 will be a much better year than 2009, but I don't think we have seen the worst of things yet. So there is a prospect that 2010 will look pretty much like things are right now.
I see oil prices rising steadily over the next 18 months, but doubt if $80 could be reached unless there is a major change in global markets.
Within 3-4 years I expect it will be back to a business as usual approach with supply thereafter unable to match demand.

[dirty_harry]

It's hard to tell exactly what happened last year because we can't know how much demand destruction the escalating prices were causing along the way. For example people were driving less, and flying less because of fuel surcharges. So the market removed demand that would have been there at lower prices. I think it's safe to say that due to the natural production declines we are now seeing for example in Mexico and the North Sea, at some point when the recovery comes there will be trouble.
What do you guys think we should do about it - accumulate Woodside and Santos?

[Aussiejeff]

It's hard to tell exactly what happened last year because we can't know how much demand destruction the escalating prices were causing along the way. For example people were driving less, and flying less because of fuel surcharges. So the market removed demand that would have been there at lower prices. I think it's safe to say that due to the natural production declines we are now seeing for example in Mexico and the North Sea, at some point when the recovery comes there will be trouble.
What do you guys think we should do about it - accumulate Woodside and Santos?

Not today ;)

[nick2fish]

How is it that we have a hundred character limit, yet posts like the above are ok:confused:

[sails]

How is it that we have a hundred character limit, yet posts like the above are ok:confused:

I expect these posts will be deleted when one of the mods re-appear - haven't seen any sign of them for a while this evening...

[baboon]

Maybe because

[nick2fish]

Even though mods have deleted "sales advice post" my post of complaint still fits :D Sorry Jeff, happy that you can get away with it and as you can see from my signature, much can be said in just a few words ;) Congrats on your weight lost and keep up the good health. Oh and very amusing Baboon, but no one likes a show off:D

[kennas]

100 character minimum is only applied to the stock threads.

[weatherbill]

if you're into conspiracy, big oil men wanted to drop the price of oil in a plan to bankrupt Iran, who recently thwarted the control of london and NYMex exchanges to opentheir own, so dropping the oil price below the break even price for Iran was the hidden reason for this last drop in oil.

[MRC & Co]

Hi, anyone know which instruments to watch which correlate with the price of crude oil (CL)?

Cheers

[surfziggy]

These ETFs

LOIL.L
CRUD.L
OILB.L

all on LSE.

But you will likely get affected by contango if you hold longer than short term.