Oil seems to have gone off everybodies radar for the moment as the price has eased off. But the long term problems have not gone away as this article points out.
I am always asked about Oil prices. Here is my prediction as it will affect the market as a Bullish catalyst. Oil prices will fall during the year to $35 and will likely bounce. Expect Volatility. If $35 is penetrated then strong support is at $30. $50 is major resistance here at the beginning of the year.
This was posted in another forum. What do you think wayneL?
wayneL
6th-January-2005, 10:03 PM
Well I'm not really one for forecasts, but I think the next 30 days will set the tone for the rest of the year, all things being equal...and barring any left field developments.
I see ~$40.50 (feb contract) being the critical level, and many suspition is that it will break to the downside... but I am on the sidelines at the moment.
Cheers
positivecashflow
6th-January-2005, 10:14 PM
Oil prices have fallen slightly Wednesday despite a rise in crude inventory levels last week. Crude inventory levels fell by 3.3 million barrels, but traders have been encouraged by a rise in distillate and gasoline inventory levels. Of late, oil prices have been fluctuating around the $43 a barrel level. There remain concerns about possible terrorist activity later this month during the Presidential inauguration and the election in Iraq. Here's another interesting quote from an article written Jan 5th 2005.
stefan
6th-January-2005, 10:15 PM
Not to mention that it also depends on the rest of the winter which so far has been very mild.
I don't see a major reason why oil would drop significantly as there is no indication other than the mild winter that demand will actually decrease anytime soon.
Happy trading
Stefan
PS: Very interesting article Wayne. Thanks for posting it.
Bonk
8th-January-2005, 01:48 PM
No one can predict oil ? Price is back over USD $ 45
OIL IS KING !
UraniumFuture
10th-January-2005, 11:53 PM
Peak oil is forecast for this year or next according to Matt Simmons, adviser on energy to Bush/Cheney, and also Colin Campbell, respected oil industry figure from the UK. What does that mean for investing? It means get the f#ck out of stocks vulnerable to high oil prices and into stocks that benefit from high oil prices. They are few and far between but obviously oil stocks with good reserves will do very well. The other area is uranium and there is bricks and mortat fundamentals to support this.
Global consumption has been steadily climbing up to around 60,000 tonnes per annum. Half of this is pulled from the ground and the rest comes from desembled weapons inventories maining in good old Russia! However these inventories are about to run down at a point in time where countries around the world ramp up nuclear power plans. The cost of uranium account for only 5% of the cost of nuclear energy with the rest coming from plant establishment and maintenance. Uranium recently hit a 20 year high of US$20.70 /lb and has continued to rally regardless of oil prices coming back from their US$57 /barrel highs in late 2004. Australia has around 45% of the known global resource that is currently able to be mined at these prices and only three mines are in production in Australia. One is the Beverley mine down in SA which is not listed on the ASX or anywhere for that matter. It is privately owned by the US giant General Atomics. The other two mines are WMC's Olympic Dam and ERA's Ranger Mine. All the market fundamentals point to a continued rally in uranium stocks this year. Keep an eye on the uranium price in particular (uxc.com). The best thing about this commodity unlike gold and silver is that if you want a piece of the action you have to buy shares. You can't physically buy uranium. There are some great Candian stocks also and investors over there are much more aware of the potential of this sector of the energy market.
There are only 4 uranium stocks listed on the ASX. Paladin Resources (PDN) was up 17% today and the buy orders for tomorrow suggest more upside. ERA, Australia's biggest producer of Uranium were up 30c today to $6.70. No surprise WMC Resources is a takeover target. It has the largest Uranium reserves in OZ. And the other speculative is Summit (SMM). Speculative not because it is looking for uranium, speculative because it has proven reserves in Queensland where uranium mining is banned. Sustained periods of high oil prices and inevitable high uranium prices will see the QLD govt allow its reserves to be mined. So the value is there just they can't access it which is actually a strong positive if you consider the price of uranium will only get more expensive. Buy it and forget about it!
Joe Blow
11th-January-2005, 08:31 AM
UraniumFuture,
Please try and avoid posting the same cut and pasted information in more than one thread and lets try and keep the threads ON TOPIC.
Other than that, welcome to the forums.
:)
wayneL
11th-January-2005, 11:08 PM
A different perspective:
http://www.radford.edu/~wkovarik/oil/index.html
RichKid
12th-November-2005, 08:49 PM
Oil seems to have gone off everybodies radar for the moment as the price has eased off. But the long term problems have not gone away as this article points out.
Timely to visit your remarks Wayne! January 2005 was a long time ago now but oil has again taken a breather. When will the speculators move in again and how far will it jump, if at all?
Chart suggests a descending wedge (also known as a bullish wedge), approaching a previous congestion zone, as occurs at previous support/resistance areas, I expect it'll consolidate or bounce off imo. Can't see it falling any lower than 56 (support level) when supply still seems to be low. I've been watching oil and gold recently and have to admit I never expected both to retrace this far so quickly.
wayneL
13th-November-2005, 04:32 AM
Timely to visit your remarks Wayne! January 2005 was a long time ago now but oil has again taken a breather. When will the speculators move in again and how far will it jump, if at all?
Chart suggests a descending wedge (also known as a bullish wedge), approaching a previous congestion zone, as occurs at previous support/resistance areas, I expect it'll consolidate or bounce off imo. Can't see it falling any lower than 56 (support level) when supply still seems to be low. I've been watching oil and gold recently and have to admit I never expected both to retrace this far so quickly.
The commercial traders are very long right now....the big boys are buying. So your analysis should prove correct RK
However, the commercial gold traders are nett short.
FWIW
wayneL
14th-November-2005, 12:11 AM
RK my analysis:
Oil has been in a deep retracement since August, and in the last couple of sessions has dropped below .618 retracement, but is in a potential support level (monthly fibzone).
But Commitment of Traders Data (COT) is showing that the large commercial oil traders are nett long….and the longest they’ve been in the last 18 months. This is bullish.
The large spec traders are nett short, the shortest they’ve been for 18 months, this is also bullish.
View charts & COT data here (http://vw-organics.netfirms.com/lingrove/nfblog/?p=24) (file was too big to attach)
RichKid
16th-November-2005, 11:20 PM
However, the commercial gold traders are nett short.
FWIW
That's what I was about to checkout since the recent pattern has been a bit inconclusive for gold. Thanks!
RichKid
16th-November-2005, 11:26 PM
RK my analysis:
Oil has been in a deep retracement since August, and in the last couple of sessions has dropped below .618 retracement, but is in a potential support level (monthly fibzone).
But Commitment of Traders Data (COT) is showing that the large commercial oil traders are nett long….and the longest they’ve been in the last 18 months. This is bullish.
The large spec traders are nett short, the shortest they’ve been for 18 months, this is also bullish.
Hi Wayne,
Just saw your posts, I forgot all about applying fib levels, was about to do a chart with standard straight edge trendlines too (intersect about 55 atm) but stuffed it up. Nice to see the overalapping support levels from different TA studies. Will post a chart soon with pretty lines and dazzling colours- if I can get it right.
Thanks for the COT info, always find it useful, saw some great explanations on what to look for by Nick Radge on Reefcap.
btw, great blog and nice charts, something to keep an eye on.
wayneL
16th-November-2005, 11:35 PM
Will post a chart soon with pretty lines and dazzling colours- if I can get it right.
Oh I like those dazzling colours on charts :D Will look forward to it.
markrmau
17th-November-2005, 09:44 AM
....the large commercial oil traders are nett long….
The large spec traders are nett short, the shortest they’ve been for 18 months,
Hi Wayne, can you pls give rundown on who's who in the COT?
I guess the large spec traders are the hedge funds... Are the large commercial oil traders the refiners?
If that is so, then perhaps the situation is not so bullish. The refiners/consumers have to be long to manage risk - they know how much oil will cost them in 6 months time. However, the spec hedge funds are the ones taking the other side of the trade - and they are supposed to know what they are doing.
Having said that, I want a cold US winter for my AMU shares (US gas+oil).
doctorj
17th-November-2005, 10:57 AM
Crazy stuff last night. Henry Hub spot gas up more than 20%, New York Gate prices up just a bee's **** short of 40%.
Smurf1976
17th-November-2005, 03:55 PM
Crazy stuff last night. Henry Hub spot gas up more than 20%, New York Gate prices up just a bee's **** short of 40%.
I haven't done a serious analysis with the numbers but I VERY strongly doubt that it is possible to physically deliver the gas volumes which would be consumed in US/Canada in a normal or cold Winter due to the cumulative production losses in the Gulf of Mexico.
Substitution with fuel oil / LPG / kerosene / diesel in industry and power generation will help, but the capacity to do so is limited. Beyond that there is NO short term fix apart from demand destruction.
Given that the US gas-based chemicals industry has already been largely gutted in recent years (due to high gas prices) the remaining ability to cut demand relates mainly to non-energy intensive uses. For example, factories where gas is not a major cost or part of the business, offices, schools, houses etc. The easy options are already in permanent use and are thus unavailable as additional measures in a crisis.
The key things I would be watching for clues are the price of natural gas relative to diesel and crude oil and also the price of LPG gases. If nat gas goes significantly above the oil price in energy terms then that signals that the easy fuel switching is not sufficient. If the propane price takes off then that suggests that propane is being fed into the sales gas stream (sold as natural gas on a volume (not energy) basis) in order to beef up volumes. :2twocents
RichKid
18th-November-2005, 02:07 AM
Oh I like those dazzling colours on charts :D Will look forward to it.
Well Wayne, I'm afraid I couldn't find any bright ones ; ) alas, was looking forward to some painting, but here is what I've seen so far, wish I had a fib tool, hopefully they will correspond to the trendlines. Still a bullish weekly chart, could fall a bit more (a straight edge trend line instead of the curve would see it able to fall closer to 50 without breaking the medium term trend imo), no consolidation yet so no long signal for short term entry.
TjamesX
22nd-November-2005, 01:58 PM
From a peak oil conference in Perth;
GLOBAL oil demand could start outstripping supply in the next four years, according to the Association for the Study of Peak Oil and Gas (ASPO).
In Perth yesterday to launch the association's Australian chapter, ASPO president Professor Kjell Aleklett, a Swedish energy expert, said 54 of the 65 major oil-producing countries had already reached their peak production levels.
He warned that supply was likely to be unable to meet demand between 2010 and 2020.
"We think that 2010 is more likely than 2020 but when it comes to planning of energy issues, energy in the future and so on, this is a very short time and we must act now," Aleklett said.
He said four oil fields the size of the North Sea would need to be found for oil production to meet demand in 2025.
"This is just not possible," he said.
Smurf1976
22nd-November-2005, 04:10 PM
And right now the UK has a natural gas prices with prices now about double the price of oil on an energy content basis.
The UK made the most tragic of mistakes possible in power generation, heavy reliance on gas. Now they are paying the price and will pay, pay and pay again for years to come.
No doubt there are some good investment opportunities in gas and also non-gas power generation over there though. Just steer clear of anything which uses a lot of gas or electricity in the UK because it's getting rather expensive with wholesale spot gas price increases up to 50% in a day recently.
Closer to home, New Zealand is faced with a significant (but by no means certain) generation shortfall in 2006. This is a system energy constraint rather than a peak load constraint. It is likely that a government-owned oil-fired plant, the only thermal plant not already running flat out, will be online in a matter of weeks and after that there is no more. NZ is also faced with a long term gas supply shortfall as the Maui field depletes so good opportunities for anyone who finds gas over there.
And don't forget the USA, another country with a gas shortage.
Oh, and I almost forgot. There's an issue with oil too...
wayneL
22nd-November-2005, 05:01 PM
I reckon a good spot to live is where it's both windy and sunny....like Geraldton :D
(.....plans for solar panels and windmill on roof.)
RichKid
3rd-December-2005, 10:24 PM
Chart of oil, prices have really tightened and bounced off the important 56 support level, downtrend not broken yet but I think we may see a higher swing low, we'll know next week....maybe a small double bottom as part of this swing.
RichKid
15th-December-2005, 12:28 PM
Looks like this correction is over, nice higher swing but the price is a bit muddled atm. The Fat Prophets have a graph here showing the overall bull run, they expect it to go to $85+, don't you love the geometry in these commodity charts!!? Beuuudiful.
Just eyeballed the chart again, there's a moderate support/resistance line at about 62- shows up better on candle charts. If it can't get through it and re-establish it as support I expect it to range below till it gathers enough steam to press higher again. When all's quiet on the oil front is when it's time to get ready for the next bit of panic or euphoria imo- not that it's always an accurate guide.
mime
15th-December-2005, 06:58 PM
And right now the UK has a natural gas prices with prices now about double the price of oil on an energy content basis.
The UK made the most tragic of mistakes possible in power generation, heavy reliance on gas. Now they are paying the price and will pay, pay and pay again for years to come.
No doubt there are some good investment opportunities in gas and also non-gas power generation over there though. Just steer clear of anything which uses a lot of gas or electricity in the UK because it's getting rather expensive with wholesale spot gas price increases up to 50% in a day recently.
Closer to home, New Zealand is faced with a significant (but by no means certain) generation shortfall in 2006. This is a system energy constraint rather than a peak load constraint. It is likely that a government-owned oil-fired plant, the only thermal plant not already running flat out, will be online in a matter of weeks and after that there is no more. NZ is also faced with a long term gas supply shortfall as the Maui field depletes so good opportunities for anyone who finds gas over there.
And don't forget the USA, another country with a gas shortage.
Oh, and I almost forgot. There's an issue with oil too...
Hmmm I remember Kim Beazly had the idea of gas turning Australia more gas dependent. I didn't think it was such a bad idea but now I'm not so sure.
wayneL
4th-January-2006, 04:19 AM
I don't know whether anyone's noticed, but we >$63 again.
RichKid
4th-January-2006, 10:14 AM
I don't know whether anyone's noticed, but we >$63 again.
Sure did! Watching those swings very closely. Now for the retest of 62 and we're back firmly above a support level.
Here's a quick chart, has dipped a bit but still looking good, I'm looking for the higher swing low and for open interest to rise but I'm not sure how significant the latter is.
TheAnalyst
4th-January-2006, 10:50 AM
I don't know whether anyone's noticed, but we >$63 again.
tell me about it i sold my santos installments the other day at a reasonable profit having purchased them before xmas...if i waited a little longer i would have made 3 times as much...oh well must be happy becuase i have a few months supply of petrol for free now.
michael_selway
4th-January-2006, 09:00 PM
Sure did! Watching those swings very closely. Now for the retest of 62 and we're back firmly above a support level.
Here's a quick chart, has dipped a bit but still looking good, I'm looking for the higher swing low and for open interest to rise but I'm not sure how significant the latter is.
Hi looks good,
just wondering whether u can post a 2-3 year chart for crude
Thanks
MS
RichKid
4th-January-2006, 10:46 PM
Hi looks good,
just wondering whether u can post a 2-3 year chart for crude
Thanks
MS
Hi MS,
You can try www.futuresource.com (that's where I get mine from- it's all free), they aren't flexible enough to allow you to get specific time frames but if you fiddle with the chart size and style you should be able to get what you need.
Or you can try www.morrisonsecurities.com.au but their charts aren't as clear for me.
wayneL
4th-January-2006, 11:08 PM
Hi looks good,
just wondering whether u can post a 2-3 year chart for crude
Thanks
MS
Here is 2 years of the feb '06 futures contract
doctorj
4th-January-2006, 11:24 PM
Monthly chart for rolling crude futures all the way back to midway through '94 and 3 yr weekly chart for same contract.
Any more, please feel free to request.
michael_selway
4th-January-2006, 11:44 PM
Monthly chart for rolling crude futures all the way back to midway through '94 and 3 yr weekly chart for same contract.
Any more, please feel free to request.
Wow thanks doctorj/waynel
It appears than Crude has really taken off only in the last 2-3 yrs
Would you guys also be able to post chart for Crude since the 1980s till now? esp showing the all time high of $80/barrel?
Thanks again
MS
Smurf1976
5th-January-2006, 08:46 AM
Would you guys also be able to post chart for Crude since the 1980s till now? esp showing the all time high of $80/barrel?
US Dollars I assume? Crude oil hasn't ever traded at US$80 per barrel. The all time high is around US$70 (approx) a few months ago prior to the announcement of the temporary stock drawdowns by the IEA of both crude oil and refined products.
michael_selway
5th-January-2006, 09:01 AM
US Dollars I assume? Crude oil hasn't ever traded at US$80 per barrel. The all time high is around US$70 (approx) a few months ago prior to the announcement of the temporary stock drawdowns by the IEA of both crude oil and refined products.
Oh, i thought i read somewhere that in the mid 1980's it reached (maybe equivalent) of $US80/Barrel? The recent $US70+/barrel didnt break the record i heard also. Can someone please confirm with a crude chart from the 1980 till now?
Thanks
MS
---------------------
"Even compared to 1981, when oil prices touched $80 in real terms, the U.S. bill for overseas oil is way up. That year, the EIA says the average oil price was $31.77, or $66.30 in today's prices.
Until recently the peak price was around $40 set in the mid-1980's prior to the effective collapse of OPEC control during that period as North Sea output ramped up and global demand fell as nuclear and coal-fired generation increased thus cutting demand for fuel oil.
In inflation adjusted terms this is somewhere around the equivalent of $90 now so I think that's what you're thinking of.
US$70 was a record in nominal terms but not in real terms. That is, the oil was worth a record volume of a depreciating unit of measurement (Dollars).
I'll post a chart if I can find one that's in nominal dollar values. I did have one somewhere which went back to 1859 (the beginning of the modern oil industry) so that ought to cover everything but it's a "real terms" chart and not a nominal price one so it shows everything in 2004's depreciated Dollars rather than actual price at the time which isn't much use here.
Smurf1976
5th-January-2006, 01:41 PM
"Even compared to 1981, when oil prices touched $80 in real terms, the U.S. bill for overseas oil is way up. That year, the EIA says the average oil price was $31.77, or $66.30 in today's prices.
http://www.forbes.com/2004/08/16/cx_da_0816topnews_print.html
I've highlighted the effective answer to your question. Nominal price versus real terms.
michael_selway
5th-January-2006, 06:40 PM
I've highlighted the effective answer to your question. Nominal price versus real terms.
oh ok do u (or others) have the normal (nominal one) from 1980 till now?
Thanks
MS
Smurf1976
5th-January-2006, 07:46 PM
There's a nominal (not real terms) price chart here http://www.eia.doe.gov/emeu/cabs/chron.html
It's complete with chronology of major oil industry events back to 1970. Should be what you're looking for.
The chronology looks reasonable although I haven't read it all. Do bear in mind though that it's written from the perspective of the government (USA) of a major oil importing country and so sees price increases as "bad" whereas an exporting country would see them as "good". Like anything it depends which side of the trade you're on whether an increase is good or bad.
Regarding the EIA, their recording of actual events is fairly good in general but the track record of their forecasts isn't good especially where oil discovery is involved.
Note also that the EIA (Energy Information Administration) is totally separate from the IEA (International Energy Agency) despite the similar abbreviation and both dealing with energy.
michael_selway
5th-January-2006, 08:56 PM
There's a nominal (not real terms) price chart here http://www.eia.doe.gov/emeu/cabs/chron.html
It's complete with chronology of major oil industry events back to 1970. Should be what you're looking for.
The chronology looks reasonable although I haven't read it all. Do bear in mind though that it's written from the perspective of the government (USA) of a major oil importing country and so sees price increases as "bad" whereas an exporting country would see them as "good". Like anything it depends which side of the trade you're on whether an increase is good or bad.
Regarding the EIA, their recording of actual events is fairly good in general but the track record of their forecasts isn't good especially where oil discovery is involved.
Note also that the EIA (Energy Information Administration) is totally separate from the IEA (International Energy Agency) despite the similar abbreviation and both dealing with energy.
Thanks for the info, thats a very good site and yes the right chart
i also came across article talking about "peak" oil today, where some experts think that "good" oil will run out withing 5 yrs while others 30+. Can also watch the video of the interview with experts. Quite interesting
i also came across article talking about "peak" oil today, where some experts think that "good" oil will run out withing 5 yrs while others 30+. Can also watch the video of the interview with experts. Quite interesting
I strongly recommend that anyone with an interest in this subject aim to get their mind around the bell curve of production that most oilfields follow and the geological limits to the extraction rate. Suffice to say that even the technologically advanced USA only manages to get 6% of proven reserves out of the ground per year and few can match that. So there needs to be over 20 years of reserves available to sustain a production rate which meets current demand (assuming 5% depletion rate which is still rather high). Do the maths on that and you'll understand why production falls slowly over time rather than suddenly running out.
Oil discovery peaked worldwide in the early 1960's and has steadily fallen ever since. It has been below the rate of discovery (assuming the OPEC constant figures are false - a huge topic in itself but suffice to say that most experts believe they report total recoverable oil discovered rather than total oil remaining since they have a financial incentive to do so and figures are implausibly constant from year to year) since 1985.
It's a big topic with lots to get your mind around. Nobody with any credibility doubts that oil production will peak and then fall. It's happened in numerous countries already including those which once had huge oilfields. The USA has found about 10% of all oil to date - but production peaked in 1970 and has trended down ever since despite all manner of technical and economic efforts to halt the decline. It's much the same in other countries with the North Sea also now in steep decline.
So the question is when, not if, worldwide production peaks and what the consequences will be. :2twocents
nizar
7th-January-2006, 12:01 PM
Hi all,
Ok, i think most people share the view that world oil is running out, its just a matter of time...
Based on this, do u think it would be a good strategy to slowly buy shares (like a parcel a month to avoid paying a high price) over like the next year or so in listed oil companies with the most oil reserves?
Which do u think is a better bet out of oil search and woodside?
For OSH, according to westpac broking research, 4 analysts rate it a strong buy, 5 a moderate buy, and 2 hold.
With WPL, its 6 strong buy, 3 moderate buy, 6 hold and 1 moderate sell. I can't view their comments unless i subscribe to "Premium Research", lol...
WPL has forecast earnings growth of 59% in FY2006 with OSH 22%.
Which stock do you think is better?
And do you think this is a good strategy?
I read an article on fortune regarding this guy who reckons world is running out of oil, a good read:
Another way to potentially benefit from the world running out of oil is to invest in alternative energy forms i think. Uranium (if it wasnt 4 strict aussie laws on it), or wind-generated (eg.BBW), which is starting to become popular with g'ments in europe.
ANy views would be appreciated
RichKid
9th-January-2006, 09:15 AM
...Which do u think is a better bet out of oil search and woodside?
For OSH, according to westpac broking research, 4 analysts rate it a strong buy, 5 a moderate buy, and 2 hold.
With WPL, its 6 strong buy, 3 moderate buy, 6 hold and 1 moderate sell. I can't view their comments unless i subscribe to "Premium Research", lol...
WPL has forecast earnings growth of 59% in FY2006 with OSH 22%.
Which stock do you think is better?
And do you think this is a good strategy?
Hi Nizar,
Might be good to start a new thread comparing OSH & WPL (or post in the individual stock threads for those companies) so we can keep this thread on Oil (rather than particular companies). Thanks!
Talking of oil, it's gone higher again, I'm waiting for the next swing top to see what type of support exists below, open interest is solid on the recent upswing.
RichKid
moderator
michael_selway
9th-January-2006, 10:53 PM
Hi all,
WPL has forecast earnings growth of 59% in FY2006 with OSH 22%.
ANy views would be appreciated
Ok so naturally WPL would have a higher P/E than OSH then, and it does!
RichKid
12th-January-2006, 12:08 PM
Time to get back to price of oil folks. Chart for Feb06 contract (thanks for mentioning the correct contract Wayne, I was posting the wrong contract at one stage, us amateurs!! geez). Open interest is rising so I assume more traders are happy to open long positions at this level. If this a swing high then I expect open interest to drop on the way down to the next (higher?) swing low. Nice to see it above 64.
michael_selway
12th-January-2006, 12:26 PM
Time to get back to price of oil folks. Chart for Feb06 contract (thanks for mentioning the correct contract Wayne, I was posting the wrong contract at one stage, us amateurs!! geez). Open interest is rising so I assume more traders are happy to open long positions at this level. If this a swing high then I expect open interest to drop on the way down to the next (higher?) swing low. Nice to see it above 64.
I Still think that Oil will correct when the North America/Europe/Asia winter is over, most likely to $50+, But Long Term definitely need an Oil Stock, but not now thats all, wait for the correction first.
nizar
12th-January-2006, 02:32 PM
yeh i agree with u michael...
last correction in october, wpl fell to $29-sumthing, i wouldve bought it if i had cash at the time...
hopefully next correction sees it drop to mid-35s, then ill buy big....
american/european winter finishes when? around feb-march? Im guessing its when we finish summer...
excalibur
15th-January-2006, 09:31 AM
China has reported a 3% decrease in production expectations. Its one thing that is fact, that the chinese are bad liars. No, I think we`re gonna get a big surprise by the middle of this year.
I`m expecting $80 a barrel for oil and then the first alarm bells will start ringing. :goodnight
michael_selway
15th-January-2006, 01:41 PM
China has reported a 3% decrease in production expectations. Its one thing that is fact, that the chinese are bad liars. No, I think we`re gonna get a big surprise by the middle of this year.
I`m expecting $80 a barrel for oil and then the first alarm bells will start ringing. :goodnight
The thing about oil currently is that it is so susceptible to speculation more than metals imo. Any "bad news" will spike up oil prices even though there is no justification for it.
We saw that in the hurricane Katrina thing when it spiked to $70+/Barrel. But yet it fell down rapidly to $56+/Barrel or down 20%? i do think that oil is runnning out (PEAK OIL) but not yet, not for atleast for 3-5 yrs.
However due to its speculative nature, the price can spike up to $80/barrel yes, if there are "bad news". But the fundamentals are not there yet of rthese high prices. However there wont be "cheap oil" anymore i dont think but $50+ barrel is reasonable since the demand from China has increased indefinitely.
Smurf1976
15th-January-2006, 04:29 PM
When I last did any forecasts for Chinese oil production (late 2003) I came to the conclusion that their known fields were approximately at peak at that time. I would expect them to decline at around 3.9% p.a. once they are properly over the peak. So an overall decline of 3% seems reasonable to me.
As for the oil market generally, don't forget about the release of US and IEA stocks during 2005 and the subsequent need to refill them. The impact of this ought to be significant especially if the US goes ahead with reported plans to boost the Strategic Petroleum Reserve (SPR) from 700 million barrels to 1000 million. China and others are also looking to build or increase inventory so the bottom line is a significant demand going into government stockpiles. This ought to support the oil price somewhat and could in itself absorb a large portion of the likely production increase (worldwide) in 2006.
Milk Man
16th-January-2006, 07:54 AM
Does anyone know about any large untapped oil reserves under the darling downs (Roma I think). I heard a rumour to this effect and that the govt were keeping it in reserve. Dunno how true these rumours are, sounds a bit like BS to me.
excalibur
23rd-January-2006, 03:55 AM
Here is an article that just came in 1 hour ago (european-time)
It just could give oil price a blunt cold shower on monday.
Any Comments down there in warm Australia?????
By Unni Krishnan and N. Ananthanarayanan
NEW DELHI (Reuters) - Saudi Arabia's King Abdullah said current global oil prices were too high and needed to be at a more moderate level, television channel NDTV 24X7 reported on Sunday.
"We want to strengthen the link between India and Saudi Arabia with regards to energy, and the ability to provide energy to India over a long term. From our perspective I personally feel that the current price of oil is too high," King Abdullah said in an interview with the channel, which was recorded in Riyadh.
"The price is damaging to developing countries who subsequently have to suffer. The price needs to be at a more moderate level."
King Abdullah's comments came ahead of his four-day trip to New Delhi starting on Jan. 24, the first by a Saudi monarch in 50 years.
Oil prices surged to $69 per barrel on Friday, the highest level since September as tensions mounted over OPEC-member Iran's nuclear ambitions.
The Organization of the Petroleum Exporting Countries on Friday forecast world oil demand would grow nearly 2 percent in 2006 to 84.8 million barrels per day.
The producer group, which meets at the end of the month to review its output policy, is considered unlikely to cut production, although hawkish Iran said on Friday that the market was oversupplied.
India maintains that developed nations are not doing enough to restrain oil-producing countries from pushing up prices but King Abdullah's comments are likely to bring some relief.
Ties between Saudi Arabia, Islam's birthplace, and India, Asia's third-largest economy and home to a large Muslim minority, have improved incrementally since the early 1990s.
The Saudis are looking to deepen economic ties with Asian giants China and India, whose energy needs are soaring as their economies maintain red-hot growth.
Saudi Arabia accounts for almost one-quarter of India's total imports of crude oil of 1.9 million barrels per day. In 2004, New Delhi bought crude worth $6.2 billion from the Saudis.
Riyadh, eager to hold on to its share of India's rising oil imports as the Indian economy grows at an expected rate of 6 to 7 percent in the next decade, has said it would continue to be a reliable supplier.
There is nothing in it.
Just appeasment politics for US consumption.
They can't supply any more even if they wanted to. The tipping point is about three years away unless we are stupid enough to have a war with Iran.
(I hope it's not sooner, the further away the better)
excalibur
24th-January-2006, 10:07 AM
By Associated Press
January 23, 2006, 5:02 PM EST
LONDON -- Oil prices pulled back Monday in sympathy with a sharp decline in natural gas futures.
However, analysts said oil prices could resume their upward trend on supply fears linked to Iran's standoff with the West over its nuclear ambitions and continuing unrest in oil-rich Nigeria.
Light sweet crude for March delivery retreated 38 cents to settle at $68.10 a barrel on the New York Mercantile Exchange. March Brent crude at London's ICE Futures exchange fell 27 cents to settle at $66.16 a barrel.
Natural gas futures slid 70.6 cents, or about 8 percent, to settle at $8.574 per 1,000 cubic feet due to above-normal winter temperatures in the primary home-heating markets in the U.S.
"Warm temperatures now forecast to persist on into early February undercut physical demand for heating fuels," said analyst Tim Evans at IFR Energy Services in New York.
Nymex February heating oil futures declined by 2.63 cents to $1.8409 a gallon, while gasoline fell 2.38 cents to settle at $1.7932 a gallon.
Naimi told India's television news channel NDTV there is no fundamental reason for elevated oil prices given that there are enough supplies to meet the demand for oil.
"The (oil market) fundamentals today are in an excellent shape ... supply is plentiful and demand is well met by supply, so there's no reason why prices should be rising," he said.
However, analysts said market participants remain concerned Iran's dispute with the West over the restarting of its nuclear program could lead to supply disruptions in the second-largest oil producer within the Organization of Petroleum Exporting Countries, or OPEC.
They also pointed to worries about Nigeria, where militants holding four expatriate oil workers have threatened to launch rocket attacks on crude installations in the oil rich Niger Delta.
Such geopolitical worries, which have driven crude oil prices up at a time when global petroleum demand is high and the emergency supply cushion is thin, have overshadowed rising oil inventories and mild winter weather in the United States -- factors that would normally depress prices.
"The geopolitical drama over Iran and Nigeria is sending oil prices upwards," said energy analyst Victor Shum of Purvin & Gertz in Singapore.
The International Atomic Energy Agency's board of governors will meet Feb. 2 to discuss whether to refer Iran to the Security Council after it broke U.N. seals at a uranium enrichment plant and said it was resuming nuclear research after a two-year freeze.
Iran exports roughly 2.5 million barrels per day -- 1 million barrels more than current excess production capacity worldwide.
Oil jumped $1.52 to settle at $68.35 a barrel on Friday, the highest closing price since Sept. 1, just days after Hurricane Katrina made landfall.
Crude oil prices reached a record high of $70.85 a barrel on Aug. 30.
champ2003
24th-January-2006, 04:27 PM
Good luck in trying to forecast the oil price guys.
Under normal circumstances i'd agree with a drop down to say 50 dollars after the U.S oil winter season ends which is around the 20th of March. As you know, geopolitical unrest in Iran, Iraq, Nigeria and Russia, the oil price could well continue on at these current elevated levels far into 2006 which is great for oil stocks.
Its just a matter of us all trying to keep on top of it as hard as it is. I'd personally recommend getting into oil stocks now as there is no time like the present. If you are in the right stock at the right time on an upward trend you'll make money anyway.
Cheers!
P.s Don't just take my advise. Go on your own individual research.
Smurf1976
24th-January-2006, 05:10 PM
Yet another attempt by the Saudis to talk down the price of oil.
Based on my own research in 2003 I believe that Saudi Arabia can not produce more than 9.6 million barrels per day (2003 figure). They claim to have 10.5 - 11.0 mmbpd capacity.
Production ramped up to 9.6 mmbpd in 2005 and fell towards the end of the year to 9.5mmbpd despite the effective suspension of OPEC quotas. The Saudi response to the US hurricanes and subsequent need to release emergency oil stocpiles was to slightly REDUCE production. Where's that spare capacity...
So IMO Saudi Arabia is running flat out. I looked through everything that I could find in order to estimate their capacity. Two years later they ramped up to that capacity with relative ease and then hit a brick wall. So I would want to see absolute proof that their claimed spare capacity does in fact exist. Evidence says otherwise and this latest attempt at talking down prices appears to be nothing more than an attempt to avoid pressure to use the (non-existant) spare capacity.
To put that simply, there is NO significant spare capacity anywhere IMO. At best, any spare capacity is all located in a single country which has thus far never produced at the claimed capacity. I think oil prices will go higher than most are expecting if Iran's supply is lost since it's an outright loss with no offsetting rise in production elsewhere at a time when demand is surging and emergency stocks aren't full.
excalibur
25th-January-2006, 01:46 AM
Yet another attempt by the Saudis to talk down the price of oil.
Based on my own research in 2003 I believe that Saudi Arabia can not produce more than 9.6 million barrels per day (2003 figure). They claim to have 10.5 - 11.0 mmbpd capacity.
Production ramped up to 9.6 mmbpd in 2005 and fell towards the end of the year to 9.5mmbpd despite the effective suspension of OPEC quotas. The Saudi response to the US hurricanes and subsequent need to release emergency oil stocpiles was to slightly REDUCE production. Where's that spare capacity...
So IMO Saudi Arabia is running flat out. I looked through everything that I could find in order to estimate their capacity. Two years later they ramped up to that capacity with relative ease and then hit a brick wall. So I would want to see absolute proof that their claimed spare capacity does in fact exist. Evidence says otherwise and this latest attempt at talking down prices appears to be nothing more than an attempt to avoid pressure to use the (non-existant) spare capacity.
To put that simply, there is NO significant spare capacity anywhere IMO. At best, any spare capacity is all located in a single country which has thus far never produced at the claimed capacity. I think oil prices will go higher than most are expecting if Iran's supply is lost since it's an outright loss with no offsetting rise in production elsewhere at a time when demand is surging and emergency stocks aren't full.
Good observation there Smurf.
I think although that there argumentation is motivated by the fact that they do indeed, do not have any much further interest in bargaining with oil. More I suspect that they would like to hurt those oil producing countries by pulling the oil price down.
Why I think this is following.
As the french premier Chirac boasted about terrorizing Iran with nuclear weapons, if it would not cease to continue research in atomic energy, Iran responded in saying that they would not let themselves be pushed around from the europeans and proclaimed a Quote: " Economic war against the western world".
This phrase gave me alotta of thinking and certain political behaviour another looking eye.
Even though from politics, one cannot really understand very much, it could mean that something is stirring behind the curtain.
Time will tell
michael_selway
25th-January-2006, 08:49 AM
Good luck in trying to forecast the oil price guys.
Under normal circumstances i'd agree with a drop down to say 50 dollars after the U.S oil winter season ends which is around the 20th of March. As you know, geopolitical unrest in Iran, Iraq, Nigeria and Russia, the oil price could well continue on at these current elevated levels far into 2006 which is great for oil stocks.
Its just a matter of us all trying to keep on top of it as hard as it is. I'd personally recommend getting into oil stocks now as there is no time like the present. If you are in the right stock at the right time on an upward trend you'll make money anyway.
Cheers!
P.s Don't just take my advise. Go on your own individual research.
Actually i wouldnt recommend gettign into oil stocks atm, since SP is so high, have to wait for a correction. Also imo, atleast 10% of the $68/barrel is speculation more than anything
champ2003
25th-January-2006, 12:44 PM
Yes very true! That 10% worth that is over speculation won't be going away in a hurry either.
It doesn't necessarily mean not to invest in oil stocks at the mo.
I guess each to their own hey!
RichKid
28th-January-2006, 08:33 AM
Yet another attempt by the Saudis to talk down the price of oil.
Agree with you Smurf, clearly diplomatic posturing for the West. Chart suggests another swing low is in place although the proportions are a bit uneven overall, might suggest the a very strong bull run as open interest is high too on up days but some down days have seen high volume too, not quite sure how to interpret OI yet.
Ready for $262/barrel oil?
Two of the world's most successful investors say oil will be in short supply in the coming months.
Fortune Magazine
By Nelson Schwartz, FORTUNE senior writer
January 27, 2006: 4:24 PM EST
DAVOS, Switzerland (FORTUNE) - Be afraid. Be very afraid.
That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.
The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.
"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.
Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.
Hermitage's Bill Browder doesn't yet have the stature of George Soros. But his $4 billion Moscow-based Hermitage fund rose 81.5 percent last year and is up a whopping 1780 percent since its inception a decade ago. A veteran of Salomon Bros. and Boston Consulting Group, the 41-year old Browder has been especially successful because of his contrarian take; for example, he continued to invest in Russia when others fled following the Kremlin's assault on Yukos.
Doomsdays 1 through 6...................
"The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online."
Thansk interstign actually, so he isnt really a bear then
wayneL
28th-January-2006, 04:17 PM
hehe thx
"The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online."
Thansk interstign actually, so he isnt really a bear then
NEW YORK (Reuters) - Billionaire financier George Soros told CNBC television on Friday U.S. consumer spending would slow sharply next year as a slowdown in housing hurts purchasing power.
"There's (a) problem that I think is brewing, and that is the end of the housing boom in the United States and the ability of households to spend more than they earn because the value of their house is rising," Soros said in the interview.
"So I expect that by '07 there will be a significant decline in U.S. consumer spending and I don't see what will take its place because it's so important as a motor of the world economy," he said.
Soros argued that a veneer of relative calm both in the United States and international financial markets masked some troubling patterns in the global economy.
"Everything looks to be just hunky-dory but I don't think the outlook for the next two years is very good," he said. "The downside risks are bigger than the upside potential."
Speaking at a the World Economic Forum in Davos, Switzerland, Soros said global leaders appeared overly optimistic.
"The conference is remarkable for its complacency. It's a bit like dancing on the Titanic. They're having a very good time and there's a very cheerful atmosphere."
Smurf1976
28th-January-2006, 04:44 PM
Worldwide, there's quite a lot of new oil coming online over the next 18 months. This ought to be sufficient to offset declines in existing fields and allow for the likely demand growth. As Soros pointed out, much of that seems likely to come online in the first part of 2007.
However, beyond mid-2007 there doesn't seem to be much at all. That's when the real trouble is likely IMO since there's the declines in existing fields, demand growth and not enough new supplies to offset it.
Of course all this is complicated by:
1. The rate of demand growth. If you're a bear then you're probably expecting an economic slowdown which ought to at least slow the growth in demand if not reverse it. This could lead to a surplus of supply over demand lasting longer than expected, and being larger than expected, once it emerges. This could lead to a substantial price fall unless OPEC gets its act together again with quota enforcement (their track record is patchy to say the least).
2. Weather which influences demand both for heating and cooling (via power generation which at the margin in the US in particular affects oil demand).
3. Natural disasters, technical problems and the like affecting production.
4. The actions of various countries to boost strategic stockpiles, plus the refilling of emergency stocks drawn down in 2005, could add significant demand depending on the extent, rate and timing of refilling. The US has mooted a 300 million barrel increase in the size of the Strategic Petroleum Reserve. Add this to refilling of existing stocks and the potential for other countries to do likewise and it's a lot of oil.
5. Iran. I'm no expert on things concerning the military, wars etc. but quite clearly the situation has deteriorated over the past year and seems to be continuing to do so. Likewise there's always the threat of political / military strife in a number of other key producing countries.
Overall the key theme I see is volatility. There are scenarios which lead to sharp price rises and others which lead to substantial price falls. That said, oil does seem to be in a bull market. :2twocents
General Analysts believe Oil will drop in the next few yrs
"...the broker is now forecasting a barrel of West Texan Intermediate to average US$60 throughout 2006. For 2007 the new forecast is US$53.50/bbl, for 2008 US$48/bbl and for 2009 US$45.00/bbl. The broker’s long-term oil price forecast remains at US$40/bbl from 2010...."
However others are forecasting $100 and higher a barrel i.e Peak Oil?
Who is right then? They both seem to be the opposite direction
Thx
MS
Smurf1976
7th-February-2006, 06:57 PM
Having studied the subject in considerable depth my opinion is that production will rise over the short term (this year and next) and then peak and fall. The "peak" is likely to be somewhat bumpy rather than a nice smooth curve IMO.
In this context of a largely fixed production base which does not meaningfully respond to conventional price signals, the actual price over the short term becomes largely a function of economic growth and hence oil demand. A forecast is complicated by the feedback of higher oil prices into that very economic growth which caused them. If the economy booms then oil prices should rise. But if the economy slowed over the next 18 months then that combined with rising production could give the oil price a decent hit. And then there's Iran etc... Longer term there's the issue of unconventional oil development (tar sands, bitumen etc) and end use substitution. An eventual frenzy to develop such things and a resultant oil price slump is plausible but many, many years away IMO.
You just can't keep taking oil out of the ground many times faster than it's being found and the actual level of planned new capacity after 2007 suggests that the game is over. Not surprising given the near total lack of major oil finds in the recent past. It really says it all when enough oil to run the world for literally a month or even a week is touted as a major discovery since it's bigger than anything else found in recent times.
For those who doubt the reality of a peak in production, I respectfully point out that it has already occurred in more than half of all major oil producing countries. It is incomprehensible how it wouldn't at some point occur globally and as the dominos keep falling one by one the date draws nearer. Timing is, of course, the question but even the optimists have trouble stretching the numbers beyond another 3 decades. And they are the optimists relying on unsubstantiated "political" claims of reserves rather than proper geology. The geologists tend to be somewhat more concerned.
mime
7th-February-2006, 10:50 PM
I can't see the price dropping to $40 a barrel because the more China grows the more demand for oil. The price of oil is simply supply and demand(and speculation) Even if we find and drill more oil China will out grow what ever production is found, the result is the price never falling. The graph will be an upward trend.
Oil price is seasonal depending on what time of the year it is in the States. Mainly summer will increase demand for energy because of the huge amounts used for air conditioning. Just thought I would chuck that in.
Back to peak oil. I really don't believe that it will be the end of the world because the more expensive the price the less people can afford it. What it will do is cause an economic slow down. My :2twocents
Smurf1976
7th-February-2006, 11:45 PM
I can't see the price dropping to $40 a barrel because the more China grows the more demand for oil. The price of oil is simply supply and demand(and speculation) Even if we find and drill more oil China will out grow what ever production is found, the result is the price never falling. The graph will be an upward trend.
Oil price is seasonal depending on what time of the year it is in the States. Mainly summer will increase demand for energy because of the huge amounts used for air conditioning. Just thought I would chuck that in.
Back to peak oil. I really don't believe that it will be the end of the world because the more expensive the price the less people can afford it. What it will do is cause an economic slow down. My :2twocents
In every bull market there are downturns from time to time. Look at the ASX...
The seasonal demand for oil is due to both heating and cooling use in the Northern Hemisphere countries, most notably the US. The extent to which oil ends up fuelling heating and especially cooling partially depends on the price and availability of natural gas in North America since to a large extent (but not totally by any means) oil is used as a substitute for natural gas in power stations when it's cheaper than gas. Individuals use gas for heat so power generation switches to oil if there isn't sufficient gas. About 15% of US power generation is from gas (roughly) and typically 3% from oil (coal is dominant followed by nuclear then gas then hydro then oil then the minor sources). There is substantial direct use of oil for heating however. Some industrial plants also switch fuels according to which is cheaper - there has been quite a bit of oil used in the UK recently with the gas shortage (due to depletion of North Sea reserves) there. Even New Zealand falls back on oil for electricity when hydro and gas falls short (NZ's largest gas field is all but empty...). Under very high demand scenarios there is a small amount of oil used for power generation to the main grid in Australia - via peaking plants in Queensland and to a much lesser extent New South Wales and South Australia and via fuel substitution (away from gas) mostly in WA but under some circumstances also in SA and under rare circumstances in Vic. The absolute volumes of oil used for main grid power generation in Australia aren't large however but remote communities rely almost exclusively on it.
Peak oil isn't the end of the world I agree. But it likely is the end, at least for a period of time, of unconstrained growth, mass tourism as a major growth industry and food flown in from the other side of the world at low cost. Not the end of the world but a significant change which will be somewhat painful since the world economy just isn't set up at present to cope with zero or negative growth in use of the products and services derived from oil, most notably transport.
Personally I can see a scenario where constrained oil supply forces the price up until the economy contracts which then lowers demand and hence oil prices. Then the economy grows again, oil prices rise again to new highs and the cycle repeats. Just one possible scenario... :2twocents
Commodity Strategists: Oil May Reach $96 a Barrel (Update2)
Feb. 7 (Bloomberg) -- Oil may rise to a record $96 a barrel in August, when hurricanes typically cut U.S. output, said Mitsui & Co., Japan's second-largest trading company.
Crude oil prices, which have tripled since 2001, may gain 50 percent this year as storms add to supply concerns amid rising global demand, said Tetsu Emori, 39, a commodities strategist at Tokyo-based Mitsui. Oil, which traded at $64.90 today, may average $74 a barrel in New York in 2006, he said.
Oil reached a record $70.85 on Aug. 30 the day after Hurricane Katrina made landfall on the U.S. Gulf Coast, wrecking oil platforms, pipelines and refineries, and cutting production in the world's largest energy market. Global oil demand may rise 2.2 percent this year, almost twice as fast as in 2005, the Paris-based International Agency said last month.
``Oil may peak during the hurricane season in August or September,'' Emori said in a telephone interview yesterday. ``Economic growth will add to tightness in supply.''
Global growth, led by China and the U.S., will quicken to about 4.5 percent in 2006, the International Monetary Fund's Managing Director Rodrigo de Rato said on Jan. 30.
Oil on the New York Mercantile Exchange has risen 6.2 percent this year after Iran, the world's fourth-largest producer, pressed ahead with its nuclear research program, defying the U.S. and European Union. Rebel attacks on oil facilities in Nigeria cut shipments from Africa's top exporter.
Oil in New York averaged $56.70 a barrel in 2005. It traded 21 cents lower at $64.90 a barrel at 3:54 p.m. in Singapore.
Iran Dispute
Traders are concerned that the Iranian dispute may escalate, prompting the Middle East nation to cut its 2.5 million barrels a day of oil shipments, said Emori, who works at Mitsui Bussan Futures Ltd., the trading company's commodities futures unit. That equals almost 3 percent of daily global production.
``It's geopolitical risk that's sustaining the market at these prices,'' said Emori, who started at Mitsui in 2000 and previously worked at Sumitomo Corp., Japan's third-largest trading house, and German commodity trader Metallgesellschaft AG. ``As long as the Iran issue is unresolved, it's hard for traders to sell,'' he said.
Katrina, one of 26 named storms in the worst Atlantic Hurricane season on record, closed almost every production platform in the U.S. Gulf, where about 30 percent of the country's oil is produced. Hurricane Rita, almost a month later, did the same thing.
On Jan. 26, a quarter of production, or 373,407 barrels a day, remained shut because of storm damage, the U.S. Energy Department said.
Atlantic storms are becoming stronger and more frequent because ocean temperatures are rising, the Miami-based National Hurricane Center said last year. The hurricane season starts on June 1 and ends on Nov. 30.
Rising Supply
Not all analysts agree prices will increase. Rising supply may cause oil to fall this year, the Royal Bank of Scotland, the U.K.'s second-largest lender, said last month. Oil in New York may average $52.50 this year as global output increases, it said.
``While traders and investors have focused on strong demand growth, sizable additions to supply have largely been ignored,'' Thorsten Fischer, a senior economic adviser at the Edinburgh- based bank said in a research note published on Jan. 13.
U.S. oil inventories are 11 percent higher than their five- year average, according to the energy department.
Still, concern about global supply is supporting investment in oil futures. Last week, hedge-fund managers and other large speculators increased their net-long positions in New York oil futures to the highest since September, according to U.S. Commodity Futures Trading Commission data.
``Technical problems in Iraqi oilfields and ongoing concerns over production in Nigeria remain,'' said analysts led by Kevin Norrish at London-based Barclays Capital in a note to clients yesterday. ``Oil market participants will be extremely reluctant of being short crude oil.''
Barclays Capital, a unit of the U.K.'s third-largest bank, expects crude oil prices to average $68 this year. Norrish and his colleague Paul Horsnell were the most accurate forecasters of prices among analysts surveyed by Bloomberg last year.
wayneL
8th-February-2006, 08:35 AM
Gold tanks....
.....meanwhile, so does oil, down ~3.2% and breaking key support.
This usually would be a positive for the US indecies...but alas and alak they're down too!
What IS the world coming to :D
michael_selway
8th-February-2006, 08:41 AM
Gold tanks....
.....meanwhile, so does oil, down ~3.2% and breaking key support.
This usually would be a positive for the US indecies...but alas and alak they're down too!
What IS the world coming to :D
Resources, its all a speculation in disguise! a bubble?
Ouch I'm getting really punished today. I was expecting a correction after a constant run of gains but not this much :sly:
nizar
8th-February-2006, 11:40 AM
u aint seen nothing yet...
this may be a correction similar to october, in which case more carnage is coming..
dont worry abt it, think of it as buying opportunity
mit
8th-February-2006, 02:34 PM
With peak oil on the way, I think that oil has one direction to go. I was looking for crude oil in the CMC instruments list and it has disappeared.
MIT
RichKid
8th-February-2006, 06:44 PM
Gold tanks....
.....meanwhile, so does oil, down ~3.2% and breaking key support.
This usually would be a positive for the US indecies...but alas and alak they're down too!
What IS the world coming to :D
Yep, all at once, that key support level going is the issue for me with oil. Nothing to do but trade the plan. Interesting times.
rederob
8th-February-2006, 07:56 PM
Oil retains its bullish status by holding above its 200dma.
Hopefully this WTIC chart link http://stockcharts.com/def/servlet/SC.web?c=%24wtic will show readers that oil is not acting in a way it typically does: Note the significant number of gaps and reversals in the past 2 months, let alone some very narrow daily trading ranges.
It's a market decidedly indecisive with potential to break quickly and sharply either way.
I am with mit and many others in the longer term - there is not a compelling case right now for oil to be much lower in price going forward, unless a recession suppresses demand.
Even then, we need to realise that the dominance of America as a commodities consumer is being gradually broken down, commodity by commodity, by China specifically and Asia generally.
It does not take a genius to work out that as more and more vehicles hit the road, they need to be juiced up, and will burn more oil.
So while a global contraction of industrial production may occur in the next few years, it may not be enough to knock the stuffing out of the oil bull.
Smurf1976
8th-February-2006, 09:19 PM
I am with mit and many others in the longer term - there is not a compelling case right now for oil to be much lower in price going forward, unless a recession suppresses demand.
That could be taken the next logical step to argue that any sharp fall in the oil price could be the first warning of impending recession. So oil might be a useful indicator as well as a commodity given the constrained supply. :2twocents
wayneL
15th-February-2006, 07:18 AM
That could be taken the next logical step to argue that any sharp fall in the oil price could be the first warning of impending recession. So oil might be a useful indicator as well as a commodity given the constrained supply. :2twocents
Well...
< $60
< 200 dma
Getting close to breaking major support
If your argument is valid then this is certainly a shot across the bow.
michael_selway
15th-February-2006, 08:44 AM
That could be taken the next logical step to argue that any sharp fall in the oil price could be the first warning of impending recession. So oil might be a useful indicator as well as a commodity given the constrained supply. :2twocents
Actually a fall in oil prices is good for the economy?
Oil prices sank below $US60 a barrel overnight, and US gasoline futures descended to their lowest price in almost a year as traders turned their attention to rising supplies, and away from geopolitical tensions.
The third straight day of declining oil prices took a toll on the stock prices of energy producers and refiners, while giving a lift to shares of airlines and other fuel-dependent sectors.
Light sweet crude for March delivery fell $US1.67 to settle at $US59.57 a barrel in afternoon trade on the New York Mercantile Exchange. That was the lowest close for front-month oil futures since December 27.
IFR Energy Services analyst Tim Evans said that "as prices drop toward the lower part of their recent range, we expect more than a glimmer of recognition that the downside for this market may be far more open than the average observer now believes."
Evans sees technical support at $US55.40 a barrel, but says if that level is breached, crude futures could potentially fall to $US40 a barrel.
The declines come as traders anticipate that the US Energy Department's weekly petroleum supply snapshot, due on Wednesday, would likely show climbing oil stocks for the seventh straight week. Already, the nation's commercial inventory of crude oil is nearly 11 per cent above year-ago levels.
Traders are still concerned, albeit less so, about the international dispute over Iran's nuclear activities and unrest in Nigeria.
The head of the International Energy Agency said on Tuesday that its member governments could coordinate a release of strategic oil reserves that would offset any shutdown of Iranian crude output for up to 18 months.
"We have 4 billion barrels in strategic stocks," Claude Mandil told Dow Jones Newswires. Even taking account lower estimates, he said, the IEA could keep oil supplies flowing for a year and a half.
The IEA, the Paris-based energy watchdog, has reported falling demand because of high costs of crude.
Smurf1976
15th-February-2006, 12:37 PM
Actually a fall in oil prices is good for the economy?
Agreed that a lower oil price would benefit the economy. But my thinking is that a falling oil price would itself be a sign of economic weakness.
So it contributes to one thing (benefits economy) whilst being a sign of another (weakening economy). So over a period of several years per cycle the price of oil (and the economy itself) would presumably oscillate with an upwards trend in oil prices if I'm correct in my thinking. Only time will tell.
michael_selway
15th-February-2006, 01:52 PM
Agreed that a lower oil price would benefit the economy. But my thinking is that a falling oil price would itself be a sign of economic weakness.
So it contributes to one thing (benefits economy) whilst being a sign of another (weakening economy). So over a period of several years per cycle the price of oil (and the economy itself) would presumably oscillate with an upwards trend in oil prices if I'm correct in my thinking. Only time will tell.
Hi yeah thats true, hes some insight from WPL ceo:
Date: 18/1/2006
Author: Robert Guy; Yvonne Ball
Source: The Australian Financial Review --- Page: 13
Woodside Petroleum is concerned that the spike in the crude oil price could threaten the global economy. CEO Don Voelte says high oil prices could have an adverse effect on global economic growth, and he would prefer the oil price to fall to around $US40 to $US45 a barrel in order to prevent a decline in the world economy. The oil price was trading at around $US65 a barrel on 17 January 2006. Although Woodside's earnings are boosted by a rise in the oil price,Voelte argues that demand for oil would slump if there was a slowdown in the global economy.
nizar
15th-February-2006, 04:38 PM
http://www.lifeaftertheoilcrash.net/
emma
15th-February-2006, 06:07 PM
This report makes GDY look like a good long term investment
mime
15th-February-2006, 07:23 PM
Hi yeah thats true, hes some insight from WPL ceo:
Date: 18/1/2006
Author: Robert Guy; Yvonne Ball
Source: The Australian Financial Review --- Page: 13
Woodside Petroleum is concerned that the spike in the crude oil price could threaten the global economy. CEO Don Voelte says high oil prices could have an adverse effect on global economic growth, and he would prefer the oil price to fall to around $US40 to $US45 a barrel in order to prevent a decline in the world economy. The oil price was trading at around $US65 a barrel on 17 January 2006. Although Woodside's earnings are boosted by a rise in the oil price,Voelte argues that demand for oil would slump if there was a slowdown in the global economy.
He could be saying that to reduce the fall in the companys stock price if oil does continue to decline.
dutchie
15th-February-2006, 08:30 PM
I'm waiting for a correlation between oil and gold.
When oil goes up - gold should correct and vice versa. - dream on!
wayneL
16th-February-2006, 07:10 AM
Tonights Crude oil action.:
March futures down to $57.67 on the back of news of increasing stockpiles. The daily chart is looking dreadful with only $57 as the last technical support before technical no-mans land.
Smurf is not the only one worried that this is a sign of impending recession. (as if there aren't enough already) Futures traders are all a-buzz with the implications of this.
How are the aussie oilers fairing out of this?
dutchie
16th-February-2006, 10:47 AM
Just off topic for a sec.
"Syriana" looks like an interesting movie for all oil followers.
mime
16th-February-2006, 11:00 AM
How are the aussie oilers fairing out of this?
Hurting.
mime
16th-February-2006, 04:21 PM
I just heard on the news that Qantas has a contract to purchase fuel at $57 a barrel. I don't know if that includes refining and stuff but it makes me believe they don't think the price of oil will not drop.
What does the future hold??
nizar
16th-February-2006, 05:41 PM
Commodity Strategists: Crude Oil May Reach Record $80 (Update1)
Feb. 16 (Bloomberg) -- Oil may rise to a record $80 a barrel in the third quarter as an economic expansion in China boosts demand for fuel, according to Sumitomo Corp., Japan's third-largest trading company.
China's oil demand growth may rebound from last year's 2.9 percent, said Keiichi Sano, Sumitomo's chief commodity analyst. Oil rose less than forecast in the past five months because Chinese refiners cut imports, he said. Futures prices, down 5 percent this year, will bottom out this month, he said.
``Demand from China will continue to increase and support further rises in oil prices,'' said Sano. ``The country needs more heavy fuel oil for power plants, and fuel for trucks is needed too.''
Oil prices have tripled since 2001, helped by demand from China, the world's second-biggest energy user. Power use rose 13.5 percent last year while consumption of transport fuels soared as the growing economy boosted vehicle sales. China's economy may grow about 8.5 percent this year, the nation's statistics bureau said on Jan. 24.
Oil on the New York Mercantile Exchange may set a record by October when hurricanes typically cut U.S. production, Sano said. Oil futures may trade between $75 and $80 a barrel in the third quarter of this year, said Sano, who became manager of the commodities research and strategy team in April 2005.
Crude oil prices for March delivery rose as much as 49 cents, or 0.9 percent, to $58.14 a barrel in electronic trading on the New York Mercantile Exchange. It was $58.01 at 10:43 a.m. Tokyo time.
Growth in the U.S. economy, buying by pension and index fund managers and the risk of supply disruptions in oil- producing nations such as Iran will help boost oil prices this year, Sano said.
China
In September last year, Sano forecast oil prices would rise to between $80 and $90 a barrel in the first quarter of 2006. He trimmed that projection as oil demand growth from China failed to keep pace with his expectations, he said.
``China didn't buy much oil last year,'' Sano said. ``That could be the reason.''
Chinese imports fell 7.1 percent in November and 6.9 percent in December compared with a year earlier, according to Bloomberg data. Rising international prices discouraged refiners from buying because they were unable to pass on crude oil's 40 percent gain last year. China imposes curbs on product prices, limiting the price refiners can charge customers.
Oil in New York traded as high $60.05 a barrel yesterday. The contract fell to its lowest closing price so far this year of $57.65 yesterday after U.S. oil inventories rose to 11 percent above the five-year average.
Gasoline closed at $1.3848 a gallon yesterday, the lowest in almost a year, on speculation supplies increased for a seventh week. Natural gas stockpiles in the U.S. are 38 percent higher-than-usual for the time of year, according to the U.S. Energy Department last week.
``Lowest Price''
``Now is the lowest oil price this year when we look at the fundamentals,'' said Sano, who joined Sumitomo in 1988 to trade metals. ``High inventories of gasoline and natural gas are weighing on oil prices now, but this situation won't persist.''
As much as 750,000 barrels a day of U.S. refining capacity will be shut in March for scheduled maintenance, the 26-member IEA said on Feb. 10. ``The current high inventories will be consumed during the maintenance,'' Sano said. ``Gasoline demand remains strong in the U.S.,'' he said.
The U.S. economy will grow at a 4 percent annual rate from January through March, almost four times the previous quarter's pace, according to a Bloomberg survey on Feb. 9. Global growth, led by China and the U.S., will quicken to about 4.5 percent in 2006, the International Monetary Fund's Managing Director Rodrigo de Rato said on Jan. 30.
Hurricanes
Oil may rise to a record $96 a barrel in August, when hurricanes typically cut U.S. output, said Mitsui & Co., Japan's second-largest trading company on Feb. 6.
``Oil may peak during the hurricane season in August or September,'' said Tetsu Emori, 39, a commodities strategist at Tokyo-based Mitsui. ``Economic growth will add to tightness in supply.''
Concern that oil supply from Iran, the world's fourth- largest producer, may be disrupted will also help boost prices, Sano and Emori said. Iran pressed ahead with its nuclear research program, defying the U.S. and European Union. The UN Security Council has delayed considering the dispute until after March 6.
``The risk related to Iran was just pushed back,'' Sano said. ``It can reappear'' in March.
Iran produced 3.89 million barrels a day of oil in January, making it the second-largest oil producer in the Organization of Petroleum Exporting Countries, according to Bloomberg data. The Middle Eastern nation exports 2.5 million barrels a day, or 3 percent of daily global production.
Oil prices may stay high because buying by pension and index fund managers is adding a premium of $20 to $30 a barrel to prices, Sano said.
``Funds keep putting in money and I think this trend may continue for one to two years,'' he said. ``Unlike hedge funds, index funds buy low and stay in the market for longer time.''
I cannot verify worldwide oil production has peaked. I do not know when alternative energy sources can compliment fossil fuels. I cannot predict when the world will reduce oil consumption significantly. I cannot image there will be a war or wars. However I know channel. I will sell 1/3 of my energy portfolio if the value of portfolio bounce off the top channel and buy 1/3 of my energy portfolio if the value of portfolio bounce off the bottom channel. See chart at http://www.flickr.com/photos/globevestor/100344100/
michael_selway
18th-February-2006, 01:51 AM
I cannot verify worldwide oil production has peaked. I do not know when alternative energy sources can compliment fossil fuels. I cannot predict when the world will reduce oil consumption significantly. I cannot image there will be a war or wars. However I know channel. I will sell 1/3 of my energy portfolio if the value of portfolio bounce off the top channel and buy 1/3 of my energy portfolio if the value of portfolio bounce off the bottom channel. See chart at http://www.flickr.com/photos/globevestor/100344100/
Figure 1. World, OPEC, and Non-OPEC Oil Production
Notes: (1) World oil production is forecast to peak in 2006. (2) The OPEC/non-OPEC crossover event occurs in 2008. (3) The OPEC nations' rate of oil production from 1985 to 1999 increased by 9.33 times that of the non-OPEC nations.
Figure 4. The Olduvai Theory: 1930-2030
Notes: (1) 1930 => Industrial Civilization began when (ę) reached 30% of its peak value. (2) 1979 => ę reached its peak value of 11.15 boe/c. (3) 1999 => The end of cheap oil. (4) 2000 => Start of the "Jerusalem Jihad". (5) 2006 => Predicted peak of world oil production (Figure 1, this paper). (6) 2008 => The OPEC crossover event (Figure 1). (7) 2012 => Permanent blackouts occur worldwide. (8) 2030 => Industrial Civilization ends when ę falls to its 1930 value. (9) Observe that there are three intervals of decline in the Olduvai schema: slope, slide and cliff - each steeper than the previous. (10) The small cartoons stress that electricity is the essential end-use energy for Industrial Civilization.
Global oil discovery peaked in 1962 and has declined to virtually nothing in the past few years. We now consume 6 barrels of oil for every barrel we find.
Smurf1976
18th-February-2006, 08:54 AM
Basically agreed with the charts posted re discovery and production but disagree with the notion that electricity is the main problem with lack of oil.
In order of importance, coal, nuclear, hydro and natural gas all produce far greater amounts of electricity worldwide than oil.
Australia's electricity is primarily from coal (around 80%), hydro (about 10% in total, 60% of that in Tasmania), natural gas (most of the rest). Apart from remote communities, the role of oil is limited to peak and backup generation (without which blackouts would occur for a few hours per year only) and startup of coal-fired plant for which there are other, albeit less ideal, means available.
That said, there is the threat of future greater dependence on limited resources in Australia's electricity industry. Queensland is actively encouraging reliance on limited resources(!) whilst understanding of the problem seems to be limited to the Victorian energy unions and Hydro Tasmania which have both made public comments on the issue.
UK electricity is mainly from coal (nearly 50% in recent months), natural gas (around 30%) and nuclear (most of the rest). Coal use is up sharply as gas supplies decline although lack of coal-fired plant limits this trend in the near future. Oil is a minor fuel for backup of gas-fired plant, coal-fired plant startup and limited peak load generation.
USA electricity is mainly from coal (about 54%), nuclear (about 20%), natural gas (15%), hydro (8%) with only 3% from oil although some of that is used in place of gas due to gas shortages from time to time.
New Zealand electricity is mainly from hydro (two thirds of the total), geothermal (about 6%) with the remaining 30% or so from a mix of gas and coal (gas is historically dominant) according to availability. Oil serves as backup only with actual use normally quite low (though lack of oil would cause blackouts when the backup generation is needed since it runs hard for relatively short periods).
So electricity isn't the real problem in my opinion. By aviation (100% oil fuelled), shipping (nearly 100% oil fuelled apart from gas tankers), land transport (close to 100% oil fuelled apart from electric trains and small amounts of biofuels and natural gas) are real problems. And of course the non-fuel uses of oil - everything from paint stripper to bitumen for roads and lubricants are produced from oil.
michael_selway
19th-February-2006, 07:56 PM
Basically agreed with the charts posted re discovery and production but disagree with the notion that electricity is the main problem with lack of oil.
In order of importance, coal, nuclear, hydro and natural gas all produce far greater amounts of electricity worldwide than oil.
Australia's electricity is primarily from coal (around 80%), hydro (about 10% in total, 60% of that in Tasmania), natural gas (most of the rest). Apart from remote communities, the role of oil is limited to peak and backup generation (without which blackouts would occur for a few hours per year only) and startup of coal-fired plant for which there are other, albeit less ideal, means available.
That said, there is the threat of future greater dependence on limited resources in Australia's electricity industry. Queensland is actively encouraging reliance on limited resources(!) whilst understanding of the problem seems to be limited to the Victorian energy unions and Hydro Tasmania which have both made public comments on the issue.
UK electricity is mainly from coal (nearly 50% in recent months), natural gas (around 30%) and nuclear (most of the rest). Coal use is up sharply as gas supplies decline although lack of coal-fired plant limits this trend in the near future. Oil is a minor fuel for backup of gas-fired plant, coal-fired plant startup and limited peak load generation.
USA electricity is mainly from coal (about 54%), nuclear (about 20%), natural gas (15%), hydro (8%) with only 3% from oil although some of that is used in place of gas due to gas shortages from time to time.
New Zealand electricity is mainly from hydro (two thirds of the total), geothermal (about 6%) with the remaining 30% or so from a mix of gas and coal (gas is historically dominant) according to availability. Oil serves as backup only with actual use normally quite low (though lack of oil would cause blackouts when the backup generation is needed since it runs hard for relatively short periods).
So electricity isn't the real problem in my opinion. By aviation (100% oil fuelled), shipping (nearly 100% oil fuelled apart from gas tankers), land transport (close to 100% oil fuelled apart from electric trains and small amounts of biofuels and natural gas) are real problems. And of course the non-fuel uses of oil - everything from paint stripper to bitumen for roads and lubricants are produced from oil.
Yeah, also alternative energies to oil could prelong the running out of oil as suggested above in those articles, eg hybrid cars
Back
Date: 1/2/2006
Author: Trevor Hoey
Source: The Australian Financial Review --- Page: 25-26
Value can still be found in the Australian sharemarket, despite the surging price of many stocks. This is even the case in the oil and gas sector, which has risen strongly on the back of the rising crude oil price. Cooper Energy is one such stock that is worth considering. Its shares are currently trading at around $A0.65, compared with just $A0.23 in early 2005, and its South Madura oil field in Indonesia is estimated to contain 200 million barrels of oil equivalent. Stuart Petroleum, Anzon Australia, Arc Energy and Petsec Energy are other oil stocks that still offer value to the astute investor
nizar
20th-February-2006, 11:33 PM
does any1 know a website to check 24-hr oil ?
wayneL
20th-February-2006, 11:34 PM
does any1 know a website to check 24-hr oil ?
www.futuresource.com will give you the futures charts 20 mins delayed
michael_selway
21st-February-2006, 01:03 PM
Basically agreed with the charts posted re discovery and production but disagree with the notion that electricity is the main problem with lack of oil.
In order of importance, coal, nuclear, hydro and natural gas all produce far greater amounts of electricity worldwide than oil.
Australia's electricity is primarily from coal (around 80%), hydro (about 10% in total, 60% of that in Tasmania), natural gas (most of the rest). Apart from remote communities, the role of oil is limited to peak and backup generation (without which blackouts would occur for a few hours per year only) and startup of coal-fired plant for which there are other, albeit less ideal, means available.
That said, there is the threat of future greater dependence on limited resources in Australia's electricity industry. Queensland is actively encouraging reliance on limited resources(!) whilst understanding of the problem seems to be limited to the Victorian energy unions and Hydro Tasmania which have both made public comments on the issue.
UK electricity is mainly from coal (nearly 50% in recent months), natural gas (around 30%) and nuclear (most of the rest). Coal use is up sharply as gas supplies decline although lack of coal-fired plant limits this trend in the near future. Oil is a minor fuel for backup of gas-fired plant, coal-fired plant startup and limited peak load generation.
USA electricity is mainly from coal (about 54%), nuclear (about 20%), natural gas (15%), hydro (8%) with only 3% from oil although some of that is used in place of gas due to gas shortages from time to time.
New Zealand electricity is mainly from hydro (two thirds of the total), geothermal (about 6%) with the remaining 30% or so from a mix of gas and coal (gas is historically dominant) according to availability. Oil serves as backup only with actual use normally quite low (though lack of oil would cause blackouts when the backup generation is needed since it runs hard for relatively short periods).
So electricity isn't the real problem in my opinion. By aviation (100% oil fuelled), shipping (nearly 100% oil fuelled apart from gas tankers), land transport (close to 100% oil fuelled apart from electric trains and small amounts of biofuels and natural gas) are real problems. And of course the non-fuel uses of oil - everything from paint stripper to bitumen for roads and lubricants are produced from oil.
"Long-term forecasts showed analysts expect prices to fall by over $US16 by 2010.
US oil prices are expected to average $US42.92 in 2010, with Brent crude seen at $US39.75 a barrel.
Analysts' forecasts showed divergence of $US25 for 2010."
Hm but in the first 2 articles 2012 is where "blackouts" occur due to supply/demand deficit? So by then, oil prices should be higher than now?
Does anyone know why the big difference in opinion/prediction?
thx
MS
Smurf1976
21st-February-2006, 09:17 PM
The first two articles are basically about geology and actual investment in oil production. That is, how much oil will be produced over the coming years.
The last article assumes that the geology and investment issues are unchanged and will reflect the past. Like saying that stock xyz went up 10% in each of the past 10 years and therefore must go up 10% in each of the next 10 years.
Since the geological constraints are different now to those in the past, by virtue of conventional oil being a relatively limited resource (at least in terms of known and suspected recoverable deposits) ther two approaches will produce very different results for production volumes. Since the latter article focuses on price only, it's possible that an economic slowdown (ie global recession) could also have been assumed thus lowering demand and likely price.
Hence two very different forecasts from two very different methods. Without knowing exactly what assumptions have been made it's difficult to validate the latter article. They may be aware of the geological issues but simply predicting an economic slump. Or they may be totally unaware of the geological issues and predicting business as usual economic growth. They don't give enough detail in the article to say which is the case. :2twocents
mime
22nd-February-2006, 09:42 AM
$42 a barrel by 2010?? Are they drunk? Did they factor in inflation, growth of Asia? I recon it will be at least $70 a barrel by then.
nizar
22nd-February-2006, 10:53 AM
$42 a barrel by 2010?? Are they drunk? Did they factor in inflation, growth of Asia? I recon it will be at least $70 a barrel by then.
agree 100%..
"It's not a matter of when oil is going to touch US$100 a barrel -- though obviously it's going to do that some day -- it's to get people realizing this is not a spike, not like past developments like the Yom Kippur War or the invasion of Kuwait," Mr. Coxe said. "What we've done is transformed the demand side of the equation for oil permanently."
"When, not if, the residents of the coastal cities of China, that's 165 million people, have the same percentage of automobiles as South Koreans have today, we'll need two new Saudi Arabias operating flat out."
Very quietly and without much ado, April oil slipped under the $60 mark last night. Trading at $60.02 at this precise moment.
Without some sort of supply shock, I can see Oil range bound between $55 & $65 for some time (a guess)
Comments?
professor_frink
9th-March-2006, 12:15 PM
just had a quick look at the oil chart, and it looks like it might find some support(at least for the short term) around $58-$59. Could be interesting if goes below that!
Without some sort of supply shock, I can see Oil range bound between $55 & $65 for some time (a guess)
Comments?
looks like oil's on its way to the upper end of your range wayne. Will be curious to see how far it gets.
wayneL
14th-March-2006, 09:49 AM
looks like oil's on its way to the upper end of your range wayne. Will be curious to see how far it gets.
Yes indeed, a strong move! Somebody probably read my comments and thought, what a load of cobblers...lets take it to 70 :rolleyes:
professor_frink
14th-March-2006, 09:59 AM
Yes indeed, a strong move! Somebody probably read my comments and thought, what a load of cobblers...lets take it to 70 :rolleyes:
ha! don't be modest- you should say that everyone read your post, noticed that it was in the lower half of the range and decided to jump on board :D
watch for them all to take profits at 65 :D
pharaoh
14th-March-2006, 10:11 PM
Hi guys
What do you guys think of buying futures in oil?
I went to a seminar today, at the Masonic club in sydney, and the guy presenting on futures was really compelling.
I want to buy heaps of contrtacts for oil, seems a bit of a no brainer at the moment, with global uncertainty on supply etc, and China's thirst.
I am going to post a futures question along these lines also, but wouldn't mind a few opinions or guidance...
Any thoughts?
I have never bought futures, but am starting to learn.
nizar
14th-March-2006, 10:31 PM
Hi guys
What do you guys think of buying futures in oil?
I went to a seminar today, at the Masonic club in sydney, and the guy presenting on futures was really compelling.
I want to buy heaps of contrtacts for oil, seems a bit of a no brainer at the moment, with global uncertainty on supply etc, and China's thirst.
I am going to post a futures question along these lines also, but wouldn't mind a few opinions or guidance...
Any thoughts?
I have never bought futures, but am starting to learn.
Hmm...
i dont know much about futures either...
Global uncertainty on supply? Hmm.. the Iran issue yeh they provide 4million barrels per day which is significant... US demand is about 25million per da....i think u have to look at Tar Sands in Canada, this is the largest oil field in the world after saudi arabia, at 175billion barrels. Thats the reserves. Some estimates reckon that in total can be more than 1trillion.
Tar Sands will add maybe 3million barrels of oil per day to the supply side of things by 2010. Problem lies with the cost. Tar Sands oil costs almost us$20 to produce per barrel as its much harder to extract as its heavier than the middle eastern type which costs less than us$2/barrel...
As to demand from asia, this has the potential to be much higher. I was reading from one economist that the coastal people of china number 165million, and when they have the same % of automobiles as korea, then we will need 2 more saudi arabias!
I think to do sumthing like this u have to know alot about oil, which u already may. If u havent already, try reading Jeremy Leggett's "Half Gone", i heard its a good read. This guy was former professor of geology, and used to work for oil companies and runs a renewable energy company and and is on the board of some UK energy regulatory body... seems to know his stuff better than most
Personally, i reckon oil seems to be heading down in the near future and is reliant on a one-off random attacks in saudi or nigerian militants to push it up. Its also good to keep in mind that higher oil prices, by default, mean that deposits that were previously subeconomical to become profitable, so more supply comes on line without new discoveries being made.
Good luck
wayneL
14th-March-2006, 11:01 PM
I want to buy heaps of contrtacts for oil,
I hope you have deep pockets
http://www.nymex.com/CL_spec.aspx
1 contract = 1000 barrels = 42,000 gallons
A $5 dollar move against you will see you down $5,000.00 PER CONTRACT
There is more supply coming on line over the next year and the world is creeping towards recession. It may or may not race up as fast as you think. It could dribble down to $45-$50 over the next year before it eventually takes off. Could you hold on to several contracts in those circumstances?
There are very credible oil bears.
A great contract to trade but not something to staple to the bottom drawer.
Sir Burr
29th-March-2006, 04:03 PM
The oil is going, the oil is going!
Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.
Interesting read, you have to view an advert to read the whole article.
The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?
SB
michael_selway
29th-March-2006, 11:03 PM
The oil is going, the oil is going!
Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.
Interesting read, you have to view an advert to read the whole article.
The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?
SB
dude ist not over yet, there slots of supplies atm (esp US) as all the oilers are increasing production
wont run out yet also as some eg WPL has 1 billion in reserves i think
Prices may go high but not dangerously high yet
thx
MS
markrmau
16th-April-2006, 11:43 PM
Iran.
Any thoughts here? If we loose Iran's supply, forget about oil below $100US. We are looking at $300-$500US/barrel. The demand side of the equation is VERY innelastic.
Perhaps, we are turning full circle. The ultimate arbiter of our moral dillemas (should we kill people to further our own needs?) will be decided using market place economics - world growth would collapse if we lost iranian oil. Hahahaha.
Pity how many Iraqis were collaterally damaged in order to protect oil supplies.
nizar
17th-April-2006, 12:00 AM
The oil is going, the oil is going!
Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.
Interesting read, you have to view an advert to read the whole article.
The obvious solution to all this (the "deadline") is allowing oil to increase in price gradually, so that wind/nuclear becomes the cheapest source of electricity, gas is used in ground transport, then oil in air transport and shipping. With adequate management over the next half a century, oil supplies will last another 200 years at least?
SB
Read "Half Gone" by Jeremy Leggett
A compelling read, this guy is former Prof of Geology, consultant to big oil companies, and adviser on energy to UK government. He interviews top geologists and execs from Shell, Exxon, Saudi Aramco, Iranian and Kuwait oil officials and other government officials and experts in the field... He clearly knows his stuff, and speaks with heaps of credible references... His view is that peak oil is very close, but he actually speaks of 2 types of people, early toppers and late toppers, early toppers believe peak oil will come in this decade 2009-2010, while late toppers believe it will be 2025-2030...
MS: As of last count, WPL has 1.3billion barrels
Smurf1976
17th-April-2006, 03:39 PM
MS: As of last count, WPL has 1.3billion barrels
1.3 billion barrels of actual recoverable oil? Or are they including condensate, LPG etc?
Or is it oil equivalent including natural gas and everything else?
In financial terms it may not matter too much depending on the basis of their gas sales contracts but it matters hugely when it comes to assessing world oil supply since gas is not directly interchangeable for oil in most applications. This is a very common problem which leads to overestimation of oil reserves - effectively counting gas as "oil". :2twocents
nizar
17th-April-2006, 04:54 PM
sorry, oil equivalent
Smurf1976
17th-April-2006, 06:53 PM
sorry, oil equivalent
No worries. :D
I wasn't making a point about your post by the way. Just wanting to draw general attention to the manner in which companies report oil reserves. :)
It's reasonably common practice to report "oil equivalent" which basically means every flammable substance they have expressed in terms of the equivalent amount of oil that would provide the same energy when burned.
If we only used oil in furnaces or to generate electricity there would be no problem - butane, propane, methane, ethane or whatever will still fire the furnace as will oil. But those things aren't oil as such and in the context of the way oil is actually used they aren't a great deal of use as a replacement, at least not a "drop in" one. This is particularly the case with methane, which tends to be the dominant component of non-oil "oil equivalent" reserves.
(Methane is "natural gas", ethane is petrochemicals industry feedstock, straight propane is household and commerical LPG, butane mixed with propane is automotive LPG).
It's a bit like a gold mining company including silver, iron, zinc and copper and reporting it as "gold equivalent" with all metals treated equal on the basis of weight. Since their uses aren't generally interchangeable it would be misleading to say the least. It would, however, give a nice big number for gold reserves and likely help the share price somewhat.
One of the great problems in the oil business is that it's virtually impossible to get accurate data. Even the oil majors themselves struggle with data beyond their own operations. Different companies report different things as "oil", they use different criteria for defining "proven" reserves, some intentionally understate discoveries to keep a "reserve" to announce if the share price starts to slide, others overstate their reserves and pray, some simply quote the same figures year after year to the point that they're meaningless, sometimes governments simply decree what the reserves will be with no scientific basis whatsoever. All of which makes serious forecasting and analysis somewhat difficult.
Be careful with oil stocks - is it REALLY oil or just gas? Depending on where it's located, gas can be highly valuable or literally worthless whereas oil is universally valuable. In the Australian context, gas is moderately valuable (but nowhere near as valuable as gas in the US or UK) provided that it is within economic distance of existing infrastructure or consumers. :2twocents
nizar
17th-April-2006, 09:56 PM
One of the great problems in the oil business is that it's virtually impossible to get accurate data. Even the oil majors themselves struggle with data beyond their own operations. Different companies report different things as "oil", they use different criteria for defining "proven" reserves, some intentionally understate discoveries to keep a "reserve" to announce if the share price starts to slide, others overstate their reserves and pray, some simply quote the same figures year after year to the point that they're meaningless, sometimes governments simply decree what the reserves will be with no scientific basis whatsoever. All of which makes serious forecasting and analysis somewhat difficult.
Be careful with oil stocks - is it REALLY oil or just gas? Depending on where it's located, gas can be highly valuable or literally worthless whereas oil is universally valuable. In the Australian context, gas is moderately valuable (but nowhere near as valuable as gas in the US or UK) provided that it is within economic distance of existing infrastructure or consumers. :2twocents
Thanks for the info above Smurf...
Tend to agree with what you are saying about hard to find accurate data, apparently i read that Shell got fined a massive amount $100million+ a few years back for overstating reserves and a few of their execs had to quit over it saying they were ordered/pressure by the board to report the highest figures they could... surely other companies do the same thing...?
ANyway, which oilers are u holding at the moment?
crackaton
21st-April-2006, 09:54 PM
Interesting article. I also note that China intends exporting cheap cars to Aus, something like 11K. If ever there was a time for alternative transport now is the time so come on guys get your thinking caps on!!!
Oil: the party is over
Gwynne Dyer
Wednesday, April 19th 2006
Welcome to the world of US$70-per-barrel oil. That's if there is no crisis in the Gulf over Iran's nuclear ambitions. If there is, then get ready for US$140 a barrel. Oil briefly breached the US$70 barrier eight months ago, but this time it is going up for good.
Exactly one year ago the investment bank Goldman Sachs put out a paper suggesting that the "new range'' within which oil prices will fluctuate is US$50-US$105 per barrel. (The old range, still used by most of the oil industry when deciding if a given investment will be profitable, was US$20-US$30.) The price could surge well past the upper end of the Goldman Sachs range if the United States actually does launch military strikes against Iran, but it's going up permanently anyway.
Transient events like the Iran crisis and the political unrest in Nigeria (which has cut that country's exports by a quarter) drive the daily movements in the oil price, but the underlying supply situation is so tight that oil would stay high even if Nigeria turned into Switzerland and Iran opted for unilateral disarmament. "On production, there is nothing we can do. (OPEC, the Organisation of Petroleum Exporting Countries, is) already producing at maximum output,'' said Abdullah al-Attiyah, Qatar's Oil Minister.
This is not about "peak oil,'' the notion that we are already at or near the point where total global oil production reaches its maximum and begins a long decline. That may well be true, but the present price rise is just about rising demand for oil as the big developing countries, especially the Asian ones, lift large parts of their populations into the middle class.
Middle-class people buy cars. They also run their air conditioners all summer, and take holidays abroad, and do other things that have big implications for total energy consumption, but above all they buy cars. For the foreseeable future most of the cars they buy will run on some form of refined oil.
The rising demand that drives the oil price up does not just come from the middle-class Americans (and, increasingly, Europeans) who insist on driving enormous SUVs with macho names like "Raider'', "Devastator'', and "Genocidal Exterminator''. It also comes from the new middle class of unassuming Chinese, Indian, Russian and Brazilian families who only want a modest family car for the school run and the weekend. There are just so many of them. This is the first big price rise that has been caused by rising demand rather than some temporary interruption of supply.
Goldman Sachs also predicted last year that in 20 years' time there will be more cars in China than in the United States -about 200 million of them. Ten years after that, India's car population will also overtake America's. Within 20 years Russia and Brazil will each have more cars than Japan. We are headed for a billion-car world (unless all the wheels fall off first), and that means permanently high oil prices.
Good. If the oil price rises gradually from US$70 to US$100 over the next five years, people and governments will start paying serious attention to energy conservation and alternate energy sources (including nuclear energy). The sooner that happens, the less extreme the global warming that we will have to contend with as the century progresses. But if the oil price leaps to US$100 or more in one swift jump we will have the mother of all recessions, and then there will be a desperate shortage of funding for developing alternative sources of energy.
A US attack on Iran is not the only threat to oil prices. If the markets should ever collectively decide that "peak oil'' is upon us and that the supply of oil is heading for actual decline, the price would soar out of sight overnight. The oil companies and the governments of OPEC reassure us that oil reserves are ample to cover consumption at the current rate of world economic growth for decades to come, but they would be saying that whether it was true or not, and there is reason to suspect that it is not.
Never mind the geology. Just consider the fact that in the years 1985-1990, when OPEC's declared reserves grew by a massive 300 billion barrels, no major new oilfields were brought into production. The "growth'' was achieved by recalculating existing reserves, and the incentive for exaggeration was provided by OPEC's decision to set production quotas in proportion to the total size of each member's reserves. So over a quarter of the world's total "proven'' oil reserves of 1.1 trillion barrels may be no more than an accounting fiction.
The best we can hope for in the coming years, therefore, is a relatively slow and steady rise in the oil price, rather than a steep, fast rise that upsets everybody's applecarts. The party is definitely over.
-Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.
YOUNG_TRADER
22nd-April-2006, 02:01 PM
Oh dear, don't rise too much or else you may de-rail this commoditites boom!
nizar
22nd-April-2006, 02:20 PM
Oh dear, don't rise too much or else you may de-rail this commoditites boom!
Tend to agree, when oil gets to $100 or not even that high but higher than what its at now, then it will cause inflation...
After this happens, there will be a recession and demand for everything will go down, commodity prices will go down, company profits will be less, and the global stockmarkets will see a massive correction, unemployment up also, exports will be down due to decreased demand...
But gold - will go up..
But even though commentators such as Jim Rogers say that historically commodity bull runs last for btw 15-23yrs, these correlate inversly to global equity markets... now we have both - so something should give..
I would say commodity producers would be the way to go for big gains during commodity bull runs...(eg. Poseidon nickel in 1970s), but now we also have high oil prices - and if that curbs demand - that may ruin everything ?
The oil spike in 1980s was only short-lived, but speculators/economists/commentators say because of China and India's growth, the demand side of the equation is permanently changed forever. To quote some1 (i forgot who): "When the coastal people of china decide they want to have the same % of automobiles as Korea, and they number 165million+, we'll need 2 more Saudi Arabias pumping flat out"..
http://www.miningmx.com/energy/479408.htm
Thoughts ?
kgee
22nd-April-2006, 05:17 PM
I've been bullish on oil for a while and there's still a lot of well priced companies out there including a few juniors who are producing and with good exploration prospects...my guess is we will see some considerable gains in these over the next few weeks
crackaton
22nd-April-2006, 05:24 PM
I've been bullish on oil for a while and there's still a lot of well priced companies out there including a few juniors who are producing and with good exploration prospects...my guess is we will see some considerable gains in these over the next few weeks
I 'm banking on cue and to alessr degree PNo and ARQ
michael_selway
22nd-April-2006, 05:25 PM
I've been bullish on oil for a while and there's still a lot of well priced companies out there including a few juniors who are producing and with good exploration prospects...my guess is we will see some considerable gains in these over the next few weeks
hi which oil juniors u reffering to?
thx
MS
nizar
22nd-April-2006, 05:44 PM
hi which oil juniors u reffering to?
thx
MS
A junior oiler i like is STX
michael_selway
22nd-April-2006, 05:53 PM
A junior oiler i like is STX
hehe yep, but just wondering which ones in particular kgee is reffering to
thx
MS
YOUNG_TRADER
25th-April-2006, 05:56 PM
Down Boy! Down! Sit! Sit!
Looks like Oil will rebound strongly from $72.70 support to test previous high this week!
Fab
25th-April-2006, 06:37 PM
Crakaton,
PNO is not an oiler as far as I am concerned ?! Maybe you are referring to another stock ??
crackaton
25th-April-2006, 08:12 PM
Crakaton,
PNO is not an oiler as far as I am concerned ?! Maybe you are referring to another stock ??
Sorry my mistake. It was pan pacific oil. PNO is pharmaceuticals.
RichKid
27th-April-2006, 10:20 PM
The retracement seems to be accelerating, OI increasing. Might be some local ASX oil co set ups to enter in anticipation of the next run up.
kgee
27th-April-2006, 11:58 PM
Michael I like COE and maybe EPN depending on testing of fairbridge (next couple of weeks...)I hold AZA and the NXS takeover should be successful I can see it going to 1.60 shortly.
As to oil it will be interesting to see how the US and the markets react to Iran refusing to stop their Uranium enrichment isn't the 28th the deadline?? :confused:
YOUNG_TRADER
28th-April-2006, 12:17 AM
Good boy, thats it sit sit!
markrmau
5th-May-2006, 11:26 AM
Whats going on with oilers?
CL got smashed on nymex last night but WPL steady, AMU up HZN rocketing.
Not what I expected.
Or is it because CL was just having a fibonacci retracement? ;)
Mumbank
5th-May-2006, 01:44 PM
Interesting announcement by ROC, may have some bearing on why HZN has taken off.
markrmau
5th-May-2006, 01:50 PM
I know, looks like i'll be opening more red tonight.
But good grief. Crude dropped 3% and WPL is up almost 1% now :confused:
What is going on :sly:
scsl
20th-June-2006, 02:53 AM
i came across this very interesting article by Clif Droke, dated 18 Jun 2006:
"Oil and the 8-Year Cycle"
http://news.goldseek.com/ClifDroke/1150642920.php
what's encouraging is that it talks of a distinctive if asymptotic upward move in oil from roughly 2007-2009.
but having just gone long on Oil Search CFDs, i was a bit worried to read that he expected oil to bottom in September this year...
are these kind of sites credible? and are there any of you fundamentalist investors or technical analysts that think otherwise?
cheers
RichKid
21st-June-2006, 01:56 PM
i came across this very interesting article by Clif Droke, dated 18 Jun 2006:
"Oil and the 8-Year Cycle"
http://news.goldseek.com/ClifDroke/1150642920.php
what's encouraging is that it talks of a distinctive if asymptotic upward move in oil from roughly 2007-2009.
but having just gone long on Oil Search CFDs, i was a bit worried to read that he expected oil to bottom in September this year...
are these kind of sites credible? and are there any of you fundamentalist investors or technical analysts that think otherwise?
cheers
Hi scsl,
I don't really know much about that site but generally the chart looks bullish, currently appears to be correcting, still some more of it to go before a move out of this range- chances are an upward break but nothing is assured. Overall trend is certainly up. Maybe someone who has studied oil cycles will be able to comment.
....ok, I've just had a quick look and extracted the article in full below. It's a shame that chart wasn't annotated to reflect the commentary.
In view of the approaching 8-year cycle bottom we’ve been discussing in recent articles let’s examine the crude oil market compared to previous cycles for ideas on what to expect in the weeks and months ahead.
Does oil follow the 8-year cycle as closely as the stock market does? Not as closely but the longer-term cycles with the Kress 120-year cycle series typically have a depressing effect on the oil price, not before but just after the final bottoming phase of the cycle. In other words, the oil price usually has a delayed reaction to the longer-term cycle bottoms.
For instance, the last long-term cycle bottom that we experienced this decade was the 12-year cycle bottom of October 2002. We all remember how bad the year 2002 was for stock prices as the bear market that had begun in 2000 was at its worst. Stock prices fell nine of out of 12 months in 2002 before bottoming in the fall of the year with the 12-year cycle low. During most of 2002 the oil price was actually rising off its late 2001 low price of approximately $17/barrel and made a high of just over $30/barrel in the fall of 2002 just as the 12-year cycle was bottoming. In the weeks immediately following the 12-year cycle bottom, the oil price experienced a rather sharp retracement or corrective pullback from about $31 down to about $25 (at that time a fairly sizeable decline). After finding support above the $25 level, oil continued its bull market into 2003.
What is the relationship between the 8-year cycle bottom and the price of oil? As discussed in the previous commentary entitled "A look at the upcoming 8-year cycle bottom," the previous 8-year bottom in autumn of 1998 saw an almost across-the-board bottom of what had been a severe decline in stocks and commodities that summer. The crude oil price had fallen from its high in January of that year to a low of around $10/barrel by the end of the year, making it one of the last to bottom among the fuels (natural gas bottomed in September-October along with the orthodox low of the 8-year cycle in ‘98 along with the broad stock market).
Despite the belated bottom in oil in 1998 you can see that there was downward pressure being exerted against the oil price throughout that year in response to the falling 8-year cycle. The slope of the oil price through 2006 has been upward, but even this year with the 8-year cycle bottoming you can see evidence that there is pressure against oil coming from this cycle. This has especially been evidence since late April/early May of this year as oil peaked at that time just over $74 and has been below that level since.
http://goldseek.com/news/ClifDroke/2006/oil.gif
What this testifies to is that the secular trend for oil is up while the short-term trend is coming under pressure from the "hard down" phase of the latest 8-year cycle that is due to bottom in September. Once the downward pressure from the 8-year cycle has lifted oil should eventually resume its upward bias with 2007 most like witnessing a rising trend. One reason for this assumption is that the 8-year cycle is really only a composite of the 2-year cycle. The 2-year cycle bottoms in even numbered years and peaks in odd numbered years. In response to the 2-year cycle you can see that the oil price tends to outperform in odd years (1985, 1987, 1989, 1999, 2005) and underperform in even years (1984, 1986, 1988, 1992, 1998).
One very notable exception to this was in 1990 when a previous 8-year cycle was bottoming. The oil price experienced a rather sharp drop from February through July of that year when downward pressure from the 8-year cycle was strong. That summer, however, the oil price made an about face and shot up to a major high at that time of $40/barrel. This was in the face of the Persian Gulf war of course and is an example of how political considerations can supercede strictly financial concerns in the oil market due to its extremely sensitive nature. Yet in keeping with the delayed reaction it often has to a longer-term cycle, the oil price declined sharply in the months following the bottom of the 8-year cycle in 1990, with oil dropping from $40 to a more subdued $18/barrel in early 1991.
With the secular trend of oil up relative to the comparable period in the previous decade, the upcoming 8-year cycle bottom should produce for oil a meaningful pullback followed by a resumption of the rising trend probably by sometime in early 2007. The previous 8-year cycle low in late ‘98 was followed by an explosive rally in the oil price from early 1999 until later 2000 with oil rising from $10 to almost $40 in that nearly 2-year period. At that time oil was coming off a major "oversold" extreme so it’s doubtful the rise in oil following the upcoming 8-year cycle low will be as pronounced. There should, however, be a distinctive if asymptotic upward move in oil from roughly 2007-2009.
This expectation is not only a function of the market being relieved of downward pressure from the 8-year cycle; it’s also a natural response to the tendency of inflationary commodities such as oil and gas to experience bull markets during the final three years of any given decade. This decennial pattern is not a cycle, properly speaking, but rather a recurring pattern within a longer-term cycle. Looking back at the past several decades you can see the tendency for stagflation, or the phenomenon of stagnant earnings growth and rising commodity prices, to rear its unsightly head from approximately the seventh year of the decade through the ninth year (e.g., 1977-1979, etc.) During this period stock prices often experience meaningful gains despite the fact that corporate earnings growth begins to slow noticeably, partly in response to rising commodity prices. This in turn eventually gives way to the bear market and/or economic recession that usually accompanies the onset of a new decade.
The upcoming 2007-2009 period will probably not be an exception to this historic pattern. Stock prices will likely benefit from the lifting of the 8-year cycle pressure in 2007 up until the peak in the 10-year cycle in 2009. But during this period we can also expect to see certain commodity prices pushing forward with stocks, gradually undermining corporate balance sheets along the way. The years 2007-2009 will be a transitional time for the U.S. for it will represent the final forward surge before the massive deflation beginning with the bottoming of the 60-year/120-year cycle in 2010-2014.
Clif Droke is the editor of the daily Durban Deep/XAU Report, a technical forecast and analysis of several leading gold and silver stocks, including DRDGold and the QQQ available at www.clifdroke.com. He is also the author of numerous books, including "Gold Stock Almanac 2006."
This is the link to Droke's previous article on 8 year market cycles referred to above: http://news.goldseek.com/ClifDroke/1150297620.php
scsl
22nd-June-2006, 02:40 AM
ok thanks for that RichKid.
...i'm just banking on a short term spike out of the $68-70 region it's been trading in the past week or two. :)
it's currently $70.12 as i post this, up about 80 cents!
Magdoran
2nd-July-2006, 07:07 PM
Originally posted by Captain G
on the "Gold Price - Where is it heading?" thread
Hi Magdoran, just very curious, but why will oil be poised to potentially run up to test $90 within 3 months ??
Cheers, Capt.
This is in response to a question made about oil on the "Gold Price - Where is it heading?" thread.
I was projecting possible extensions to the bullish drive in Crude and Brent oil, and have attached 3 rough working charts to illustrate the potential levels oil may move to if the pattern in the current period gives a higher low, and moves bullishly out of the existing consolidation (see the charts). I am still working on this, so this is literally a work in progress.
Of course any bullish drive may fail around any of the extension divisions as shown in the chart, and would expect resistance at the 25%, 33%, 50% and 75% divisions.
The pattern looked initially to be accumulation to me, but it could be distribution for a pull back. I tend to favour the concept that this is accumulation for a drive up, but recognise that a marginal high may come in and halt the move – and it may just move sideways from here.
The 100% extension target over the next 3 moths or so (still working on time projections) as a potential target is based on the concept that consolidations can form 50% levels in price into the future (this concept is not my idea by the way).
HUSpotV (Unleaded futures) is problematic for the bullish projection though. I suspect that fuel is the primary driver in oil pricing above the ancillary products. The last bar could be a false break, but if it only yields a small pull back and makes a higher low, or is exceeded in 3 trading days, this would be bullish. If it pulls back, it could blunt a bullish drive in oil.
Ok, I’m going to be out of range for a few days, but will be interested to see what happens over the next couple of weeks.
Regards
Magdoran
rederob
2nd-July-2006, 09:39 PM
Magdoran
I think $90 is possible, but only if accompanied by geopolitical concerns that spill onto the world stage - Iran is the culprit to watch.
And then I thought about hurricanes: Put the two together and we have $100 as possible.
Otherwise I think POO over $85 this year will be a bit of a tall order.
I say this based on pragmatism, and not on natural demand, which I expect to be typically robust in the second half.
Pragmatism tells me that if POO soon hits $90 or $100 then we have a recipe for overheating the inflationary ingredients and cooking the US economy.
My suspicion is that even the speculators know this ( I know the oil companies do), and will need to be careful about killing the goose that lays the golden eggs.
My other suspicion is that peak oil is so close that if the global economy sees clear weather over the next few years we will definitely seee POO over $100 later on in 2007.
Curiously, the ratcheting of prices to accommodate higher oil costs over recent years shows us that we may be able to survive a little longer at these ridiculous levels.
Of the indicators I will be looking at to pre-emt a global market meltdown, oil will be my first gauge. Followed by a DOW chart.
Gold will run its own course, and may rise irrespective of oil prices, interest rates and bourse movements.
michael_selway
2nd-July-2006, 09:44 PM
Magdoran
I think $90 is possible, but only if accompanied by geopolitical concerns that spill onto the world stage - Iran is the culprit to watch.
And then I thought about hurricanes: Put the two together and we have $100 as possible.
Otherwise I think POO over $85 this year will be a bit of a tall order.
I say this based on pragmatism, and not on natural demand, which I expect to be typically robust in the second half.
Pragmatism tells me that if POO soon hits $90 or $100 then we have a recipe for overheating the inflationary ingredients and cooking the US economy.
My suspicion is that even the speculators know this ( I know the oil companies do), and will need to be careful about killing the goose that lays the golden eggs.
My other suspicion is that peak oil is so close that if the global economy sees clear weather over the next few years we will definitely seee POO over $100 later on in 2007.
Curiously, the ratcheting of prices to accommodate higher oil costs over recent years shows us that we may be able to survive a little longer at these ridiculous levels.
Of the indicators I will be looking at to pre-emt a global market meltdown, oil will be my first gauge. Followed by a DOW chart.
Gold will run its own course, and may rise irrespective of oil prices, interest rates and bourse movements.
Is There A Crude Oil Oversupply Or What?
FN Arena News - June 29 2006
By Greg Peel
"There has been a contradiction evident in the oil market throughout [the second quarter]. On the one hand, a mass of analyst and oil company executive comment has talked of chronic over-supply and price crashes. Some press comments have taken that view on board, and run with it repetitively as if it were set in stone. However, on the other hand, physical markets have not manifested the supposed over-supply, there have been three straight monthly averages for WTI above [US]$70, and, rather than crashing in a suitably humble fashion, the market is now gaining strength."
And therein lies the dilemma. This is the way Barclays Capital currently reads the crude oil market.
The current state of the oil market can best be unravelled by simplifying into four distinct factors. (1) Supply – is it or is it not in a position of surplus? (2) Demand – are higher prices having any effect in lowering demand? (2) Products – regardless of crude supply, supply of gasoline and other products will remain tight. (4) Geopolitical tension is the wildcard (and throw hurricanes in there as well).
Merrill Lynch has just raised its oil price assumptions. The analysts now value oil companies on the basis of a 2006 price of US$67.50/bbl (up 8.5%), 2007 of US$65.00/bbl (up 18%) and 2008 of US$50/bbl (up 8%). The longer term assumption remains at US$42/bbl.
US$42/bbl might seem like wishful thinking, but Merrills insists that "the full cycle cost of large-scale marginal sources of supply" dictates that this is a realistic price. In English, it means that if the oil price stays high enough for long enough then peripheral oil sources such as Canadian oil sands (extensive resources) or gas-to-liquid conversion begin to look economic and worth pursuing.
It is on the supply side that Merrills go on to formulate its view, despite having just upped forecast prices, that over the next 18 months the crude oil price will drift lower. Merrills believes global oil production is set to expand rapidly over coming quarters. Production is declining in the North Sea and Mexico (largest supplier to the US) but substantial production is anticipated from the Former Soviet Union (specifically Russia, Azerbaijan and Kazakhstan), Africa (Angola and Sudan) and Canada. Brazil is also expected to increase production.
Merrills expects non-OPEC production to grow by about 1.5 million barrels per day in 2007.
Then we have OPEC, which is also bringing further production on-line. Nigeria, Kuwait, Algeria, Iran, UEA, Libya and Saudi Arabia all plan to increase production. This increase could be 1.1 mb/d, says Merrills.
However, increased production is not going to solve the problems at the pump. Global refining capacity is still woefully inadequate. Moreover, a lot of the supposedly excess oil being produced at the moment is "heavy" crude. Refiners gave up on heavy crude years ago. Turning excess heavy crude into useable product would mean major refinery rejigging. "Sweet, light" crude is what everyone's set up for, and that is not in excess. One of the biggest sources is Nigeria, and its production has been slashed by terrorists.
If heavy crude producers end up creating even more of a bottleneck at the refiners they will have to consider actually cutting production. Otherwise the price of crude really will collapse. OPEC would not let this happen. Merrills suggests the next round of OPEC production meetings could be feisty.
If there's currently such an excess, or an excess to come, says Barclays, why then is the oil price going up? Oil prices will finish higher in the second quarter of 2006 than where they started. When Barclays crunches all the available numbers, and the dust settles, it appears the market in the second quarter will be significantly tighter than last year.
One possible answer to the conundrum is gasoline. As suggested, you can pump out as much black gold as you like but if you can't refine, it's not worth much. Thus a tight gasoline market, and subsequently high gasoline price, is what's dragging up the oil price.
Logic dictates that the higher prices go, the more demand will fall. So turning to the demand side, many economists base their predictions of, for example, a slowing US economy, on the fact that ongoing high oil prices will lead to demand falls that will curtail economic activity. Is there any evidence of this? Not much.
The demand effect comes down to price elasticity. In other words if the relationship between oil price and demand is elastic, each dollar of oil price will directly force a fall in demand. If inelastic, it won't. The Australian example is one that shows just how inelastic the relationship is.
An average Sydney family may use a car to drive to and from work, and another to drive the kids to and from school. Although higher oil prices have affected some increase in public transport use, and motor scooter and bicycle sales, most Sydneysiders have continued to buy the same amount of petrol but give up something else. New clothes perhaps, or dining out. As the price of petrol has climbed ever higher, it is not petrol sales that have suffered.
Merrills finds that the global price elasticity of oil is very low. The analysts estimate that, on average, a 10% increase in the price of petroleum products affects only a 0.5% fall in demand. In parts of the world it's even less. The greatest guzzlers of them all – Americans – have seen 40% higher gasoline prices this summer from last, but demand has fallen 1%.
While most economists expect the US economy to slow from here – not recede, just slow – global economic growth forecasts are hardly leaden. Merrills expects 4.4% global growth in 2007, which is still "above trend". This is not a figure that suggests a significant fall in oil demand. In fact, Merrills forecasts 2007 demand growth of 1.9 mb/d. (If you recall, aggregate supply increases were tipped to be 2.6 mb/d).
Merrills does not believe the refinery bottleneck problems will be solved before the second half of 2008. The analysts thus reason that demand for gasoline, diesel and jet fuel will simply have to slow to match available supplies. Maybe it will, but where does that leave the price? Merrills calculates that supply growth of light crudes (that which can be turned into fuel at present) will only be 1.4 mb/d.
On that assumption, Merrills suggests oil prices will drift lower over 18 months. If the fuel simply isn't available, then other arrangements will have to be made. Price spikes in products will also curtail demand and make consumers think again. Get set for hybrid car sales to rocket. Once everyone's reassessed their oil usage, then there's no reason to pay up so much. At least that's the theory.
But what of our old friend, geopolitical tension? Iraq, Iran, Nigeria, the nationalisation of South American sources – all are sufficient unknowns that can make a lot of hard core analysis worthless. FN Arena published the view of Credit Agricole's Jean-Charles Lacoste on Tuesday which is that we are in for the next great global oil shock, just like the seventies, due simply to the risk of some further devastating event. Oil at US$100/bbl, says Lacoste.
And as we speak, the waters in the Gulf of Mexico are getting warmer, and warmer…
Magdoran
2nd-July-2006, 11:57 PM
Hello rederob and Michael,
Markets are not rational. $90+ oil prices seem incredible, don’t they? If you’d even mentioned this level a few years ago, people would have thought you were potty, wouldn’t they? But speculators are focussed on the present to make money out of the market. I really don’t think they’re thinking about the longer term effects. In fact, a spike in oil prices and a resulting crash in the price will make some speculators who play the long side on the way up, and the short side on the way down rich. Very rich.
So, good point, rederob and Michael, what would $90+ oil do to the global economy, combined with rising interest rates, and soaring commodity prices? I fully agree with Michael and rederob, if we hit this level, it wouldn’t be sustainable. Look at the way commodities exhaust up into highs, then fall sharply from these heady heights – perhaps even look at the “dot com” boom, this is a good illustration of how markets perform in “blow off trends”.
My contention is that our whole current economic system is stacked like a house of cards. What we have is the perception of perennial demand based on the sustained growth in China. But are we are at the crossroads right now? Can the record levels of US debt be sustained without either an effective long term strategy in place where the US dollar loses value relatively against the Chinese currency, or that consumption rates are slowed considerably and debt levels are reduced? Add the oil scenario spiking to equivalent levels to the 70’s oil shocks, what would the effect be?
Think about this – much of the current prosperity has been driven around the western world in part by the surge in real estate values, which in part was fuelled by low interest rates which allowed significant leveraging of capital to borrow to acquire both for domestic and business pursuits. Add to this the equity in domestic households which sharply lifted the ability to purchase a range of household items, entertainment, luxury items etc. While all this is going on the Chinese have built major industrial cities in very short periods of time to supply to this demand, and millions of Chinese workers toil for a pittance to keep prices competitive.
Are we at a point where this kind of economic demand will fall due to inflationary flow on from key commodities like oil, metals, and the effect of contracting or sluggish house prices and rising interest rates? Are the internal domestic drivers in China sufficient for it to continue despite conditions in the US? Essentially to what extent is China “addicted” to the US, and vice versa? Where Australia’s economic future stands in my view is based on the commodity boom which has been the primary reason for the prosperity over the last 3 years.
A point lost on many people is that copper has increased price dramatically over the last year, almost quadrupling (see the attached chart). This has to have an effect on key costs world wide. Copper is often described as an economic barometer, just look at the attached chart, and tell me if this looks sustainable or exhaustive.
Are the recent corrections in the metals an overbalance in time and price with further correction to come, or is this the mid point for a major boom? Or is it the point where prices consolidate? I’m kind of leaning to the corrective viewpoint currently in the metals charts, but if the metals rally and test their highs, this has to be inflationary.
The question is, is anyone going to say “the Emperor had no clothes”, or is the whole system going to be sustained by “faith” by turning a blind eye (like the Japanese did in the past to their “Zombie” company structures and in western terms bankrupt banking system). Inflation rates are the key, and with key commodity prices soaring, this puts the question of how long inflation can be contained at the “desirable levels” before the base costs filter down and start having a marked impact?
I don’t think we’re at this point just yet, but consider a scenario where oil spikes up to that 90+ level, would this trigger a rather unpleasant set of economic events on a global scale? How this might pan out is beyond my capacity to measure, but what I can imagine is a significant contraction in demand and a potential major slide in forward estimates across the board for earnings – resulting potentially in a significant correction. But this is of course dependant on a range of variables playing out this way. Essentially it’s about perception and confidence above the fundamentals.
However I do think it is possible to maintain the current favourable economic conditions for years, especially if everyone maintains an optimistic outlook, and the structural strategies are addressed (particularly in the US) to reduce debt without sending the whole system into a recession or depression. Another danger is if there is a wholesale sell off of US currency and bonds and what the effect of this might be. Key holders are China and Japan. The Chinese are unlikely to want to unsettle the current arrangement, so for the present this is not a likely scenario, but it is something to consider.
Certainly in the longer term, if the Chinese demand and expansion despite some fluctuations remain in place, this signals longer term growth. The problem I think we have is in timing – when will corrections happen, how long and how deep will they go, and when and how far will a wider boom period last?
My controversial thinking at the moment is that the apparent lockstep of Gold with Crude oil prices may be about to diverge… But this is way too preliminary, all I can do is to interpret what I’m seeing in the charts currently, and this is a possibility. But what I see is oil looking bullish, and Gold in the short term looking like it should correct more. Of course I could be completely wrong here, and I will adjust my forecasts over the next few days/weeks as the price action gives more clues where these commodities might head.
There are several key variables to consider which we have charts on:
• Interest/Bond rates (particularly US – hence FED policy is a factor)
• Currency movements – particularly the US Dollar (since we’re looking at NYMEX Gold, it’s in US dollars),
• US indexes (DOW, NASDAQ, S&P 500)
• Oil/Fuel Prices (CL and HU, and LBCA)
• Metal Futures (Copper, Nickel, Aluminium, Zinc)
Of course this doesn’t cover the larger questions of the wider economic backdrop on issues like inflation, US debt levels (individual and national) and the relationship with China, and more broadly complex global economic cycles of supply and demand and the interrelationships between various countries and economic sectors.
In my undergraduate days I remember reading a book by Peter Gourevitch when it had just been released and was interested in the causes of depressions, and the responses by various governments to these situations. I think some of these notions are relevant in the current period considering the nature of the Chinese political system since much of the commodity boom is based on accelerating demand from China. That is that their system of government is not democratic, and policy can still be imposed. Second guessing the policy direction in China then is a key element on the way the global economy will behave into the future (an obvious point I know, but never the less often neglected).
Another perspective of interest was the notions put forward by Jim Rodgers in “Hot Commodities” on China. (Rodgers had travelled around China on a motorbike for around a year doing comprehensive economic research, and wrote the “Investment Biker” and “Adventure Capitalist” – prior to this he had been George Soros’ key partner when the Soros fund quadrupled in value - see “Soros on Soros”). Even Rodgers recognised that there will be periods of correction which can be marked by sharp pull backs. The key question for us as investors and traders is “when, and how much” – this is what I’m attempting to do.
Regards
Magdoran
P.S. I’ll look forward to returning to see how robust the debate becomes when I get back. Hope you all have a prosperous week! Mag
Crude marks a record close on political concerns
All-time closing high for front-month contract; natural gas sinks
E-mail | Print | RSS Feed | Disable live quotes
By Myra P. Saefong, MarketWatch
Last Update: 3:24 PM ET Jul 5, 2006
SAN FRANCISCO (MarketWatch) -- Crude-oil futures closed at a new record Wednesday, finishing above $75 a barrel for the first time since mid-May, with developments in Iran and North Korea raising concerns among traders ahead of U.S. data expected to show a decline in crude inventories.
"Over the last 24 hours, Israeli planes hit the Interior Ministry in Gaza City, the Arab League transferred $50 million in funds to the Palestinians, Iran rejected a July 12 deadline [to respond to a United Nations proposal] and North Korea launched seven missiles," said Michael Fitzpatrick, an analyst at Fimat USA, in a note to clients. "This is the opposing force to the thinking that ever-higher commodity prices will eventually choke off demand as central banks struggle to keep inflation in check."
Crude for August delivery climbed as high as $75.40 a barrel on the New York Mercantile Exchange, matching the record intraday high for a front-month contract seen on April 24 and marking the contract's first rebound to that level since May 11, when prices reached an intraday level of $75.85. ...
Magdoran
6th-July-2006, 10:50 AM
Errata:
The HUSpotV data on the last chart in post 141 was wrong. The apparent spike up and close near open never happened. The new chart shows the actual bar, and also last nights price action.
This paints a very different and bullish picture, and my reservations in my comments before on HU (Unleaded futures) are reversed. Look at the attached chart with the now correct bar, and this looks bullish.
Regards
Magdoran
stockmaster
8th-July-2006, 12:18 AM
How will oil price go for next week? Man, if it goes up even more, i can't afford the oil bill. Need to catch a train tomorow :banghead:
Magdoran
8th-July-2006, 04:55 PM
Behaving Technically as expected... Please see charts - still working on the time projections...
wayneL
8th-July-2006, 09:44 PM
Pretty sensible analysis there Mag.
Those time/price levels... what are they? They look similar to monthly pivots (though must be different)
Cheers
Magdoran
9th-July-2006, 01:44 AM
Hi Wayne,
Thanks... How’s WA?
I’m not quite sure what you’re asking me. Are you asking me what I'm working on, or what is showing in the chart - maybe my arrow musings about the pattern I'm expecting?
These charts are primarily aimed at price and wave projections. The time factor needs a Gann based chart to project time with any precision. Gannalyst can do time and price, but Advanced GET's time capacity is rudimentary, and inadequate from a Gann perspective.
I sometimes mark highs and lows with an arrow to make it easier to observe counter trends and wave counts manually. The Elliott wave generation in GET is based on moving averages, and can have some odd labeling that I don’t agree with.
Essentially I manually work out time and price projections; hence I mark these with whatever text and drawing tools that is available on the chart.
Regards
Magdoran
wayneL
9th-July-2006, 02:50 AM
Hi Wayne,
Thanks... How’s WA?
:sleeping:
I’m not quite sure what you’re asking me. Are you asking me what I'm working on, or what is showing in the chart - maybe my arrow musings about the pattern I'm expecting?
These charts are primarily aimed at price and wave projections. The time factor needs a Gann based chart to project time with any precision. Gannalyst can do time and price, but Advanced GET's time capacity is rudimentary, and inadequate from a Gann perspective.
I sometimes mark highs and lows with an arrow to make it easier to observe counter trends and wave counts manually. The Elliott wave generation in GET is based on moving averages, and can have some odd labeling that I don’t agree with.
Essentially I manually work out time and price projections; hence I mark these with whatever text and drawing tools that is available on the chart.
Regards
Magdoran
OK
One day I'll study this Gann stuff (time & price stuff only) to see if there's anything for me. To much on ATM though.
Nevertheless, any suggestions for a starting place will be appreciated.
Cheers
michael_selway
11th-July-2006, 08:34 AM
:sleeping:
OK
One day I'll study this Gann stuff (time & price stuff only) to see if there's anything for me. To much on ATM though.
Nevertheless, any suggestions for a starting place will be appreciated.
"The price of petrol is disgusting, absolutely disgusting…"
"It’s just going up and up…"
"It’s outrageous…"
"I get so mad – you ever get so mad you can’t even talk about it no mo’?"
(Vox pops – motorists in Australia, UK and US)
If, like these motorists, your fury rises with the numbers ticking over on the petrol bowser, get a grip. You may soon look back fondly on the good old days when petrol was $1.40 a litre.
The world is at the beginning of the end of the age of oil, according to a growing body of analysts. It stands at a precipice of "peak oil" – the point at which oil producing countries can no longer keep up with growing demand, where production climaxes and then plunges into irrevocable decline.
This, say the doomsayers, may send national economies spinning into turmoil, up-ending comfortable urban lifestyles that rely on oil for the cheap transport of people and goods and for the manufacture of thousands of mundane household and office items – from mousepads, banknotes and drink bottles to carpets, clothes, cosmetics and deodorants.
The crunch will come some time in the next few years, without warning, they say. "The worst case is that it’s occurring now or very soon because the world is unprepared, it’s absolutely unprepared," says one of the most influential pessimists.
But this is just scaremongering, say many authoritative oil industry voices. While they agree that oil is unlikely to get cheaper any time soon, they insist that oil production will keep pace with demand for decades to come. There is simply no end in sight to the black gold bonanza, according to these optimists.
They check off their list: vast untapped oil reserves claimed by Middle Eastern nations; the prospect of further discoveries; and smarter technology that will extend the life of existing oil fields and make new ones easier to exploit.
Even the optimists concede that massive discoveries of easy-to-reach oil are a thing of the past. But, they say, higher prices will make other ways of producing oil and alternative fuels commercially viable.
Who is right? Four Corners investigates a truly global issue that reaches into every home and every car and touches every human life. This special report* explains why oil prices are high right now and asks how long the world has left to prepare for a day when there is not enough oil to go around.
Reporter Jonathan Holmes goes in search of an answer in the Middle East, the US and Europe, interviewing the key protagonists. He asks if the world is being told the truth about the vast unexploited reserves that are claimed to lie beneath the desert sands of the Middle East. He looks at alternative oil sources and the obstacles to exploiting them. And he explains what peak oil means for Australians who depend so heavily on oil for transport and tourist income.
"Peak Oil?" … on Four Corners, 8.30 pm Monday 10 July, ABC TV.
This program will be repeated about 11 pm Wednesday 12 July; also on ABC2 digital channel at 7 pm and 9.30 pm Wednesday.
*Four Corners also presents a Broadband Edition on "Peak Oil?" … See the program in full; watch extended interviews with the experts; delve into interactive maps showing who produces the oil and who buys it; browse key reports about how much oil remains untapped; learn about the alternatives; and discover the impact of peak oil on Australia’s economy and way of life.
thx
MS
RichKid
11th-July-2006, 09:31 AM
................
.............
"Peak Oil?" … on Four Corners, 8.30 pm Monday 10 July, ABC TV.
This program will be repeated about 11 pm Wednesday 12 July; also on ABC2 digital channel at 7 pm and 9.30 pm Wednesday.
*Four Corners also presents a Broadband Edition on "Peak Oil?" … See the program in full; watch extended interviews with the experts; delve into interactive maps showing who produces the oil and who buys it; browse key reports about how much oil remains untapped; learn about the alternatives; and discover the impact of peak oil on Australia’s economy and way of life.
thx
MS
Thanks for that Michael, I didn't realise it was all on the web, missed most of the show so I will have to catch the repeat. It's a shame they didn't consult our resident expert Smurf as his posts had a hell of a lot of stuff that they could have used. Maybe you should do some consulting for these researchers and reporters Smurf? Your posts are top quality. Thanks for sharing your knowledge and expertise, it's very educational.
michael_selway
11th-July-2006, 10:43 PM
Thanks for that Michael, I didn't realise it was all on the web, missed most of the show so I will have to catch the repeat. It's a shame they didn't consult our resident expert Smurf as his posts had a hell of a lot of stuff that they could have used. Maybe you should do some consulting for these researchers and reporters Smurf? Your posts are top quality. Thanks for sharing your knowledge and expertise, it's very educational.
NP u can watch it online below, its split into 6 parts
[IMG]A company is worth the PV of all future cashflows (forecast EPS) discounted for time and risk, nothing more or less.
1/PE = ROI. Money in the bank is about 5% return or PE of 20, but risk free.
Risk = high debt, commodity price sensitivity etc
What is PV? :confused:
also, I like to value a company for what you would get if it was liquidated NOW!
i.e. Net tangible assets (all assets less liabilites (not including intanglibles) does that fall into your equation Michael?
There have been times when a compay is selling for less than what it is worth now - CMI for instance was selling at 97 cents - if you work that back you'd see that is less than what it is worth if you liquidated it. So any future profits (and it does make profits) are your for free.
I'm not having a go, I'm just interested in your thoughts. Thanks. :)
michael_selway
13th-July-2006, 11:05 PM
A good read, I recommend it ;)
Talks about Coal to Oil,
Tar Sands of Canada (Apparantly more Oil here than in Saudi region,
Will Coal Replace Oil?
FN Arena News - July 13 2006
By Greg Peel
One of the reasons Hitler lost the war is because he ran out of fuel. As Germany had not been bestowed with oil reserves, Hitler was aware of the important part oil would play in his plan for world domination. The eastern front was very much about securing Russia's oil supply.
In the end he failed, but not before exploiting new technology that had been pioneered by two scientists called Fischer and Tropsch in the 1920s. They were able to turn coal into diesel. Rumour has it that when Patton made the final push into Germany, he did so using syphoned-off Nazi synthetic fuel.
Not long after, the Middle Eastern oil fields were opened up. There was seemingly an endless supply. The concept of coal conversion became irrelevant. It remained irrelevant right up until recently when oil could be purchased for US$16/bbl.
Except in South Africa. During the 1980s when South Africa was under the rule of an apartheid regime, oil imports were subject to international sanction. In order to overcome a lack of fuel, one company, Sasol Ltd, took advantage of the country's vast coal reserves and revisited the earlier German technology.
It was a long road, but for the last seven years aircraft flying out of Johannesburg International Airport have used a blend of jet fuel containing 50% converted coal. After decades refining the technology, and in a new oil price regime where US$70/bbl is beginning to feel like the norm, Sasol is making windfall profits. It hopes to win approval for a 100% synthetic jet fuel this year.
Sasol has become the leading world expert in coal conversion, and the US is very interested. For one thing, the US is keen to reduce its reliance on Middle East crude. But with a focus that only an American could have, the real push is coming from the military. Rummy wants in.
More than half of the fuel consumed by the US government is used by the air force. About US$4.5 billion per year's worth. The air force recently learnt its fuel bill would rise, as of June 1, by 57c per gallon. Last year it rose 40c.
While the military may be leading the charge, so to speak, commercial airlines are watching with acute interest. Rising jet fuel costs have threatened to all but cripple the global airline industry. The general thinking has always been that synthetic fuels, in various forms, only come under the radar when the oil price exceeds US$50/bbl. Any less and traditional jet fuel is the most economical. Will we see US$50/bbl again?
The US is, nevertheless, not without its coal conversion converts. One Pennsylvanian company, WMPI Pty Ltd, has been working on turning that state's waste coal into zero-sulphur diesel or jet fuel and is commissioning a plant this year. It is doing so finally due to a big, fat grant from George Bush. There are other coal or gas conversion plans being rolled out in other US coal-producing states.
It makes sense. While the US is a net importer of oil, and it's pretty light-on for gas as well, it boasts 27% of the world's known coal reserves. Russia has 17%, China 13%, India 10%, Australia 9% and South Africa 5%.
Why, then, has the US been so slow to adapt coal conversion technology when the concept should have been banging successive government's over the head? The US is far and away, daylight second, the world's biggest consumer of oil.
The answer lies largely in cost, as much as it might in a lack of foresight, or a blind belief in the God-given right to consume oil at will. Converted coal can produce oil at around US$35-40/bbl. Add in fixed costs and you reach the rough US$50/bbl figure for economic viability. Crude oil has never been higher than US$50/bbl until last year.
That's in nominal terms of course. The 1980 previous oil price peak generated a similar wave of panicky interest in alternative fuel sources, with one of the most predominant being shale. Shale oil was going to be the West's great saviour, and Sheik Yamani could go and stick it. The problem was, it was also expensive.
By the time anyone thought seriously about large-scale shale oil production, the oil price collapsed again when the OPEC supply-side shock was over. Shale oil became of minor historical interest.
When the oil price shot up again recently, one was hard pressed to find analysts who didn't see it as a short term phenomenon. Sure, China was suddenly buying lots of oil, but at higher prices demand would fall and supply would increase and everything would revert to normal, except at maybe a slightly higher average.
When Goldman Sachs issued its infamous US$101/bbl prediction two years ago, most fellow analysts laughed. They're not laughing anymore.
Governments, in the meantime, have relied on their respective energy agencies to keep them grossly misinformed. Only a year ago the US Energy Information Agency predicted crude would soon be back at US$30/bbl. The equally incompetent Australian agency, ABARE (Australian Bureau of Agriculture and Resource Economics), has said consistently in recent years that oil prices are about to fall.
"I have made the occasional mistake", said Dr Brian Fisher, executive director of ABARE, to a senate committee recently (source: Four Corners).
Coal is converted into oil by first mixing it with oxygen and steam at high temperature and pressure to produce carbon monoxide and hydrogen. The second step – the Fischer-Tropsch synthesis – uses a catalyst to transform the gas into a liquid synthetic crude, which is further refined.
By-products are mercury, sulphur, ammonia and other compounds that can be sold. The other major by-product is carbon dioxide, and herein lies a problem.
A coal-based power plant of equivalent size to WMPI's conversion plant in Pennsylvania discharges about four million tons of carbon dioxide per year. As greenhouse gas emission controls come into play, at least in some countries, the additional burning of coal may not be viable, particularly if carbon emissions are monetarily quantified.
However, there are environmentally positive outcomes for coal-conversion as well. The actual diesel fuel, when used in a car for instance, has been shown to produce only 10% of the carbon monoxide and 70% of the particulate emissions of conventional sulphur-free diesel (source: Scientific American). Moreover, the South African experience has shown that oil can be produced from waste coal.
In Pennsylvania, as an example, for every two tons of coal extracted, one ton is low-energy, useless waste coal. This sits in a stockpile – 260 million tons of it at present – that is in itself an environmental hazard.
While South Africa has refined the technology, the fact remains work needs to be done to sell coal-conversion as a cleaner alternative to regular crude. It has even been suggested that electricity be produced during the conversion process, and that carbon dioxide emission be collected to be pumped down oil wells. At least they're trying.
But when it comes to alternative non-renewable energy sources (ie other than wind, solar etc) pundits tend to overlook one thing. Nuclear energy might be clean, but uranium mining is far from clean. Coal-converted oil might be better than regular oil but coal mining is a very dirty business. The same can be applied to "clean coal" technologies.
What price might the earth pay to ultimately bring the oil price down?
There is little doubt that the demand side of the equation is what has been driving up the price of oil. No one quite anticipated just how much energy the world's emerging economies would require. It hasn't helped that geopolitical and religious conflict have further thrown supply into doubt. And supply itself has been a long time catching up to rising demand.
Could it be that China might be forced to utilise its extensive coal reserves for oil production?
The answer to this question might be, despite China's already drastic pollution problems: it might have to. The world's reserves of oil may indeed be dramatically low. If you believe some experts, we may have already reached "peak oil".
The question of peak oil has suddenly been a headline-grabber, even though scientists have been warning of the peak oil phenomenon for years. Peak oil may only be a decade away, or we may have passed it already.
What is peak oil?
When an oil reserve is first tapped, up from the ground comes a-bubbling crude. Or if you're more of a Jimmy Dean fan, it spurts high into the air. This is because underground oil reserves are trapped under a lot of pressure.
When the first well is drilled, the oil delivers itself. Maybe hundreds of barrels a day. The next step is to see just what sort of area the reserve might cover by drilling a lot of new wells. Eventually, the one reserve may have been accessed by hundreds of wells, delivering thousands of barrels per day under its own pressure.
After a period of time, natural laws dictate that the pressure will begin to subside and eventually reach equilibrium. From this point on, the oil needs to be pumped out. As the level in the well starts dropping, it may be necessary to pump water in to get the oil out. This becomes more costly and does not produce the same barrel-per day volume. In order to cover the shortfall, more wells need to be drilled to keep production levels up....
.
wayneL
13th-July-2006, 11:08 PM
The situation in the middle east is looking a lot more volatile as well.
Very dangerous... very sad.
michael_selway
13th-July-2006, 11:21 PM
...Finally an oil reserve simply will not be able to produce the same volume per day and the cost of recovering the remaining oil will rise. The reserve has passed its peak. It's now all down hill. After a period of time any remaining oil left will not be able to be economically recovered. Game over...
The technology that allowed oil to be recovered from under the sea was a great leap forward for an oil-hungry world. Thanks to the North Sea, Britain became an oil exporter in 1981.
In 1999, production peaked at 4.5 million barrels per day. By 2005, it had slumped to 1.5 million. That was 14% less than 2004, and less than Britain's daily consumption. (Four Corners)
The US Department of Energy's stance on peak oil is that it's "decades away". But then one wouldn't want to start a panic. Because according to US oil company Chevron, in 33 of the world's 48 most important oil producing countries production has already peaked. Australia's peak was passed in 2000. (Four Corners)
The Association for the Study of Peak oil has visited every oil producing country and every well in the world and the downward trend is evident everywhere. One saviour may well be the next big oil discovery. When that happens we can all get some sleep.
The only problem is oil discovery has also been trending down – for the last 50 years in fact. Consumption has risen in the meantime, and it was in 1981 when the world last found more oil than it consumed. (Four Corners)
While the US doesn't want you to think oil has peaked, the Middle East doesn't either. Rather, the Middle East is gearing up its production capacity to be able to meet the needs of the emerging economies. Granted, it's taking some time, but new wells are being drilled and we'll get there eventually.
Middle Eastern oil reserves are one explanation offered by those who believe the oil price will eventually fall from its highs. Twenty years ago, Saudi Arabia claimed to have 260 billion barrels of oil under the ground. The Saudis produce over 9 million barrels per day, or 10% of world consumption.
No one is allowed in to assess Saudi's oil reserves for themselves. It is a closely guarded secret. Having pumped 10% of the world's oil needs for twenty years the Saudis now claim to have – 260 billion barrels of oil under the ground. That's right, it hasn't changed. (Four Corners)...
Suspicious? I would be. If the Saudis still have that much oil then why is the oil price up here? Even US$40/bbl seemed exorbitant a couple of years ago. And it is definitely not in the interest of Saudi Arabia or any other Middle Eastern oil producer to allow the price to go so high. It is at this price that the world starts talking about moving away from oil.
If the oil is really there, then the most sensible course of action would be to let the world assess that for themselves. Okay, it might take some time yet to ramp up production, but knowing definitively that there's nothing to ultimately worry about would ease pressure on the oil price. Yet the best the Saudis can come up with is a figure that never changes.
If the oil is not there, what happens next? There are the massive tar sands of Canada, but recovering oil from tar sand is expensive and environmentally unsound. There are reserves in the Arctic regions, and perhaps the Antarctic, but will that be a popular move?
If the world needs oil for its existence, then one possibility is clearly coal conversion. Coal is already used to produce electricity, and steel. Estimates suggest there is 200 years of known coal supply in the world, or 100 if it is used for conversion to oil.
From an environmental perspective, one would hope we can quickly move away from needing any form of oil. Realistically, the price of coal is not likely to drop much from here
PV = Present Value, basically adjusted for time
Yeah NTA is a another way to value a company.
Lets say a company has in proven in-ground uranium worth 1 billion based on spot prices. But the thing is if not managed well they can actually make a loss when it comes to production and selling
Also a "cheap asset" can earn alot of money. And vice versa an expensive asset (if sold on market) could be making losses if not managed well (but it could be taken over, but then again it coudl ge bust)
Actually i have a question for you Realist
Lets say an Aussie listed company with 100mil shares (fully diluted) can earn 100mil in NPAT per annum with near 100% certainty but no growth (so dividends are possible). Also assuming no disaster world events such as Terrorism, SARS, etc, whats the most you are willing to pay for each share roughly?
Ill give u my answer after yours :)
Thanks
MS
What is PV? :confused:
also, I like to value a company for what you would get if it was liquidated NOW!
i.e. Net tangible assets (all assets less liabilites (not including intanglibles) does that fall into your equation Michael?
There have been times when a compay is selling for less than what it is worth now - CMI for instance was selling at 97 cents - if you work that back you'd see that is less than what it is worth if you liquidated it. So any future profits (and it does make profits) are your for free.
I'm not having a go, I'm just interested in your thoughts. Thanks. :)
wayneL
13th-July-2006, 11:56 PM
Oil futs punching through $76
YOUNG_TRADER
13th-July-2006, 11:57 PM
Hmmm I've got a value for that company Michael, but I'll wait as the question was not directed at me,
michael_selway
14th-July-2006, 08:45 AM
Hmmm I've got a value for that company Michael, but I'll wait as the question was not directed at me,
Hehe yep, wait for "Realist's" response first :)
thx
MS
Realist
15th-July-2006, 05:45 PM
Lets say an Aussie listed company with 100mil shares (fully diluted) can earn 100mil in NPAT per annum with near 100% certainty but no growth (so dividends are possible). Also assuming no disaster world events such as Terrorism, SARS, etc, whats the most you are willing to pay for each share roughly?
First I will assume they do not have significant debt because that changes any valuation. Next I will assume they will make $100M NPAT per year for many years and have done so before with some slow growth (to cover inflation at least).
The way I work the market cap out quickly for a company that continuosly makes $100M per year NPAT is 4 times 5 years NPAT so $2,000M is my quick estimate.
$2 Bill Market cap so I'd pay roughly $20 a share.
michael_selway
15th-July-2006, 09:56 PM
First I will assume they do not have significant debt because that changes any valuation. Next I will assume they will make $100M NPAT per year for many years and have done so before with some slow growth (to cover inflation at least).
The way I work the market cap out quickly for a company that continuosly makes $100M per year NPAT is 4 times 5 years NPAT so $2,000M is my quick estimate.
$2 Bill Market cap so I'd pay roughly $20 a share.
Hi thx for that, yep assuming what you mentioned as well
But when you say "4 times 5 years NPAT" what do u mean exactly? like how did u coem up with those numbers?
thx again
MS
Realist
15th-July-2006, 10:15 PM
Right, I am back and 3/4 p*ssed after watching the rugby bloodbath at the pub.
First of all was I correct?
What is your answer?
Realist
15th-July-2006, 10:18 PM
when you say "4 times 5 years NPAT" what do u mean exactly? like how did u coem up with those numbers?
I mean what I say. Find a company that has made profits the last 5 years. I wont buy anything else.
Add up those last 5 years profits. Then multiply by 4.
That is the approximate market cap.
If they are growing fast and a truly great prospect add a little to the market cap.... If they aint growing much subtract a little.
michael_selway
16th-July-2006, 08:05 PM
I mean what I say. Find a company that has made profits the last 5 years. I wont buy anything else.
Add up those last 5 years profits. Then multiply by 4.
That is the approximate market cap.
If they are growing fast and a truly great prospect add a little to the market cap.... If they aint growing much subtract a little.
oh ok, its just a very different thought, esp multiply by 4, seems out of nowhere that number
anyway mine conincidently same asnwers as your about $20 per share
Bascially the hidden assumption is the current risk free interest, about 5% return p.a. For example if u put $1 in the bank u will get 5c interest, if u put $20 in the bank you will get $1 interest per annum
So thats why for this example since each share can earn $1 per share in NPAT every year (assumption was "near certainty" or "risk free"), thus peopel will be willing to pay up to about $20 for each share (PE of 20 = 5% return)
If the the market was only $10, people will quickly buy it up to around $20, beacuse at $10 they are getting 10% return pa, more than 5% in the bank
Obiviously in the real ASX, there are risks (external and company specific) and peopel have to factor that in and so most likely pay under 20, maybe 18 or so, depending on the risks of course. But essentially depends on the current risk free interest rate, thats the key
also yeah if its EPS grows (or downgrades) people might be willing to pay more/less than $20 per share, depending how much its forecast growth next yr or 2 is, and the risks to those growth in EPS forecast etc
thx
MS
michael_selway
16th-July-2006, 09:52 PM
If the current interest rate was 10% pa, the max ill pay for that stock will be about $10
However you will still be paying $20? which will earn u $1 pa, but if u put that $20 in the bank it can earn u $2 pa?
Since they have no growth and can sustian earnings, they will likely pay most of their EPS out as dividends
thx
MS
Realist
16th-July-2006, 10:21 PM
oh ok, its just a very different thought, esp multiply by 4, seems out of nowhere that number
anyway mine conincidently same asnwers as your about $20 per share
What I do is find a company that has made a profit the past 5 years with regular growth. I don't use foward or projected earnings, I use facts not speculation.
Say the last 5 years NPAT are roughly: 900K 950K 1000K 1050K 1100K
Then I add up the previous 5 years NPAT - and multpily by 4. That gives you a market cap based on an average PER of 20 on the last 5 years earnings.
You see a PER should never be judged on 1 years worth of earnings. One great year can make an average company look cheaper than it really is, and one great year may have been for some unknown and possibly sinister reason (some weird sale, cooking the books who knows). If a company has 5 great years in a row well it would have been no fluke.
Now a PER of 20 is higher than the market average of around 15. But your company is growing and solid - you pay a slight premium for that. And 20 is an indication of the most you'd pay not an average price.
Where did I get this from? - Graham initially, who else, he always says look at 5 years earnings, 10 years if possible. Never just 1.
And PER's are hugely important of course in valuing a company.
:)
And that brings me back to the original question. How much importance do you place on NTA or debt?
PER's can be misleading in valuing a company, a company with huge assets and no debt is obviously worth alot more than one with huge debts and little assets - regardless of their PER's or earnings power.
rederob
16th-July-2006, 10:33 PM
And that brings me back to the original question. How much importance do you place on NTA or debt?
PER's can be misleading in valuing a company, a company with huge assets and no debt is obviously worth alot more than one with huge debts and little assets - regardless of their PER's or earnings power.
And I suggest those are just the tip of the iceberg of fundamental analysis.
If it was that easy for every stock we would all be quite rich and not looking here for inspiration!
;)
michael_selway
16th-July-2006, 10:47 PM
And that brings me back to the original question. How much importance do you place on NTA or debt?
PER's can be misleading in valuing a company, a company with huge assets and no debt is obviously worth alot more than one with huge debts and little assets - regardless of their PER's or earnings power.
Hi Realist
Thanks for your thoughts
ok imo, EPS and forecast EPS(DPS) the most important, the NTA and Debt are "risks" to the earnings amoung other risks ofcourse, so i have to adjust the PER (up or down) to reflect that
Btw what do u think of the below
If the current interest rate was 10% pa, the max ill pay for that stock will be about $10
However you will still be paying $20? which will earn u $1 pa, but if u put that $20 in the bank it can earn u $2 pa?
Since they have no growth and can sustian earnings, they will likely pay most of their EPS out as dividends
thx
MS
ALso another scenario about future EPS forecast
Lets say last 5 yrs it earns 100mil NPAT, but next yr forecast is 200mil NPAT(with near 100% certianty), , and after that 300mil NPAT (with near 100% certianty), then after that steadies at 300mil NPAT indefinetly (with near 100% certianty).
Assuming same facts apply from ealier. whats the max would u be willing to pay for it now?
thx
MS
Realist
16th-July-2006, 10:49 PM
If it was that easy for every stock we would all be quite rich and not looking here for inspiration!
;)
It is easy. Fundamental analysis is a get rich slow scheme.
It takes decades before you can retire filthy rich, not days unfortunately.
So I've got plenty of time to wait and post tripe here. :D
Realist
16th-July-2006, 11:04 PM
Originally Posted by michael_selway
If the current interest rate was 10% pa, the max ill pay for that stock will be about $10
However you will still be paying $20? which will earn u $1 pa, but if u put that $20 in the bank it can earn u $2 pa?
Since they have no growth and can sustian earnings, they will likely pay most of their EPS out as dividends
thx
MS
Yeah, the way I look at it houses are a good investment when interest rates are higher because houses become cheaper - people can only afford so much in mortgage payments, and by definition if someone can afford $1000 a week in mortgage payments they can borrow less when interest rates are higher.
Why buy a house though when you're paying high interest rates? Because you are paying off your mortgage over 30 years and interest rates will in all likelihood come down, making your payments easier. You get a cheap house and the likelihood of easy payments in a few years.
So how do interest rates affect shares? Hmm negatively I would think, Graham would move more money into bonds and have less in shares - because bonds are safer.
If you can get the same return from a term deposit as you can on shares then I'd take the term deposit any day - no risk!
So I agree with you I'd pay less for a company when interest rates are high.
How much less - well I'd adjust the 5 years times 4 to maybe 5 years times 3.5 even 3.
I have never invested when interest rates are high, I may find out soon though... :eek:
When interest rates rise I'd have less in shares, more in the bank - simple as that. So because I own less shares I'd be more discerning about what shares I bought, your company where we agreed the most we'd pay is $20 I'd be tempted to pay say $15 at the most.
There are no foolproof sharemarket calculations that work in all cases - common sense always comes first over any ratio.
Realist
16th-July-2006, 11:16 PM
Also another scenario about future EPS forecast
Lets say last 5 yrs it earns 100mil NPAT, but next yr forecast is 200mil NPAT(with near 100% certianty), , and after that 300mil NPAT (with near 100% certianty), then after that steadies at 300mil NPAT indefinetly (with near 100% certianty).
Assuming same facts apply from ealier. whats the max would u be willing to pay for it now?
$20 is what I would pay at the most!! :D
I may miss out on a good deal of course.
But there is no such thing as a 100% certainty of a company tripling their NPAT in 2 years.
Projected earnings are as likely to be wrong as they are to be right.
Analysts can only predit so much, they can not predict that war breaks out between China and Taiwan and there is a trade freeze on China and your company (that relies on China) goes under. The shares die, you paid too much, I didn't. You lose more than me.
But lets say they were right and your company does triple its NPAT, people that buy that company make big profits amd I miss out, those people are highly likely to buy a similar company where the projections did not work out and they make a loss. Over time I will do better being safe, than people who punt on projections of stellar growth.
michael_selway
16th-July-2006, 11:27 PM
$20 is what I would pay at the most!! :D
I may miss out on a good deal of course.
But there is no such thing as a 100% certainty of a company tripling their NPAT in 2 years.
Projected earnings are as likely to be wrong as they are to be right.
Analysts can only predit so much, they can not predict that war breaks out between China and Taiwan and there is a trade freeze on China and your company (that relies on China) goes under. The shares die, you paid too much, I didn't. You lose more than me.
But lets say they were right and your company does triple its NPAT, people that buy that company make big profits amd I miss out, those people are highly likely to buy a similar company where the projections did not work out and they make a loss. Over time I will do better being safe, than people who punt on projections of stellar growth.
Whats you say is true
But thats also how we differ i think, and yes in alot of cases u will miss a great growth company, like above if those EPS did in fact occur 300 mil indefinitely would mean 60 max eventually (we both agree on this). But what i would be willing to pay now maybe 40 (which is 1 yr in advance only)
Its true that its not 100% certaintly, but close to it, and one shodul give it some credit atleast, u woudl think?
Basically, looking at past earnings isnt everything, current and future EPS is much more important
For example, a merger or takover or acquistion is announced, why does price go up? Why are people willing to pay more now after the news? According to what you said above u will still pay the same based on the last 5 yrs NPAT*4 etc?
The reason is because the new M&A actiavity has changed to future, i.e. its should be now more EPS accreditive than before, ie forecast EPS increases due to synergies etc
What do u think about this M&A point, are u willling to pay more after the news?
thx again
MS
Realist
16th-July-2006, 11:47 PM
What do u think about this M&A point, are u willling to pay more after the news?
Hi Michael, the answer is No.
It does not matter to me what the reason is. My reason was just an example.
I pretty much ignore future earnings forecasts. Much like I ignore anyone's tips on the Melbourne Cup.
I look at facts, not forecasts.
For every great opportunity I will miss I can show you just as many sour opportunities I'd avoid.
My first aim when investing : don't lose!!
If you are paying $40 a share for a company that has made $100M NPAT in our example you are paying up to $25 too much = maybe 62% too much.
Not wise.
michael_selway
17th-July-2006, 12:00 AM
Hi Michael, the answer is No.
It does not matter to me what the reason is. My reason was just an example.
I pretty much ignore future earnings forecasts. Much like I ignore anyone's tips on the Melbourne Cup.
I look at facts, not forecasts.
For every great opportunity I will miss I can show you just as many sour opportunities I'd avoid.
My first aim when investing : don't lose!!
If you are paying $40 a share for a company that has made $100M NPAT in our example you are paying up to $25 too much = maybe 62% too much.
Not wise.
Return (1/pe) is one thing, Risk is the other (Time or future is the 3rd), so as long as risk is low in the above example, i would be willing to pay up to $60 if it was 100% certain. if 90% certainn 55 maybe, 80% certain 50 maybe etc, see where im getting at? Depends on what you (or the market) think the Risks (upside or downside) to the Return is in the future.
One shoudl look at more than just 1 yr forecast but atleast 3 imo, 5-10 is optimal. I think most brokers use 10.
Also your point about not looking at forecasts, fine. Thats a fair opiion in that regard
But all i know that the general market looks at forecats for sure, and thsu M&A news will usualy mean a jump in prices to reflect the change in the future (forecast EPS). Imo its important to understand how and why the market reacts to news and annoucements.
anyway thanks for sharing your ideas! its been great knowing :)
thx
MS
Smurf1976
17th-July-2006, 12:05 AM
Yeah, the way I look at it houses are a good investment when interest rates are higher because houses become cheaper - people can only afford so much in mortgage payments, and by definition if someone can afford $1000 a week in mortgage payments they can borrow less when interest rates are higher.
Why buy a house though when you're paying high interest rates? Because you are paying off your mortgage over 30 years and interest rates will in all likelihood come down, making your payments easier. You get a cheap house and the likelihood of easy payments in a few years.
So how do interest rates affect shares? Hmm negatively I would think...
Exactly. You want low interest rates AFTER you take out the mortgage, not before. :2twocents
michael_selway
17th-July-2006, 12:58 AM
Return (1/pe) is one thing, Risk is the other (Time or future is the 3rd), so as long as risk is low in the above example, i would be willing to pay up to $60 if it was 100% certain. if 90% certainn 55 maybe, 80% certain 50 maybe etc, see where im getting at? Depends on what you (or the market) think the Risks (upside or downside) to the Return is in the future.
One shoudl look at more than just 1 yr forecast but atleast 3 imo, 5-10 is optimal. I think most brokers use 10.
Also your point about not looking at forecasts, fine. Thats a fair opiion in that regard
But all i know that the general market looks at forecats for sure, and thsu M&A news will usualy mean a jump in prices to reflect the change in the future (forecast EPS). Imo its important to understand how much and why the market reacts to news and annoucements.
anyway thanks for sharing your ideas! its been great knowing :)
thx
MS
Hi Realist
Actually forgot one thing, instead of using M&A (positive news) shoudl have used a negative news example
E.g. in the question where it can earn 100mil NPAT indefiently at near 100% certainty and the other assumptions etc
whats happens if all of a sudden the company issues a profit downgrade?
"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"
Woudl u still be willign to pay max $20 per share now?
My answer is no, because the future has changed ie forecast EPS has decreased significanlty, so need to revalue once again etc, price downwards of course
thx
MS
Realist
17th-July-2006, 01:18 AM
Hi Realist
Actually forgot one thing, instead of using M&A (positive news) shoudl have used a negative news example
E.g. in the question where it can earn 100mil NPAT indefiently at near 100% certainty and the other assumptions etc
whats happens if all of a sudden the company issues a profit downgrade?
"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"
Woudl u still be willign to pay max $20 per share now?
My answer is no, because the future has changed ie forecast EPS has decreased significanlty, so need to revalue once again etc, price downwards of course
thx
MS
Ahh to easy. :D
Before I had even read the newspaper that morning the downgrade was announced the share price would have dropped. Many others hear news before I do. Market efficiency means the share price will dive - probably more than it needed to.
The share price may be $12 now (depending on the severity of the downgrade).
So would I now buy the company?
Hell yes, it makes $100M NPAT consistently year after year, and I get it at a discount. I'm planning to own it for the next 20 years so now is a great time to buy.
(the exception is if the NPAT becomes a loss) - if $100M becomes $40M so be it. But as I said before I do not like losses.
Realist
17th-July-2006, 01:19 AM
Exactly. You want low interest rates AFTER you take out the mortgage, not before. :2twocents
Interest rates are variable. What is 6 months or even 5 years of high interest out of a 30 year loan? Not much.
michael_selway
17th-July-2006, 08:45 AM
Ahh to easy. :D
Before I had even read the newspaper that morning the downgrade was announced the share price would have dropped. Many others hear news before I do. Market efficiency means the share price will dive - probably more than it needed to.
The share price may be $12 now (depending on the severity of the downgrade).
So would I now buy the company?
Hell yes, it makes $100M NPAT consistently year after year, and I get it at a discount. I'm planning to own it for the next 20 years so now is a great time to buy.
(the exception is if the NPAT becomes a loss) - if $100M becomes $40M so be it. But as I said before I do not like losses.
"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"
Thats the seveirty of the downgrade, the max ill pay is $10 based on those forecast numbers and the risk assumtions
So if it falls from 20 to 15 and stays there, i stilll wont buy, still too expensive. If it fall sbelow 10 then yeah one say probably buy it once dust settles.
Doesnt matter that it earned 100mil last year, future has changed now. Its not making a loss but just much less NPAT now than before
thx
MS
Realist
17th-July-2006, 09:37 AM
"Due to a sudden downturn in sales we now expect the next FY NPAT to be
around 50mil NPAT, but expect 50mil NPAT to be maintained from then on indefiently"
Thats the seveirty of the downgrade, the max ill pay is $10 based on those forecast numbers and the risk assumtions
So if it falls from 20 to 15 and stays there, i stilll wont buy, still too expensive. If it fall sbelow 10 then yeah one say probably buy it once dust settles.
Doesnt matter that it earned 100mil last year, future has changed now. Its not making a loss but just much less NPAT now than before
thx
MS
Hi Michael,
Yes you, and the majority of investors look at future earnings and give it great importance, so you are more likely to pay alot for a company with great prospects, and you are not willing to buy a company with poor prospects. It is the way most people invest and I can see why.
But I am the exact opposite though.
I am not willing to pay too much for a company with great prospects because prospects are merely future predictions - they are not facts.
I am however willing to buy a 'great' company with poor prospects for a cheap price. Because I know companies evolve and change, and I am willing to hold for a long time.
Neither is right or wrong as such. But I believe my strategy can get me a great company for a great price. A couple of years of low earnings is irrelevant if you got it cheap and hold for 30 years, and I also know that predictions and projections are often wrong, and market sentiment can swing to extremes, severely overvaluing a company that has good prospects, and severely undervaluing a company that has poor prospects. And I know companies evolve and change to remedy poor longterm prospects - Coke used to sell just sugary drinks, now they sell water and diet drinks.
What shares have you bought recently out of interest?
the last couple I bought were CDO and PRG. CDO released a poor outlook, PRG a good one.
scsl
8th-August-2006, 01:47 AM
oil is up sharply tonight! it's about $76.70 at the moment...
seeing as august and september are the peak months for Gulf Coast hurricanes and with the Middle East situation probably worsening, maybe this could be the start of the next leg up?
YOUNG_TRADER
8th-August-2006, 10:24 PM
oil is up sharply tonight! it's about $76.70 at the moment...
seeing as august and september are the peak months for Gulf Coast hurricanes and with the Middle East situation probably worsening, maybe this could be the start of the next leg up?
Unfortunately it would appear so,
I shudder to think what a hurricane will do to the Oil Price, $100 US? ?
Oil will most likely hit the target of $100 US before Gold reaches $1000 US
scsl
9th-August-2006, 12:18 AM
Unfortunately it would appear so,
I shudder to think what a hurricane will do to the Oil Price, $100 US? ?
Oil will most likely hit the target of $100 US before Gold reaches $1000 US
YT, it seems pretty likely that oil will break $100 before gold reaches $1000. but having said that, the tensions in the Middle East and further global inflation worries could make gold run up as well...
just saw a news update that petrol in Australia could reach $1.80! boy is that gonna be painful!! which will lead to inflation staying high, particularly headline CPI inflation, and another rate rise before the year's out. :(
doctorj
9th-August-2006, 01:41 AM
For those that haven't seen the news, BP announced today (or yesterday perhaps) that they will have to shut in the Prudhoe Bay oil field in Alaska after detecting corrosion in the pipeline away from the field. It's not known how long it will take to fix; Credit Suisse engineers estimate anywhere from weeks to months on the optimistic side. BP have said that production won't recommence until the company/regulators are satisfied the problem has been rectified.
Prudhoe Bay is responsible for about 8% of US oil production or 400k barrels a day.
My understanding is that BP previously determined that normal corrosion prevention maintanence didn't need to be done on the pipes as their xrays/ultrasounds indicated the pipe was in satisfactory condition and they simply flushed it with an anti corrosive agent.
Smurf1976
9th-August-2006, 01:43 AM
With the shutdown of 400,000 bpd of production at Prudhoe Bay due to corroding pipes the overall supply situation just got worse.
US hurricane season is on the way too, so no surprise to see rising prices.
Also, I'm yet to be convinced that the reason for production falls in Saudi Arabia, which seem to have been getting worse for months now, is really because they can't find anyone to buy the oil. Can't find a way to produce it more likely IMO.
Iran is also reported to be drawing down stocks to meet demand. :2twocents
Smurf1976
9th-August-2006, 01:45 AM
Looks like doctorj was posting the same thing as I was typing... :)
doctorj
9th-August-2006, 01:46 AM
Do you know if the Saudi's hold, or held, significant stock piles of oil?
If they didn't I'd have expected production to reduce/prices to increase much more sharply if their some of wells had started pumping water.
I don't think we've come to the Saudis running out of oil just yet.
pacer
9th-August-2006, 03:17 AM
So shouild iI buy or sell WPL....Hurricaine season and all......I dont Know where they base most of thier opperations so would like a bit more info.......?
michael_selway
20th-August-2006, 10:58 PM
So shouild iI buy or sell WPL....Hurricaine season and all......I dont Know where they base most of thier opperations so would like a bit more info.......?
Smurf, do u think $40/barrel is likely?
Woodside boss predicts fair oil prices
Email Print Normal font Large font August 20, 2006 - 11:49AM
Advertisement
AdvertisementWoodside Petroleum boss Don Voelte says world oil prices will return to reasonable levels of about $US40 a barrel, but it won't happen any time soon.
The chief executive of Australia's biggest independent oil and gas producer said demand for the resource, with prices soaring in recent months, plus disruptions to supply and world-wide tensions, would keep prices up probably until next year.
"I'd say at least for the rest of this year, probably into next, what you see is what you'll get," Mr Voelte told ABC TV.
"(But) I do predict oil to come back down I think in a reasonable level.
"I think the area we have to prepare for is about $US40 a barrel, somewhere in that range."
Crude oil prices rose to $US71.14 per barrel in New York on Friday, up $US1.08...
Do you know if the Saudi's hold, or held, significant stock piles of oil?
If they didn't I'd have expected production to reduce/prices to increase much more sharply if their some of wells had started pumping water.
I don't think we've come to the Saudis running out of oil just yet.
I'm not certain as to actual capacity (70 million barrels comes to mind) but to my understanding the Saudi's do have substantial tank farms for storage.
It is quite possible that the actual production never reached the 9.6 mmbpd or so that they were "producing" 6 months ago. They could have just been drawing down stocks which would explain why production has dropped significantly in recent times (official line is they can't sell the oil).
Official data puts Saudi wells on average declining at 8% per year. They can maintain production only by constant drilling of new wells. The main concern is that many of these wells are being drilled into the same reservoirs as the depleting wells - more holes in the ground to get at the same oil. If those reservoirs were to undergo a spectacular decline (quite possible - it's happened using the same technology in Oman and Russia) then they simply couldn't maintain production. That's a big "if" however since the West hasn't had proper (uncensored) data since the 1970's on key Saudi oil fields.
As for water, officially 30% of the liquids extracted at Ghawar (largest Saudi oil field) are water. This used to be somewhat higher until they (presumably) closed the wells that were flowing very high amounts of water.
Water itself isn't a problem (though it can be - look at the corrosion in Alaska with their reported 75% water cut) - it's how much oil that comes up with it that matters. That said, when water starts coming up it's a bit like having blood come out of your body. You feel fine but it's a warning sign of trouble. :2twocents
WaySolid
21st-August-2006, 08:33 AM
Smurf what are your sources for your quoted data?
Official data has the Saudi oil wells going down at 8% a year? How official exactly?
Seeing as the Saudi's are very secretive and the chief oil minister continues to tell the world don't worry be happy for the next 50 years, I can't think the source is that official!
The Saudi's huge push into the promotion of local tourism as an industry and their appetite for gold speak much louder than their words for me.
Dannyboy80
6th-September-2006, 07:27 PM
I heard/read somewhere that some of the wells in Saudi are on the way out as they have been pumping to much water into them to extract the oil.
Then again, l just saw on the news that discovered a new oil field off the US. Who knows where the price is going? If l knew where the price was heading, l'd be rich.
Smurf1976
6th-September-2006, 07:49 PM
Smurf what are your sources for your quoted data?
Official data has the Saudi oil wells going down at 8% a year? How official exactly?
Seeing as the Saudi's are very secretive and the chief oil minister continues to tell the world don't worry be happy for the next 50 years, I can't think the source is that official!
The Saudi's huge push into the promotion of local tourism as an industry and their appetite for gold speak much louder than their words for me.
That is the official line from Saudi Aramco. That their wells (as opposed to fields) are declining at 8% per annum.
It does seem to be perfectly reasonable number. Practically any individual oil well that isn't reasonably new will have ongoing continuous decline and those in Saudi Arabia would logically be no exception.
That they have quite a number of active drilling rigs and, at best, flat production capacity (though actuall production has declined - supposedly because nobody will buy their oil) adds considerable weight to this. It's perfectly normal to be drilling additional production wells to offset decline and this appears to be what they are doing.
If their fields, as opposed to individual production wells, start declining at that rate then it's time to panic.
Likewise if they stated their wells were not declining at all then that would be clearly not true unless Saudi wells are incredibly different to those everywhere else. Unlikley. :2twocents
Dannyboy80
6th-September-2006, 08:12 PM
http://www.msnbc.msn.com/id/14678206/from/RS.1/
mime
6th-September-2006, 08:14 PM
About that big find in the gulf. It will take years to get the feild running and make little change to the current demand for oil.
Smurf1976
6th-September-2006, 08:15 PM
IThen again, l just saw on the news that discovered a new oil field off the US. Who knows where the price is going? If l knew where the price was heading, l'd be rich.
Proper figures aren't available yet and won't be for some time. But when initial estimates show that the biggest oil discovery in years might ultimately produce enough oil to run the world for 5 WEEKS then you start to understand what the problem is...
It is a big discovery only in the context of disastrous discovery results in recent years. Based on what is announced so far, it's pretty much irrelevant compared to any real, major oilfield. Small even compared to Alaska and less than 2% of all oil discovered in the US to date. That this is the best the industry has done for a long time is the very nature of the oil problem...
It's still good news however. But it doesn't materially change the oil supply situation unless it is very much larger than initial estimates show. Producing less than 0.5% of world supply for 20 years isn't going to change everything although obviously it's good news for those involved with it.
Smurf1976
6th-September-2006, 08:55 PM
Too late to edit...
Those figures are for the lower end of the estimated size, 3 billion barrels of liquids (oil and condensate). The upper end is 15 billion barrels - about what the world uses in 6 months. Better but still not something that will change the situation radically. :2twocents
scsl
19th-September-2006, 03:01 PM
Crude for October delivery is currently at about $64. Technically, I think it's oversold and a bounce from the support area of $62.50-$64.50 towards the $70 mark is possible. However, after that, fundamentals such as OPEC lowering its demand forecast again and a warmer than normal winter could see oil prices head below $60.
IMHO, the longer term will see oil go higher than its previous highs and head towards $90-100.
Any charting analysis or fundamental viewpoints would really be appreciated.
Magdoran
19th-September-2006, 03:42 PM
Crude for October delivery is currently at about $64. Technically, I think it's oversold and a bounce from the support area of $62.50-$64.50 towards the $70 mark is possible. However, after that, fundamentals such as OPEC lowering its demand forecast again and a warmer than normal winter could see oil prices head below $60.
IMHO, the longer term will see oil go higher than its previous highs and head towards $90-100.
Any charting analysis or fundamental viewpoints would really be appreciated.Tend to agree its found support. The question is will it find a lower high and test down further, or find a higher low and try to resume bullishly?
On the one hand it looks pretty bearish, but when you look at it in the wider context, crude tends to correct hard, then base, then trend up… the problem is the magnitude and timing…
scsl
19th-September-2006, 09:33 PM
This is an excerpt from a market (oil) report...
In contrast, Morgan Stanley technical analyst Mark Newton said he thinks conditions are right for crude-oil prices to enjoy a bounce that could take prices back above $70 a barrel.
"The recent drop in crude oil ... to oversold territory over the last few months has reached a strong area of support that creates an attractive near-term buying opportunity," Newton said. "Factors such as momentum, sentiment and intermediate-term cycles all suggest that this pullback is buyable from a risk-vs.-reward perspective."
He said a rebound could reach initial resistance at the $68 to $70 a barrel level, while intermediate-term resistance sits in the mid-$70s.
If everything falls into place, crude could drop perhaps even to $15 a barrel, Verleger says. And then, he says, you would see gasoline at $1.15. Here's how that could occur.
* Oil and gasoline inventories continue to grow. They've been building up all over the world as users and refiners have scrambled to ensure enough supply in case, say, the Strait of Hormuz in the Persian Gulf is shut down. Tankers from Iran, Saudi Arabia, Kuwait, Iraq and other Gulf oil producing countries must pass through the strait to bring crude oil to the rest of the world.
* The weather cooperates. On top of a hurricane with few threats to the oil and gas fields in the Gulf of Mexico, weather cooperation means a warm winter like the winter of 2005-2006. That would drop demand for heating oil, a key heating source especially on the East Coast and in Europe. And that would create excess supplies of crude that refiners could use to make gasoline.
* Tensions in the Middle East continue to ease. This assumes conflicts between Israel and Hezbollah in Lebanon tail off and that Iran and the rest of the world come to an agreement over Iran's nuclear program. (Admittedly, the latter is a reason why the scenario could fall apart.)
* Drivers take the bus. There is anecdotal evidence that U.S. drivers are finding other ways to get around with gas prices above $3. The big question is if they will climb back behind the wheel as prices drop.
Those four pieces are just the start. Beutel thinks two more catalysts are starting to emerge.
1. At current prices, Beutel says, "you can drill a lot of dry holes before you give up on a field." And so, drawn by the potentially huge profits, energy companies are finally starting to make plans to drill for more oil.
2. Beutel thinks buyers are already demanding more fuel-efficient vehicles. "They're not buying SUVs," he says.
I was going to buy oil at around the current prices but the trend continues downward. Globally, I think it will be a problem if oil drops too low in price. High prices have spured governments to find alternatives. I think it currently early enough to give us time to convert to a new economy while there is plenty of oil.
With low oil prices consumption will go up and no doubt our Government will go back to sleep as far as oil is concerned and the next price rise may be caused by peak oil.
MIT
Halba
20th-September-2006, 03:00 PM
$15 oil yeh right. still not too many commercialised discoveries and a lot of risks in the world still. also gulf of mexico still struggling from last years hurricanes. this hurricane season not over yet either(don't count your chickens before they hatch). Maybe likely $45oil/bbl possible, where it was before the run started. US winter coming also, and with the trend in weather extremes, likely to get pretty cold out there.
Sustainable US$45 oil will result in some quite big economic expansions for many years, and still profitable for the oil producers. IT will lower costs for mining firms like BHP too.
Knobby22
20th-September-2006, 04:51 PM
Agree 100%, Halba
Lower oil is good for the mining companies.
$45 is the best we can hope for.
nizar
20th-September-2006, 07:37 PM
Agree 100%, Halba
Lower oil is good for the mining companies.
$45 is the best we can hope for.
oil price wont stay below us$60/barrel for long as OPEC will turn off the taps
scsl
4th-October-2006, 01:43 AM
Oil is now at $59.03! :eek: It's even gone below $59. This big fall from above $63 is on news that there is ample supply going around.
Gold is also down considerably, holding just above $582. I'm not sure what's happening with base metals prices but these falls in oil and gold could signal a dark, dark October...
wayneL
4th-October-2006, 05:39 AM
Oil is now at $59.03! :eek: It's even gone below $59. This big fall from above $63 is on news that there is ample supply going around.
Gold is also down considerably, holding just above $582. I'm not sure what's happening with base metals prices but these falls in oil and gold could signal a dark, dark October...
Is that cash? I've got Nov futs closing at $58.675.
Must be less than that on cash.
Commods in freefall!
wayneL
4th-October-2006, 06:25 AM
I'm not sure what's happening with base metals prices but these falls in oil and gold could signal a dark, dark October...
I don't follow nickel/zinc etc, but copper took a > 10c per pound hit
Oil traded yesterday above $60 a barrel after news from OPEC said that it may be cutting oil supply by 1 million barrel a day from actual production with the cold US weather demanding more fuel to keep the heating going in the winter.
With the OPEC cutting the supply the prices will rise again since th cut is coming at a time when demand is high , but one has to keep a watch whether the cut will be from the actual production or not.
Oil has been going up since last week when some oil refineries had to shut down few units for maintenance , reducing crude oil consumption , this tren is carried forward by another possible oil supply cut by OPEC very soon. I feel this is a crucial time for people as OPEC has been quite lucky in keeping everyone's interest and if it happens the way OPEc wants then looks like the whole world is going to dance on the finger tips of OPEC .....
RichKid
17th-October-2006, 08:02 PM
I've been tracking oil for a while now and as you can see from some of my older charts there were times when I had no idea at all about what it was doing!! The current charts are of oil using Elliott Wave. fyi the major wave 3 terminted just below 2.618 x Height of the major wave 1.
The monthly chart shows some nice trendlines and channels, that blue one intersects current price activity near the 0.382 retracement which is a typical wave-3 retracement level (also note the flip/flop congestion/support area circa $54). This chart was one of the easier ones to label for someone like me who's starting out in EW, so most traditional Elliotticians would have similar labelling imo.
I have an alternative count on this for the current decline, both counts show this first leg as a major wave A- the primary count of this decline shows oil correcting in a wave 4 (usually retraces to the level of the prior degree wave-4 per EW theory).
The alternative count (marked a-b-c) suggests oil has completed this major wave A and is about to bounce into the wave B, which typically retraces 50% of the wave A. I may have to amend the last fortnight's very minor count.
Would be happy to see more of the chartists on ASF discuss this market from their particular field of TA. I still use traditional TA and price/volume analysis, I believe I have gone beyond being an absolute beginner but I'm very much a learner still so will be happy to study with others. For some great EW charting see Wavepicker and MarketWaves charts elsewhere on ASF.
Magdoran has some charts in the Improving Chart Analysis thread so you can see an accomplished trader at work there, his time studies add that extra dimension to the charts and are well worth a look imo.
Wayne, are you trading the swings in this market?
wavepicker
17th-October-2006, 10:07 PM
I've been tracking oil for a while now and as you can see from some of my older charts there were times when I had no idea at all about what it was doing!! The current charts are of oil using Elliott Wave. fyi the major wave 3 terminted just below 2.618 x Height of the major wave 1.
The monthly chart shows some nice trendlines and channels, that blue one intersects current price activity near the 0.382 retracement which is a typical wave-3 retracement level (also note the flip/flop congestion/support area circa $54). This chart was one of the easier ones to label for someone like me who's starting out in EW, so most traditional Elliotticians would have similar labelling imo.
I have an alternative count on this for the current decline, both counts show this first leg as a major wave A- the primary count of this decline shows oil correcting in a wave 4 (usually retraces to the level of the prior degree wave-4 per EW theory).
The alternative count (marked a-b-c) suggests oil has completed this major wave A and is about to bounce into the wave B, which typically retraces 50% of the wave A. I may have to amend the last fortnight's very minor count.
Would be happy to see more of the chartists on ASF discuss this market from their particular field of TA. I still use traditional TA and price/volume analysis, I believe I have gone beyond being an absolute beginner but I'm very much a learner still so will be happy to study with others. For some great EW charting see Wavepicker and MarketWaves charts elsewhere on ASF.
Magdoran has some charts in the Improving Chart Analysis thread so you can see an accomplished trader at work there, his time studies add that extra dimension to the charts and are well worth a look imo.
Wayne, are you trading the swings in this market?
Some great work there Richkid,
thanks for the charts, lets see if we can get some evidence of a rally starting to build up after this probable impulse down. Gold looks like it's had a bit of a prop up, so maybe oil might not be far behind.
Cheers
RichKid
18th-October-2006, 12:14 AM
Some great work there Richkid,
thanks for the charts, lets see if we can get some evidence of a rally starting to build up after this probable impulse down. Gold looks like it's had a bit of a prop up, so maybe oil might not be far behind.
Cheers
Thanks! That's the crucial issue now, this impulse has clearly slowed down; but, as expected, if this is a w4, I'd suggest any further w5 lower will be short considering the extended nature of w3.
NB- Typo in original post, that 0.382 retracement level was in relation to w4, accidentally wrote w3! So w4 should retrace about 38.2% of w3 (vertical price displacement). Further evidence of this leg down being completed is that the midpoint of w3 is smack bang at the 50% level, note however that a truncated w5 could result in this measure remaining intact.
patanx
18th-October-2006, 04:40 AM
Anticipated production cut by OPEC later this week, in addition to fast-approaching U.S. winter season sends crude higher. (http://e-nvestments.blogspot.com/2006/10/opecs-big-gamble.html)
Oil prices rose for a fourth straight session Tuesday, topping $60 a barrel as OPEC prepared to agree a production cut and the United States braced for winter.
U.S. light crude for November delivery rose 42 cents to $60.36 a barrel, adding to Monday's $1.37 rally and extending a recovery from a 2006 low of $57.22 touched last week. Brent crude added 21 cents to $61.87 a barrel.
The OPEC cut and winter fears are limiting the downside but at the same time, the upside is limited by the high crude inventories in the United States. In the short term, the market is going to find it hard to go up and equally hard to go down.
Ministers from the Organization of the Petroleum Exporting Countries are due to meet on Thursday in Qatar to finalize a deal to cut one million barrels from daily output to stem oil's rapid slide since a summer peak of $78.40 a barrel.
However, the question remains whether the group, which supplies a third of the world's oil, will cut from its nominal quotas or from current output. Wrangling over market share has delayed agreement on the curbs, first mooted more than two weeks ago.
Several members, including OPEC's largest producer Saudi Arabia, have been producing above their official quotas and have already trimmed production, while others like Indonesia pump far less than their limits and are loathe to cede market share.
The telling thing is that the big boys like Saudi Arabia have yet to say anything and the only noises are coming from those who are producing below quota.
Here you'll find a site with realtime information for free (http://www.gnutrade.com) (registration needed and then go to the "Trade now!" section)
vishaldon
18th-October-2006, 09:02 PM
The prices of the crude oil rise in the US market as the members of the OPEC about to meet tomorrow in Qatar to discuss on the same issue that is weather to cut oil production or to continue with the same output. OPEC had already taken the decision of cutting the production but that was done before the prices were rise. So the market is waiting for tomorrow decision taken by the members. This group has decided to cut production by 3.6 % of the total OPEC production. Organization for Petroleum Exporting Countries that pumps out about 40 % of world oil output. A small reduction in the output might effect to the greater extent to the US market.
OPEC might be happy with the rise in prices and the decision taken by this members is more likely to be positive to the society
RichKid
18th-October-2006, 09:42 PM
The prices of the crude oil rise in the US market as the members of the OPEC about to meet tomorrow in Qatar to discuss on the same issue that is weather to cut oil production or to continue with the same output. OPEC had already taken the decision of cutting the production but that was done before the prices were rise. So the market is waiting for tomorrow decision taken by the members. This group has decided to cut production by 3.6 % of the total OPEC production. Organization for Petroleum Exporting Countries that pumps out about 40 % of world oil output. A small reduction in the output might effect to the greater extent to the US market.
OPEC might be happy with the rise in prices and the decision taken by this members is more likely to be positive to the society
Vishaldon,
I've pm'd you about this before, please read the forum code of conduct and posting guidelines and post in the relevant thread, you can't create a new thread for every little news item that you publish elsewhere. I have now merged your post with the oil thread as you can see. I won't be issuing any further warnings, please browse through the forums to get a feel for how and what to post.
In relation to the oil chart- we may be completing an ending diagonal here on the dailies so look out for a quick bounce, I may have labelled this prematurely.
phoenixrising
23rd-October-2006, 09:02 PM
Talk around the Sydney Traders Expo last weekend (beside a lot of salesmanship) was that as soon as US Congressional elections are done oil will rebound, ie the Whitehouse has a no high oil price word out to the world.
Interesting to see what happens post elections
Sodapop
23rd-October-2006, 09:07 PM
Not to mention that the Northern Winter is on the way - and if it is anything remotely like last year - demand (for heating oil) will be very high (and early signs are not good - for a mild winter)... I don't beleive this blip will last long...
:hide:
vishaldon
23rd-October-2006, 09:12 PM
After dropping to the year low on Oct 20th drop by .9% reaching to $57 a barrel oil prices got a little charged up in New York. The Organization for Petroleum Exporting Countries to cut production larger than expected. Oil prices gained sooner after OPEC meeting on Oct 19, agreement to cut output has been made because of the speculation agreement by the members such as Saudi Arabia and Kuwait wont be enough to pare global inventories as the US Crude supplies are 14% more than the five years average. Saudi Arabia also intimated Japan refinery to expect lower shipment in November. Crude oil for December delivery fell as much as $1.07, or 1.8 percent, to $58.26 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
OPEC agreed to cut output to 26.3m barrels a day, if fully implemented, on November 1st. Saudi Arabia, the world’s biggest oil producer, warned a further production cut of 0.5m b/d could be made in December.
The U.S. gasoline pump price fell eight cents in the past two weeks to $2.20 a gallon, the lowest this year. Prices for regular gasoline have declined 82.5 cents from a record average $3.025 a gallon. Heating oil for November fell as much as 1.85 cents, or 1.1 percent, to $1.6615 a gallon in after-hours trading on the New York Mercantile Exchange. It was at $1.6796 a gallon
thestorm
23rd-October-2006, 09:15 PM
Talk around the Sydney Traders Expo last weekend (beside a lot of salesmanship) was that as soon as US Congressional elections are done oil will rebound, ie the Whitehouse has a no high oil price word out to the world.
Interesting to see what happens post elections
Yeah a lot of highly respected people are saying that the US Govt is manipulating both the oil and Gold price so they can stay in power. Very interesting times ahead after the elections especially if the Republicans lose control of Congress.
thestorm
23rd-October-2006, 09:18 PM
After dropping to the year low on Oct 20th drop by .9% reaching to $57 a barrel oil prices got a little charged up in New York. The Organization for Petroleum Exporting Countries to cut production larger than expected. Oil prices gained sooner after OPEC meeting on Oct 19, agreement to cut output has been made because of the speculation agreement by the members such as Saudi Arabia and Kuwait wont be enough to pare global inventories as the US Crude supplies are 14% more than the five years average. Saudi Arabia also intimated Japan refinery to expect lower shipment in November. Crude oil for December delivery fell as much as $1.07, or 1.8 percent, to $58.26 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
OPEC agreed to cut output to 26.3m barrels a day, if fully implemented, on November 1st. Saudi Arabia, the world’s biggest oil producer, warned a further production cut of 0.5m b/d could be made in December.
The U.S. gasoline pump price fell eight cents in the past two weeks to $2.20 a gallon, the lowest this year. Prices for regular gasoline have declined 82.5 cents from a record average $3.025 a gallon. Heating oil for November fell as much as 1.85 cents, or 1.1 percent, to $1.6615 a gallon in after-hours trading on the New York Mercantile Exchange. It was at $1.6796 a gallon
Read my lips. M.A.N.I.P.U.L.A.T.I.O.N
MalteseBull
26th-October-2006, 09:15 AM
Up 3% over night...should see it to $70 this time:
Oil prices leapt more than three per cent to over $US61 on Wednesday after other OPEC members followed Saudi Arabia's lead in enforcing output cuts and US fuel stocks unexpectedly fell.
Prices also drew strength from news of fresh strife in Nigeria, where militant unrest has shut in more than a quarter of the OPEC member's production capacity.
US light crude settled up $2.05, or 3.45 per cent, to $US61.40 a barrel, the biggest one-day percentage gain since March 17. London Brent was $US2.19 higher at $US62.05 a barrel.
US crude had already risen 54 US cents on Tuesday after Abu Dhabi's state oil firm told major customers it would cut crude exports by about five per cent in November.
On Wednesday, an Iranian official said Iran had also informed customers it was cutting supplies by 176,000 barrels per day (bpd) in November.
Leading OPEC producer Saudi Arabia, which is shouldering the greatest part of a 1.2 million bpd production cut agreed last week, had told clients earlier this week it would reduce November supplies.
A Nigerian official said its national oil company would maintain a five per cent output cut in November after a voluntary 5 per cent cut to October supplies.
Nigeria's production has also been disrupted by militant attacks and on Wednesday oil company sources said villagers had invaded four pumping stations in Nigeria's southern Delta.
It was not immediately clear how much impact the invasion had on oil supplies.
Even without OPEC supply curbs, US oil imports fell last week, causing US crude inventories to fall by 3.3 million barrels, according to US government data released on Wednesday, above analyst expectations.
At the same time, distillate stocks, including heating oil, fell by 1.4 million barrels, compared with the 1.1 million barrel decline forecast.
Gasoline inventories, which had been expected to decrease by 600,000 barrels, dropped by 2.8 million barrels.
Doubts OPEC would abide by its agreement helped to push US crude down to $US56.55 a barrel last week, the lowest level this year.
Some analysts still say OPEC has yet to prove its determination, but others said the producer group had gained experience in how to stave off any price collapse that it would now put to good use.
"They have learnt a considerable amount in the last few years about micro-managing the market," said John Waterlow of Wood Mackenzie consultancy.
OPEC's success in shoring up the market could also depend on the weather.
Temperatures in the US Northeast, the biggest oil consuming region in the world, will be colder than usual and higher heating demand was expected over the next five days, US based private forecaster Meteorlogix said on Tuesday.
Private WSI Corp on Monday predicted warmer-than-normal Northeast temperatures in November, but said they would be followed by cooler weather in December and January.
-------------------------------------------
good time to accumulate on Oil stocks:
WPL, OSH, MOS, TAP, BKP
scsl
30th-November-2006, 11:08 PM
I'm starting to feel as though the time is right to be buying oil stocks again. The oil price is holding above $60 and continuing to rise, and with demand set to increase as the US encounters cold weather, I think stocks like WPL and OSH will come into favour again. Whether or not OPEC decides to further cut oil production will not have a big an effect as the demand that is traditionally stronger in the coming months.
I got this from Bloomberg, which gives the level at which a rally may gain support:
January oil futures have traded between $57.80 and $63.21 this month. The contract may need to push through $65.60 before investors gain confidence a rally is under way, Waggoner said.
I'm bullish on oil but I'll probably wait and see where the oil price moves in the next week or two before jumping on WPL and OSH. (I don't own them atm but am looking to buy their shares and CFDs.)
scsl
15th-December-2006, 10:34 PM
Oil's back up again, having dipped to about $60.70 on stock buildup and warmer weather in the US. The rise in the last three days is largely due to OPEC cutting production. Rises in the oil price are detrimental to the economy but (as sadistic as it sounds) we really need it to rise and rise noticeably before the likes of BHP, WPL, OSH etc can 'get going' again.
I may have prematurely gone long on OSH (CFD position opened on Dec 4) but I still hold (although it's a sizeable paper loss atm) and am confident of OSH heading back up again after dropping to $3.10.
Any technical or fundamental thoughts on oil or OSH? Thanks in advance.
Kauri
15th-January-2007, 01:20 PM
Storm dumps ice and rain on US
A massive storm front has blanketed much of the United States, resulting in freezing rain, snow, sleet, flash floods and at least one tornado.
At least 13 people have been killed in accidents on slick roads.
The ice, wind and snow has brought down trees, traffic signals and power lines.
It has also blocked roads and forced the cancellation of hundreds of flights.
I think the US has a RDO on monday, but I wonder if this will move the POO.
wayneL
16th-January-2007, 04:26 PM
I think the US has a RDO on monday, but I wonder if this will move the POO.
It still traded electronically... moved up a tad, but nothing out of the ordinary and has since moved back down.
One storm does not a winter make. (with apologies to Aristotle)
TheRage
17th-January-2007, 10:08 AM
With the price of oil so cheap I was wondering if anyone else viewed the current Sp movement in all the oilers as an opportunity. I haven't been able to download and crude oil charts and was wondering if anyone could post one. I realise oil is at a 18month low but wondered when it could go up again. Any thoughts from the Techies. Also I am curious why all the forecasted earnings data for the oils over the next few years is progressively declining. Is this factoring in future price movements of crude oil or drying up of reserves. Two good examples of this are Santos (STO) and Tap Oil (TAP).
mime
17th-January-2007, 11:07 AM
I would also love to know if oil is a good buy now. All those peak oil sites think it will start peaking in 2007. Any thoughts?
annalivia
17th-January-2007, 11:32 PM
I would also love to know if oil is a good buy now. All those peak oil sites think it will start peaking in 2007. Any thoughts?
Oil markets had built in a substantial risk premium of around US$10-$15 a barrel into prices during 2006, based on potential supply interruptions from both the US hurricane season and the Israeli-Lebanese war. Contrary to the fears of the market, both events were fizzers and had virtually no impact on crude oil supplies. In my view this premium has now been completely unwound, despite significant supply risks remaining.
"In the event of heightened geopolitical tensions, oil importing countries such as China and Japan will pay up for energy security."
In my view, it is essential that investors take a step back and look at the broader picture. That picture shows the world consuming oil at a much faster rate than it is replacing it. With oil consumption running at around 85 million barrels a day, annual consumption is now over 31 billion barrels of oil! Where are the new fields to sustain such consumption, when these days a find in the vicinity of a couple of hundred million barrels is noteworthy?
I believe consumption in China and India will continue to increase during 2007, helping to offset any US based consumption slowdown.
The truth is that oil companies have already found most of the 'easy oil' available in the world over the past century. While there may be vast reserves left, the extraction of this remaining oil will almost certainly be more challenging from a technical point of view and involve a higher cost of extraction and production.
As a result, the bottom line is that higher prices will be needed to justify commercial development of these new fields. Either way, world oil markets must face the harsh reality of higher prices for the oil that we have now and even higher prices to develop the more costly and more inaccessible fields of the future.
annalivia
Wysiwyg
17th-January-2007, 11:48 PM
Hello annalivia....Could you tell me if the VIOZ forum has recently opened, like at the end of last year? :bekloppt:Please and thanks.
wayneL
18th-January-2007, 12:47 AM
I would also love to know if oil is a good buy now.
It is getting better by the minute.
I wouldn't mind betting we see crude prices in the hi 40's before the weekend.
annalivia
18th-January-2007, 08:12 AM
Hello annalivia....Could you tell me if the VIOZ forum has recently opened, like at the end of last year? :bekloppt:Please and thanks.
Wysiwyg,
I have just started the forum a few weeks ago. Not many posts there now but I'm trying to ramp it up and get a few more posts going. Feel free to join and post any questions you like.
annalivia
comptec
18th-January-2007, 10:02 AM
I would also love to know if oil is a good buy now. All those peak oil sites think it will start peaking in 2007. Any thoughts?
Take a read at this: http://energyandcapital.com/reports/TruthAboutOil.pdf
Any truth in that report? What are your thoughts?
Btw, can anyone name me a few OIL stock that is anywhere near the $1 mark?
kennas
18th-January-2007, 10:10 AM
Btw, can anyone name me a few OIL stock that is anywhere near the $1 mark?
BPT is at 1.24, off highs with many many projects and maybe a long term good stock. Recently made a large acquisition (Delhi) which will turn it into one of the top, if not the top, mid tier producer - if that makes sence...
I have held it in the past but sold out when oil went pear.
kennas
18th-January-2007, 10:13 AM
Saudi have said they're not going to reduce production to prop up the POO. OPEC not happy....Oil holders not happy....4WD drivers may become happy.
chops_a_must
18th-January-2007, 10:15 AM
4WD drivers may become happy.
And that's something none of us deserve to see... :(
annalivia
25th-January-2007, 04:23 PM
Take a read at this: http://energyandcapital.com/reports/TruthAboutOil.pdf
Any truth in that report? What are your thoughts?
Btw, can anyone name me a few OIL stock that is anywhere near the $1 mark?
I think this article is right on the money.
Something else to ponder.
Commodity guru Jim Rogers, who began spreading the word of an impending bull market in all things commodity related back in 1999 states in relation to oil..........
"I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over $100. It will go over $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen.''
annalivia
Knobby22
25th-January-2007, 05:15 PM
Amu, Comptec.
Wysiwyg
25th-January-2007, 06:13 PM
The large expenditure on E&D has yet to catch up with demand. Motorists have been eased into future pricing at the pump. Does a better standard of living create more demand? Yes. More plane trips, more cars/trucks, more factories, more power stations.
Bush Trader
25th-January-2007, 08:58 PM
Here's something of interest. Pres Bush probably has this chart on his wall at home.
Cheers
Wysiwyg
25th-January-2007, 09:04 PM
Here's something of interest. Pres Bush probably has this chart on his wall at home.
Cheers
Sorry to tell you but your graph is showing 0 euros for oil at one stage & 150 euros at another.
fleathedog
29th-January-2007, 07:21 PM
Hi guys and gals
I am thinking now is reasonably good time to get into oil and gas stocks given the current selloff.
I can't be bothered going through what I went through with the minerals co's trying to interpret all that technical data with the oilies so am looking for a conservative fund of large multinational oil and gas stocks.
I have had trouble so far so would appreciate any ideas.
Thanks!
Wysiwyg
31st-January-2007, 01:53 AM
For those interested...It is obvious that oil prior to 2004 had ventured above $30 (average) 3 times.So I can only assume that we will NOT see the $70 + again and possibly a $40 to $50 range soon.I think the PEAK oil scenarios may apply to some fields but others are being discovered to keep the worlds machinery turning.Bags less than $50 by April.
The problem is from what I hear, is that cost of production on average, is now at about $40 per barrel. Is this true?
Wysiwyg
31st-January-2007, 02:45 AM
The problem is from what I hear, is that cost of production on average, is now at about $40 per barrel. Is this true?
Do not know mate....maybe the answer is in your signature.
Bush Trader
31st-January-2007, 09:24 AM
Sorry to tell you but your graph is showing 0 euros for oil at one stage & 150 euros at another.
I did not draw the chart, however my interpretation is that the x axis is using an index not actual $ values to compare exchange rate and oil price US $/bbl, sorry for any confusion. I posted the data to demonstrate a point that whilst the world quotes oil US $, the weaking of US exchange rate againt the Euro $, may see the OPEC nations in which currency they are actually paid. It may be that gold may become the prefered currency.
Cheers
TjamesX
7th-February-2007, 12:10 AM
This seems to have slipped under the radar....
Matthew Simmons stated last week that he believes we have reached the peak in Oil production, thanks to field declines in large fields and lack of new supply.....
http://www.youtube.com/watch?v=4IwtAQzrfiw
commentary on the video at;
http://www.theoildrum.com/node/2239
Oil is now back to $60 (20% above lows) - are we going to retest highs?
I think this is big news - this guy is not some 'oil expert' that has sprouted up in recent years with the high oil price. His company has been around since the 70's....
How does he think we solve the problem;
"Start from the ground - how did we get to 85mmb/day of consumption, and what would we do if supply went to 70, when we thought it was going to 100"
This is big news... according to him - we are at Peak Oil!
