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A crude oil at $200 response

  • #1
  • First Post: May 24, 2008 9:15am May 24, 2008 9:15am
Today’s oil prices are because of two factors, supply and demand and the current worth of the US dollar.

The Dollar issue can be debated till we all turn blue in the face, but oil has a worldwide worth factor…. Call it “X”. As the dollar slides it costs more dollars to equal X hence one side of the problem.

The other boils down to worldwide consumption. I was a mud engineer (drilling fluid engineer) in the oil patch in the very early 80’s, and we are not drilling here in the US anywhere close to the capacity we hit in 1980-81, why is that?

In the late 70’s early 80’s oil supply was considered unreliable as there were tensions in the middle east, oil/gas prices skyrocketed, I can remember gas shortages and people lining up for blocks to get gas. The oil business went parabolic.

Today we have the same tensions, but with an even bigger world need as several countries economic levels have developed significantly in the last 20/30 years.

So I ask why are we not drilling the #$^%&^% out of the ground, until we can develop some alternative sources ( don’t even get started as to why we couldn’t see this coming 10/15 years ago.) And why did we put the worlds largest (there’s only 3 in the world if I’m correct) deposit of clean burning coal in Utah ( it’s emissions are far less that the current epa standards with out any added aide.) Under national land management and make a national monument so it cant be developed?

After the bust in the mid 80’s prices went south and it was cheaper to buy the oil from the middle east than produce it here, as the wells there are very shallow and cost per produced barrel is much cheaper than in the US.

The answer for many years was that we need prices to be back in the 50’s preferably $60’s to make oil drilling profitable.

Duh? Is it high enough now?

When someone can answer the question why we are not ramping up production big-time here to offset the problem while at the same time investing big-time in alternative fuel research and development you will be getting at the true underlying issue.

Two ways to get the prices down, drill our selves out of it in the short term until we find a different answer to our needs, or a world wide depression, we wont need the stuff.

Fwiw, a weekend rant.


http://www.wtrg.com/rotaryrigs.html

http://www.wtrg.com/rotaryrigs.html#graphs

http://www.wtrg.com/prices.htm

http://gis.bakerhughesdirect.com/Rig.../default2.aspx

p.s fwiw the 1k thing is annoying
  • #2
  • May 24, 2008 9:46am May 24, 2008 9:46am
Bush administration has done a great job to perpetuate the current bull run in oil since taking office, to the detriment of most besides oil future traders/company sharholders.
Skype: heliosphan187
  • #3
  • May 24, 2008 10:01am May 24, 2008 10:01am
Yes, but these issues go back before George W took office. Clinton was the one who took the coal away. Keep digging (pardon the pun).
  • #4
  • May 24, 2008 2:55pm May 24, 2008 2:55pm
Thats it guys... The big boys are raking it in and there is not a thing we can do about it. I think oil's hay day is almost over and thats why we are seeing these prices. It's old technology..I think in the next 30 years, oil will be a lubricant, not a fuel. Hydrogen will take the lead. The technology is there, it's been around for a long time. This is about black gold folks. A select few are getting very rich. It used to be about sugar, now oil, whats next?

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  • #5
  • May 24, 2008 8:38pm May 24, 2008 8:38pm
Interesting, this article suggests oil started to really spike when ICE futures started trading in america

http://www.atimes.com/atimes/Global_.../JE06Dj07.html

Quote
Persons within the United States seeking to trade key US energy commodities - US crude oil, gasoline and heating oil futures - are able to avoid all US market oversight or reporting requirements by


Is that not elegant? The US government energy futures regulator, CFTC, opened the way to the present unregulated and highly opaque oil futures speculation. The present chief executive officer of NYMEX, James Newsome, who also sits on the Dubai Exchange, is a former chairman of the US CFTC. In Washington doors revolve quite smoothly between private and public posts.

A glance at the price for Brent and WTI futures prices since January 2006 indicates the remarkable correlation between skyrocketing oil prices and the unregulated trade in ICE oil futures in US markets. Keep in mind that ICE Futures in London is owned


 and controlled by a US company based in Atlanta, Georgia.

In January 2006, when the CFTC allowed the ICE Futures the gaping exception, oil prices were trading in the range of US$59-60 a barrel. Today, some two years later, we see prices tapping $120 and trending upwards. This is not an OPEC problem. It is a US government regulatory problem of malign neglect.

By not requiring the ICE to file daily reports of large trades of energy commodities, it is not able to detect and deter price manipulation. As the senate report noted:

The CFTC's ability to detect and deter energy price manipulation is suffering from critical information gaps, because traders on OTC electronic exchanges and the London ICE Futures are currently exempt from CFTC reporting requirements. Large trader reporting is also essential to analyze the effect of speculation on energy prices.

The report added:

ICE's filings with the Securities and Exchange Commission and other evidence indicate that its over-the-counter electronic exchange performs a price discovery function - and thereby affects US energy prices - in the cash market for the energy commodities traded on that exchange.

In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who "does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes".

The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.
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Skype: heliosphan187
  • #6
  • Edited 9:55pm May 24, 2008 9:52pm | Edited 9:55pm
The markets have a place in the equation, but world oil consumption is sitting just under 87 million barrels per day 86.61 with total production supply @ 86.6.

Here's some interesting numbers.

http://www.eia.doe.gov/steo#Global_Petroleum_Markets

check table 3a. International Petroleum Supply and Consumption
  • #7
  • May 25, 2008 1:49pm May 25, 2008 1:49pm
It has to do with strategic reserves right? In case of a major (world) war, and if McCain becomes president we are going to need that oil for the planes to bomb other innocent countries...
Happy Pip-hunt... KISSes
  • #8
  • May 25, 2008 2:15pm May 25, 2008 2:15pm
as long as the middle east is "turbulent" politically speaking oil will always rise.

its always been about politics.

I don't know if u guys know this but supply and demand dont mean squat.

u c there is supply that meets the demand so y is oil up so much??????

if u dont believe me just notice that when an arabic or iranian leader talks what happens.
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #9
  • May 25, 2008 10:44pm May 25, 2008 10:44pm
as mentionedin this post: http://www.forexfactory.com/showthread.php?t=88122 - it's banks and mainly pension funds that are the root of our oil, inflation and currency volatility problems. YOY these funds have to keep making double digit %'s for their millions upon millions of smaller investors. And all the little guys get blown around in the tornado even though they demand these funds make more and more money for them to have a good retirement. Talk about a rat wheel.

In 100 years time our great great grandchildren will look back and shake their heads just as we do now about the financial crisis of 80/100 years ago. It's all the age old problem of everyone trying to be as rich as they can and not caring about the wake they leave. Greed.
  • #10
  • May 25, 2008 10:54pm May 25, 2008 10:54pm
I was thinking that after this dance, the price will drop and every problem will be solved
but dancing dont solve everything

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  • #11
  • May 25, 2008 10:58pm May 25, 2008 10:58pm
Quoting mchael
as mentionedin this post: http://www.forexfactory.com/showthread.php?t=88122 - it's banks and mainly pension funds that are the root of our oil, inflation and currency volatility problems. YOY these funds have to keep making double digit %'s for their millions upon millions of smaller investors. And all the little guys get blown around in the tornado even though they demand these funds make more and more money for them to have a good retirement. Talk about a rat wheel.

In 100 years time our great great grandchildren will look back and shake their heads just as we do now about the financial crisis of 80/100 years ago. It's all the age old problem of everyone trying to be as rich as they can and not caring about the wake they leave. Greed.
While oil might come down dramatically in the medium or long run, at this point, there is some evidence that the price hike is due to fundamental issues, the demand being outpacing supply.
Expected the unexpected
  • #12
  • May 26, 2008 2:39am May 26, 2008 2:39am
Quoting benssol
I was thinking that after this dance, the price will drop and every problem will be solved
but dancing dont solve everything

http://youtube.com/watch?v=LoRHLrXmqbc
actually u are right
this dance dropped oil if u remember

but then when bush left new problems started showing and so here we are.
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #13
  • Jun 12, 2008 5:42pm Jun 12, 2008 5:42pm
oil and the dollar are around 90% correlated.
oil was worth $30/barrel in 2001. the dollar has lost 72 cents to the euro in this time. fundamentally i would not argue oil at $60/barrel based on dollar depreciation. (dollar depreciation is due to 2 simultaneous US wars, patriot act, and the advent of the euro as a reserve currency)
$60/barrel no questions asked.
with oil at $120/barrel you are telling us here that the world's demand for crude oil is up over 100% since 2001.
http://www.scaruffi.com/politics/oil.html
http://www.nationmaster.com/graph/en...il-consumption
according to the above links consumption is up about 8%.
It really is that easy.
  • #14
  • Jun 12, 2008 7:57pm Jun 12, 2008 7:57pm
The price of a barrel of oil is where it’s at because that’s what the market is willing to pay, but the dynamics behind the current parabolic surge in price are what’s in question and imho, are many, not just the blame of a specific group or individual.

Here in the US, we have all the carbon based fuels we need to run the country for the next 3-500 years, Why do we not drill for these proven fields? Why do our legislatures in congress point the blame to the opposite party members when each party has passes laws to keep Oil companies from drilling. We are not even getting into the Billions of dollars that are being poured into oil and commodity futures and the apparent market manipulations that are being investigated by congress, by the same people who are partially to blame.

Everyone wants to blame the current administration for the woes but these policies and general attitude to the current oil woes go back several terms of the presidency both republican and democratic alike.

What would happen if tomorrow congress announced that all restrictions for drilling were released and money would be made available for the development of alternative fuels?

The oil market would limit down till the cows came home, and the poor taxpayers would be bailing out another round of investment banks that had all their portfolios in oil.

Next time you have a really bad day trading, pick up the phone and call your congressman and see if you can get some government assistance to help cover your loss in the markets.

No , the obvious signs leading up to the current problem have been there all along, and folks have talked and talked about the need to find different energy sources blah blah blah, but no one did a #$%^& thing. Now here we are, and still nothing except pointing fingers. I guess nothing will be done here in the US, until after November, why help the country, when we can use it for political reasons and campaign promotions.

The problem is a lot of money and a lot of corruption.
  • #15
  • Jun 13, 2008 4:27pm Jun 13, 2008 4:27pm
The price of a coke is at $1.25 because we pay $1.25. This is the same thing as saying you reply to this thread in black and white because you replied in black and white. It's senseless jibbrish.
Supply and demand is precisely what has been disproven. if you missed that point go back and study the material. Price has arrived at it's present level based largely on speculative long positions.
Now I've been saying this for months, so I'm not just jumping on the senate study band wagon. I've sited them in posts so other traders can be educated because that is what FF is here for. Traders helping traders. If you hold an OPINION that oil is fundamentally priced based on supply and demand please post in the LOUNGE area where mindless dribble is acceptable and humorous and I commend you people for placing such commentaries in the lounge and keeping the business side of FF clean and stealth for us to cruise through gleaning information quickly.
I seriously hate to be inflammatory but with all due respect to intelligent members I'm only highlighting common sensical ideals and facts, and in doing so I apologize for taking up board space.
Thanks,
It really is that easy.
  • #16
  • Jun 13, 2008 4:49pm Jun 13, 2008 4:49pm
Well this might be a bit selfish but I am sales rep in the uk in a national roll 3000/6000 miles per month if/when fuel hits 1.50 per ltr i'm out of a job along with a hell of a lots of others and theirs SFA anyone can do about it. So i had better get this trading lark right bloody quick. lol

And lets face it the price of oil will never fall... why because it's running out and people are making alot of cash. ie make hay while the sun shines.


Cheers


Beno
  • #17
  • Jun 13, 2008 5:08pm Jun 13, 2008 5:08pm
Quoting The Fxorce
The price of a coke is at $1.25 because we pay $1.25. This is the same thing as saying you reply to this thread in black and white because you replied in black and white. It's senseless jibbrish.
Supply and demand is precisely what has been disproven. if you missed that point go back and study the material. Price has arrived at it's present level based largely on speculative long positions.
Now I've been saying this for months, so I'm not just jumping on the senate study band wagon. I've sited them in posts so other traders can be educated because that is what FF is here for. Traders helping traders. If you hold an OPINION that oil is fundamentally priced based on supply and demand please post in the LOUNGE area where mindless dribble is acceptable and humorous and I commend you people for placing such commentaries in the lounge and keeping the business side of FF clean and stealth for us to cruise through gleaning information quickly.
I seriously hate to be inflammatory but with all due respect to intelligent members I'm only highlighting common sensical ideals and facts, and in doing so I apologize for taking up board space.
Thanks,
The oil market is in a tizzy, because of speculation, agreed But it’s the hot button of the day as the reason for the spike, and yes the conception or misconception of supply and demand are in the mix of reasoning behind that move, everywhere I turn it’s all I hear. But just because a country or block of oil producing countries pumps x amount of barrels a day doesn’t mean there are that many barrels immediately available for refining, and refinery capacity hasn’t even been touched when we look at gas prices, which is the focal point of most consumers. And we haven’t even touched the grade of crude being pumped by which countries and what products such crude is best suited when refined. Blah blah blah……

IMHO, the whole reason for even allowing the markets to put themselves into this position is due in fact to stupid government policies, (not to mention the underlying motives for those decisions) and lack of foresight to see this coming and that lack of political initiative to do something. Thus the market has had a prepared stage to play out its hand.

And yes in an open market the value of anything is what the market will pay, sorry to state the obvious.

All I know is I was in the oil patch in the early1980’s and we drilled nearly 3 times the amount of holes that are presently being drilled, oil was in the $50-60’s then. Draw your own conclusions.

If you don’t like the thread or it’s responses pleasseeeeeeeeee take your viewing elsewhere.
  • #18
  • Jun 13, 2008 5:11pm Jun 13, 2008 5:11pm
Quoting The Fxorce
The price of a coke is at $1.25 because we pay $1.25. This is the same thing as saying you reply to this thread in black and white because you replied in black and white. It's senseless jibbrish.
Supply and demand is precisely what has been disproven. if you missed that point go back and study the material. Price has arrived at it's present level based largely on speculative long positions.
Now I've been saying this for months, so I'm not just jumping on the senate study band wagon. I've sited them in posts so other traders can be educated because that is what FF is here for. Traders helping traders. If you hold an OPINION that oil is fundamentally priced based on supply and demand please post in the LOUNGE area where mindless dribble is acceptable and humorous and I commend you people for placing such commentaries in the lounge and keeping the business side of FF clean and stealth for us to cruise through gleaning information quickly.
I seriously hate to be inflammatory but with all due respect to intelligent members I'm only highlighting common sensical ideals and facts, and in doing so I apologize for taking up board space.
Thanks,
Excellent re: spec. traders. Is there anybody out there that would have shorted oil this year? If so, you are probably broke and looking for a job.

All the President has to do is make a statement opening up drilling in the US and the oil bubble will burst down $30 -40 fast.

Just think if a missile is fired somewhere in the Middle East or a bomb explodes on an offshore drill rig courtesy of Osama BL. $4.25 gallon will seem cheap and 5.5 unemployment will be a distant memory.

As I mentioned earlier, any takers on shorting oil?
History is written by the victors.
  • #19
  • Jun 14, 2008 10:04am Jun 14, 2008 10:04am
Quote
The price of a coke is at $1.25 because we pay $1.25. This is the same thing as saying you reply to this thread in black and white because you replied in black and white. It's senseless jibbrish.
Supply and demand is precisely what has been disproven. if you missed that point go back and study the material. Price has arrived at it's present level based largely on speculative long positions.
Now I've been saying this for months, so I'm not just jumping on the senate study band wagon. I've sited them in posts so other traders can be educated because that is what FF is here for. Traders helping traders. If you hold an OPINION that oil is fundamentally priced based on supply and demand please post in the LOUNGE area where mindless dribble is acceptable and humorous and I commend you people for placing such commentaries in the lounge and keeping the business side of FF clean and stealth for us to cruise through gleaning information quickly.
I seriously hate to be inflammatory but with all due respect to intelligent members I'm only highlighting common sensical ideals and facts, and in doing so I apologize for taking up board space.
Thanks,
__________________
I think this is totally right. Just think ever has anything in any market just go straight up without any downfalls? I would highly doubt that you do. For Ex: remeber the internet burst. Everybody thought it would never come down. But a lot of online companies got burnt. Everything has an up and down and i think that if oil did hit 200 dollars a barrel there would be a major sell off. Now i know that we depend a lot on oil. But as humans we change and adapt 2 our enviorment. And if people cannot afford gas then we will adapt. I saw on the news today that they made a hybrid car go as fast as a porche 911. This is adaptation. we r going to change. Now as a trader i would ride the oil up to about 170 dollars a barrel then i would c where it went from there. My 2 pips.
  • #20
  • Jun 14, 2008 10:05am Jun 14, 2008 10:05am
sorry for my spelling
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