Silver™

I wonder if people could re-vote, would the numbers change at all?



- Understanding the oil market is difficult. Making reasonable forecasts is almost impossible. That's why most analysts were surprised by the dip in prices from the Aug. 8 historic high of $79 per barrel to below $60 in recent days. Suddenly the alarmists who foresaw an imminent era of oil scarcity are silent, OPEC is again discussing supply cuts, oil share prices are down. And new conspiracy theories are flowing, like the one about the Republicans' pushing down gas prices before the U.S. midterm elections.

What's going on? Over the last few years the public has been bombarded by pessimistic warnings about a world inexorably running out of oil, in the midst of growing instability in oil states from Iran to Nigeria, and rising demand—particularly from China, India and other emerging economies. As this bleak scenario gained acceptance, it became easy to assume that the price of oil would defy the laws of gravity and break the barrier of $100 per barrel.

In fact, the current oil crisis has nothing to do with a catastrophic shrinking of global oil resources, while the specter of rising Asian demand is largely a myth—China has huge potential to reduce its oil consumption. Supply is tight because two decades of low prices discouraged the exploration and development of new fields in the world's most oil-rich areas. That has cut spare production capacity—the critical cushion needed to cope with crises—to just 2 to 3 percent of global consumption. This makes the price of oil a hostage to political and climatic events. There has been no objective rise in oil-state instability, only in the market's vulnerability to speculation—gloomy or not.

What has happened recently is a global-market mood swing, in the face of evidence that consumption growth is slowing while production is still rising. U.S. oil inventories—and even reserves—have turned out to be higher than had been previously thought. Forecasts for the hurricane season in the Gulf of Mexico switched from severe to mild. Temporary shocks, particularly the BP spill and shutdown in Prudhoe Bay, Alaska, proved less disruptive than expected. And geopolitical risks seemed to recede, as confrontations involving Iran and Lebanon eased, at least for now.

http://www.msnbc.msn.com/id/15081350/site/newsweek/ (2 pages)

SpeedyV6

Fixed.

Silver™

Fibonacci

Man, that PistonFan sure did provide a lot of market insight and money making opportunities, but Fibonacci - he's a freakin' genius...



Hmmmm....global demand rising faster than global supply. Gee, I wonder what happens to prices when such phenomena occurs as a long term secular trend.

Fibonacci

Despite wide-eyed predictions, serious constraints remain in developing Alberta's heavy oil.

Silver™

I wonder if prices increase if that would spur investment in new exploration and new technologies, and I wonder if that would result in increased production, and I wonder if that increased supply would have an effect on prices?

Silver™

Oversupply, huge new fields discovered, substantial new investment in exploration and R&D, lowering prices, etc... looks like the end of the world to me



OPEC is expected to make formal a deal to remove 1 million barrels a day of crude from oversupplied markets Monday, an OPEC source said, as ministers lined up to support the cut.

Iran, OPEC’s second-biggest producer, and Algeria publicly backed the reduction Sunday, which would be OPEC’s first since April 2004. The plan was made public on Thursday by a senior OPEC delegate.

“I think there is more or less consensus for (cutting) 1 million (barrels per day),” OPEC President Edmund Daukoru told Reuters by telephone Sunday. “The reference point is the (official) 28 million bpd ceiling.”

Silver™

Without concerted action from OPEC, crude oil prices appear to be headed sharply lower in a real-world demonstration of Economics 101: Record highs seen last year and the first eight months of 2006 have stimulated additional supply and inhibited demand, thus driving prices lower again.

Bearish analysts like Michael Lynch of Strategic Energy and Economic Research Inc. predict that high-quality, light crude could fall below $30 (U.S.) a barrel by this time next year if OPEC fails to rein in production.

He noted that OPEC and non-OPEC producers have added new production capacity in response to record prices — Saudi Arabia alone is expected to add 1.5 million b/d by next year — while consumers are using less because of slowing economies and conservation measures.

http://www.theglobeandmail.com/servl.../Business/home

Fibonacci

Nov. 27 (Bloomberg) -- Oil stocks are signaling that crude prices may rebound to a record in 2007.

http://www.bloomberg.com/apps/news?p...TJGPc&refer=uk

Silver™

Output at Kazakhstan's Kashagan oil field in the Caspian Sea will be 25 percent higher than expected once it reaches peak production, the Financial Times reported on Monday.

International companies developing the field -- the world's biggest oil discovery in the last 30 years -- have found that peak production was expected to be 1.5 million barrels a day, 25 percent higher than published estimates, the newspaper said.

http://today.reuters.com/news/articl...c=66&type=qcna

SpeedyV6

Hi Five!

Fibonacci

No one is disputing that new reserves are found everyday and that global production is increasing. The part of the equation that Speedy and Silver keep overlooking is the anticipated inflection point when projected demand is expected to oustrip supply.

When it occurs, nobody knows for certain because it won't be obvious antil after the fact. If you refuse to believe this will happen in our lifetimes - you might as well be

Silver™

I think this is yet another issue where our beliefs are closer than we will admit.

The issue we have here though is that those who talk about "Peak Oil" think the peak has already passed and that it is all down here from here. The issue though is that we are most likely decades from a true peak and that for the last 15 years or so, oil investment has been reduced due to historically low oil prices that meant exploration and r&d did not get the funds that they should have and is really ramping up only in the last few years as prices have increased primarily due to increased demand in developing countries lead by China and India.

Thats my take on it and I have a feeling yours is fairly close

Fibonacci

Another ominous trend which Speedy touched on, is the nationalization of oil resources. Putin for example is trying to reassert Russia's influence via control of energy exports - but what he should realize is that National Champions have an extremely poor record of profitability and innovation. Competition is what keeps industries healthy.

Fibonacci

Smart money says pretty good odds new highs will be seen again this year for oil/pb.

Silver™

Oil plunged below $52 a barrel Thursday to its lowest price since May 2005, extending a sharp decline...

http://www.chron.com/disp/story.mpl/...s/4464312.html

Fibonacci

Well since the new year is barely two weeks old, we still have plenty of time to see this prediction pan out. :wink:


Especially since your pal Dubya appears anxious to salsa dance with Ahmedinejad.

SpeedyV6

I guess that's why Lukoil investors have fared so poorly.

Silver™

My guess is that prices will stay in the $60's for most of the year.

That is barring any unforeseen supply issues (prices go higher) or the global economy cooling (prices go lower).

Fibonacci

Shall we place a friendly wager?


That's quite a disclaimer!

Silver™

Sure

But you also have to pick a $10 range



“past performance is no guarantee of future results”

Energy markets are so volatile I decided to cover my ass

Fibonacci

Meh, my bet is simple: New high established on NYMEX in calender year 2007.


Volatile indeed, let's make this interesting.

And since you're more or less already in the money, I should get at least 2-1 odds for going out on a limb.

Silver™

As someone who believes that the "era of cheap fossil fuels is over and we're staring at the abyss", I thought you would want to bet on the average price during 2007, not a chance temporary spike.

Fibonacci

Nah, that's too boring - me likeee volatility. Price spikes are more fun! :wink:

My bet: New high on NYMEX crude in 2007

Your bet: No new high established

2-1 odds, my favor? Are you game? Name a number - we can settle up via paypal on Jan 1, 2008

SpeedyV6

Wouldn't a weighted average price be more appropriate. There is a difference between falling in an abyss and encountering an occasional bump in the road.

Silver™

So you just want to bet on commodity volatility???

OK Mr. Guru, how about you give the exact reason for the spike (ie: hurricane in the Gulf of Mexico, terrorist attack on Saudi oil facilities, coup in Venezuela) then we will talk.

Fibonacci

It could happen for any of the above and more. Dude, it's a simple bet. Take it or leave it. Stop talking and start walking!

Silver™

So you won't bet on averages, you won't even attempt to give a reason for a price spike, you want 2 to 1 odds "in your favor", and the price only has to go up $.01 from last years high for you to win.

Where do I sign up for this bet?


Call me when you grow a pair and actually believe that the "era of cheap fossil fuels is over and we're staring at the abyss". I don't want to bet on energy price volatility, since we all know it exists. Instead I want to bet on long term trends, especially with a "peak oil" fan like yourself.

Fibonacci

Why are you still talking? NYMEX currently around $53 pb, so it has to get close to $80 for me to win. The odds are in your favor.

Silver™

I thought this thread was about "peak oil" not energy market volitilty

I have no desire to bet on energy market volitilty because:

a: I know it exists
b: it doesn't show real long-term trends

Come on Mr. Guru, show us why you rule M&I

Fibonacci

If you don't want to make a simple bet that's fine, I just thought it would be fun.

I never claimed to be an energy trader.

Peak Oil Theory is fun to debate and yes, I think it has merit, but it's not going to play out in just one year.

Silver™

Fun?

Perhaps because the odds are so stacked in your favor regarding something I am not even debating



You are more than an "energy trader", you are the self proclaimed GURU!!!



But if "peak oil" is true, you should be able to see trends, hence a bet on averages makes sense.

Betting on energy volatility is a waste of time.

GreenMonster

You 2 kids play nice or no supper for either of you !!

Since I've got an new oil boiler, higher oil prices makes my payoff quicker, but I don't mind if it's going to take longer if I can get oil for under $2 a gallon...

Silver™

We are, just don't look in R&P

Fibonacci

How are they stacked in my favor? Look at a crude chart on NYMEX.


It's meant to be tongue in cheek - but if you insist!

Silver™

You mean a chart like this:



Again, we know there will be large swings in the price of oil, so there is no reason to bet on that.

And it is stacked in your favor because a single price spike and you win. And you won't even attempt to give the reason for the price spike. And it only has to go up $.01 for you to win. And to top it off you want the odds "in your favor".

Fibonacci

Dude, update your chart, it's 10 months stale!

NYMEX crude is trading under $51 now. And no, it doesn't need to go up only one penny from here for me to win, it has to go up almost $30 DOLLARS!!!!Admittedly, the reason for a 2007 run-up has little to do with Peak Oil, it was merely a side bet which would make an entertaining horse race, that's all.

You are a smart guy, I figured you could assume the same reasons I could for an energy spike. Pick one or more of the following:

1. Multiple hurricane's in the Gulf Region
2. More strife in Nigeria
3. Potential for The Lambada between Dubya and Ahmedinejad
4. Surging demand in Chindia
5. Terorrist stikes on Saudi oil infrastructure.
6. OPEC production cuts

There are more, but those are the biggies. Relax, I can see that you aren't a walker, you're a talker - I don't take it personally.

Silver™

You mean it isn't March 2006?

I just posted it to show the volatility in the oil market which is all so common.



Since you seem to be the biggest backer here of the "peak oil" theory, when is the run-up going to be because of "peak oil"?





The point I was making is that any of those things could happen, but I was hoping that you would be so brave as to pick the reason for the spike.

I am sure there will be multiple spikes this year, but that obvious prediction doesn't make one a "guru"


This coming from you when you won't take the more relevant bet of the average price.

But how about this, I'll take your bet if you take my bet. Let me know if you will walk the walk

SpeedyV6

If you draw a line that connects the peak in this chart and project it forward for one year the resistance level at the top of this trading channel is ~ $110 at the end of the year. A good sign of persistent break out would be seeing a 90 day moving average above $110/share. Clearly if the market sees oil production peaking, prices should soar far above this level.

Fibonacci

I'm not sure exactly when, but my guess is that we're getting closer - prob within the next decade.