Oil prices - down to $25???

[Paparazzi]

Merrill Lynch "oil could go down to $25". When do you guys think we will see higher oil prices again? say $80-100. I'm ready to invest more in Pearl Exploration, just not sure WHEN.

[cardinalvices]

I can garantee that in 10 years from now we will see oil prices like $250/barrel and more.

[Fletch XXX]

and they keep saying gas prices is why food is so much right now, well why hasnt the cost of anything else dropped, meanwhile gas has?

prices in grocery store right now are crazy... cant blame it on gas anymore.

[marketsmart]

we could see oil collapse to $10 a bar if the world economy collapses.

right now based on $43 a bar, gas should be around $1.20 a gal.

opec postponed its meeting to cut production. in two weeks we will see what opec will do to try to get prices up.

the good news is that right now this is killing iran in terms of revenue..

like i have said before, in a hundred or so years, the middle east will be back to tents and camels. without oil they are nothing..

at least dubai invested in toher industries, but they are losing their ass right now beacuse all the investment has dries up..

2009 is going to be a crazy year...

i hope everyone is stockpiling cash right now...

[Zuzana Designs]

Damn thats crazy .. I filledup my car last night.. it was 1.53 a gallon !!

[Scott McD]

Originally Posted by Fletch XXX

and they keep saying gas prices is why food is so much right now, well why hasnt the cost of anything else dropped, meanwhile gas has?

prices in grocery store right now are crazy... cant blame it on gas anymore.

Yup, the prices on everything here went way up when the oil prices rocketed. Now the price has fallen, yet nothing has came back down to the price it was before.

How the hell can they get away with that ??

[EscortBiz]

opec made it very clear they are about to do something drastic to get oil prices moving higher asap

[cardinalvices]

OPEC can suck balls. If America isn't buying there is no way oil price will go up

[MikesTraffic]

and if chinas recession hits harder, then regardless of what opec does the price of oil will plummet

[IllTestYourGirls]

Originally Posted by Fletch XXX

and they keep saying gas prices is why food is so much right now, well why hasnt the cost of anything else dropped, meanwhile gas has?

prices in grocery store right now are crazy... cant blame it on gas anymore.

Most of the crops have been harvested already with the $5.00 a gallon diesel. A lot of the beef cattle/pigs were slaughtered early because high feed prices. One of the biggest chicken plants is or has already gone bankrupt about to make a shortage of chicken.

There is a lot more to it than just gas.

On top of that it is normal for prices to go down slower than they went up.

[Vendot]

Originally Posted by marketsmart

like i have said before, in a hundred or so years, the middle east will be back to tents and camels. without oil they are nothing..

How the fuck do you know? Its only just over a hundred years ago that man couldnt fly, and the world was advancing at a far slower pace so dont tell me you know whats gonna happen a hundred years from now. The middle east could have invested their entire fortunes in new, renewable energy and could be blazing a trail in that direction.

[LadyMischief]

Apparently OPEC is leasing oil tankers, filling them up and sending them out to float as rolling reserves to try to increase demand.

[Furious_Male]

I started going long oil (via ETFs) a little bit at a time since it cracked below $50 per barrel. I have been wrong so far but I have a strategy in place to keep adding down to $20 per barrel. I can handle the pain even if its through 2009. I cannot see the prices staying down at these levels.

What I am trying to formulate is the best hedge against falling oil prices as I gradually add to my long positions. Barring a complete economic collapse the US stands to benefit if prices continue to fall. Airlines used to be a great hedge against falling oil prices but I am not so sure I like that approach.

Thoughts anyone?

[TheSenator]

The futures market has to be highly regulated.

=================
In the past, OPEC's production decisions have often failed to influence prices. Many have opined that OPEC's policies were aimed at price manipulation. My belief is that OPEC's decisions have had more to do with keeping production at levels where supply matched demand to protect against price declines through over-supply.

This time is different.

OPEC has a hard job - on the one hand, cutting production too deep will lead to price increases which will ultimately cause demand destruction. On the other hand, not cutting production allows prices to fall to levels which will cause under-investment and major price escalation and demand destruction in the future.

The president of OPEC has already indicated that cuts will be deep; deeper than the market expects. The aim is to remove supply to an extent that will surprise the market. Why then inform markets of a surprise ahead of the intent? I believe the intent is to gain an insight into market expectations; and then cut marginally ahead of those expectations! Or else, it is to prepare the market so the impact of the shock is spread over a week instead of a day.

My view is that OPEC will have learned from the last downturn when it failed to cut production and the result was oil priced cheaper than mineral water. This time OPEC will cut deep. It will force a sharp draw down of inventory. OPEC will not supply cheap oil to build and maintain inventory levels; instead production cuts will force a sharp draw down of inventory. Once inventory is down, prices will rise and at that stage enhancing production to allow inventory to return to normal levels will make sense.

In the immediate term, energy prices may decline as inventories are drawn down and non OPEC oil is used in an attempt to break OPEC. Short term, it is likely that oil prices will escalate once more. Oil trading needs strong regulatory over-sight, otherwise price levels will rise on rampant speculation once again; this can derail prospects for recovery from amongst the longest recessions in US history - it could be the straw which breaks the camel's back.

To price oil, there is demand which comes from users, and supply which comes from producers; there need be nothing more. Demand is created by users with a desire together with the willingness and ability to pay. Similarly, supply is created by producers willing and able to deliver at a price. A supplier will never increase supply if the price for that unit of supply falls below the cost of production of that additional unit; to do so would be an economically irrational decision. The equilibrium price is what the user is willing to and able pay the producer for that last additional unit of production; it is the point where marginal revenue equals marginal cost; this is where the price of oil must be and it is my belief that a reasonable estimate of the marginal cost of production is $60.

Oil needs to be priced rationally; in my view a price substantially below $60 means the needs of future generations will not be met. A price substantially above $60 is damaging to the present generation.

Why then are bubbles created? When oil prices were at $147, I wondered how speculation could occur without an inventory build by hoarders; everything produced was getting consumed at the price without an inventory build, so speculation seemed unlikely.

Here is how I think it works. This bubble was created because the relationship between users and producers became obscured. In the very short term, because demand destruction takes time, a user's "willingness & ability" to pay can exceed the producer's marginal cost of production. This spread between user willingness and ability to pay and the marginal cost of production creates an arbitrage opportunity. It is fairly easy to exploit the arbitrage opportunity through the futures market in a manner which allows today's production to continue at capacity with no inventory build up. The only problem is that real users end up paying tomorrow's potential prices today.

As long as demand continues to grow as expected by financial investors, everyone is happy. But once prices go above that user "willingness & ability" to pay, future demand falls as demand destruction occurs. The last financial investor owning the futures instrument holds "the can" as the cookie crumbles. And prices rapidly fall back towards marginal cost of production; then prices fall below the marginal cost of production as losses are limited by the can holder. Then the producer response occurs and we have come a full circle. All this occurs because the user and producer relationship has been obscured by intermediaries and arbitrageurs.

The futures market has an incredibly important role to play. It allows better pricing and provides producers and users information which will permit both better planning. However, when the market is distorted by a chain of financial investors with no underlying demand for the physical commodity, things start to go wrong. In truth, the futures market should reduce volatility; in fact, since it has obscured the relationship between users and producers, it has enhanced volatility and economic risks. This market should not be abandoned, but I believe it requires strict regulatory over-sight; it should be a market operational only for parties with real demand for the physical commodity.
============================


http://seekingalpha.com/article/1095...cut-production

[DamageX]

Repeat after me: contraction in the money supply.

[Sly]

Originally Posted by Scott McD

Yup, the prices on everything here went way up when the oil prices rocketed. Now the price has fallen, yet nothing has came back down to the price it was before.

How the hell can they get away with that ??

Do you think all of the food and products were produced only in the last two months? They were produced months ago when the costs were still extremely high... when the costs originally started skyrocketing, prices did not rise. Those companies held out for as long as they could, then they started to move. It will take a long, long time for them to go back down again... a competition war will need to kick in. Right now they are recouping losses and paying for the high prices that were only three months ago.

[Houdini]

Originally Posted by Furious_Male

I started going long oil (via ETFs) a little bit at a time since it cracked below $50 per barrel. I have been wrong so far but I have a strategy in place to keep adding down to $20 per barrel. I can handle the pain even if its through 2009. I cannot see the prices staying down at these levels.

What I am trying to formulate is the best hedge against falling oil prices as I gradually add to my long positions. Barring a complete economic collapse the US stands to benefit if prices continue to fall. Airlines used to be a great hedge against falling oil prices but I am not so sure I like that approach.

Thoughts anyone?

Same here. Just started going long oil last week with DIG and DXO. I could easily go down 20%+, but the eventual upside, I believe, will be a three figure % gain. Which ones are you buying if you don't mind?

[Furious_Male]

Originally Posted by Houdini

Same here. Just started going long oil last week with DIG and DXO. I could easily go down 20%+, but the eventual upside, I believe, will be a three figure % gain. Which ones are you buying if you don't mind?

Adding to DBO, and OIL. I am taking a closer look at DIG thanks for mentioning it. Are you hedging for the "$10 a barrel worst case scenario"?

Good luck with your trades.

[DonX]

It's about fucking time

[Houdini]

Originally Posted by Furious_Male

Adding to DBO, and OIL. I am taking a closer look at DIG thanks for mentioning it. Are you hedging for the "$10 a barrel worst case scenario"?

Good luck with your trades.

No hedges. I was thinking about buying some puts, but I really don't think we'll get that low, especially with OPEC making a cut next week. If indeed it does get that low, I will just average down my long positions.

Thanks, good luck as well.

[Drake]

I'm not complaining

[seeandsee]

year of fucking in front of us

[Houdini]

Originally Posted by Houdini

Same here. Just started going long oil last week with DIG and DXO. I could easily go down 20%+, but the eventual upside, I believe, will be a three figure % gain. Which ones are you buying if you don't mind?

8 months later, up 60% on these trades. Thinking about natural gas next. Who's buying what?

[DateDoc]

Originally Posted by Zuzana Designs

Damn thats crazy .. I filledup my car last night.. it was 1.53 a gallon !!

$1.53?? Damn, here it is at least a dollar more than that. I think $2.79 for unleaded was the last I saw. Just checked gasbuddy.com: $2.56 - $2.95 a gallon here.

[CYF]

Originally Posted by DateDoc

$1.53?? Damn, here it is at least a dollar more than that. I think $2.79 for unleaded was the last I saw. Just checked gasbuddy.com: $2.56 - $2.95 a gallon here.

This is an old thread. Gas is like 2.70 here right now.