12 replies to this topic

[isobar65]

Yesterday, Senate Majority leader Harry Reid [D-Nev.] unveiled the Consumer-First Energy Act, which calls for a revocation of tax breaks to big oil companies, a windfall profit tax and a cap on additions to the government's Strategic Petroleum Reserve.

http://seekingalpha.com/article/76498-nyme...et?source=yahoo

[Mike_The_Golfer]

yeah, sure...speculators aren't driving up the price? There is absolutley no fundamental data to support prices doubling in the last year. Good luck Senator getting that bill passed. The oil companies will line the pockets of all your colleagues to vote against that one.

[icehater]

Mike_The_Golfer, on May 9 2008, 11:30 AM, said:

yeah, sure...speculators aren't driving up the price? There is absolutley no fundamental data to support prices doubling in the last year. Good luck Senator getting that bill passed. The oil companies will line the pockets of all your colleagues to vote against that one.

Nymex is in play as a takeover target. The last thing in the world they want is lessening trades which would dry up their revenue. Here's an oil price chart. There are only two things that can drive up prices like this in such a short period:

1. Tremendous demand outstripping supply creating a real fundamental reason behind price. If that were happening we'd have near $6 gas and there'd be gas lines around the world.

2. Tremendous speculation that is artificailly pushing prices up with no real foundation.

It's interesting to see that today there was a story about a sect in India that wants to undermine India's business. It's a Mao sect that has gotten very powerful. If they ever did that India's need for oil would dry up. Yet that story gets no business coverage. But a minor pipeline story or a far fetched story on terror gets played up as if the world is ending. The speculation in oil is a well managed marketing propaganda machine right now.

[Mike_The_Golfer]

you're so right...anytime there is a situation that may affect output temporarily even the slightest bit it gets major attention and allows for another run-up another few bucks.

[icehater]

Mike_The_Golfer, on May 9 2008, 04:02 PM, said:

you're so right...anytime there is a situation that may affect output temporarily even the slightest bit it gets major attention and allows for another run-up another few bucks.

Here's the oil chart. Nothing moves this fast unless it's a developing bubble or there are dynamic market fundamentals causing a supply shortage.

http://futures.tradi....com/chart/CO/M

Look at the meotoric rise in oil vs the same thing that happened to the Nasdaq in the late 90's because of the intense speculation over every Internet company that went public. Just look at the similarity of the right side of the oil chart) and the left side of the Nasdaq chart. It was as that Nasdaq bubble neared it's peak that talk of Nasdaq 12,000 and Dow 36,000 became a daily subject. Then of coures it all collapsed (as you can see in the Nasdaq chart because long-term the only thing that can maintain a real run-up are true market fundamentals. It got so bad that AOL actually thought it was worth a lot more than any media company and we know what happened to AOL.

http://bigpicture.typepad.com/comments/200..._of_the_we.html

[Mike_The_Golfer]

I'm just curious about what will be the event that acts as the "pin" that pops the bubble. I wouldn't be surprised if, that when it happens, we see an almost 50% correction.


The similarities in those charts are scary.

[icehater]

Mike_The_Golfer, on May 9 2008, 04:39 PM, said:

I'm just curious about what will be the event that acts as the "pin" that pops the bubble. I wouldn't be surprised if, that when it happens, we see an almost 50% correction.


The similarities in those charts are scary.

Things like this can take 1-2 years to self correct but my guess is that US driving falls short of normal this summer, there's an oversupply of home heating oil in late summer and then throw in a variable like a warm winter forecast. Hurricanes are a refinery issue and are short-term so I don't think an active or quiet season will have much of an effect. Right now the hurricane season is taking on the appaerance of a quiet one IMO.

[devilsfan0405]

icehater, on May 9 2008, 04:21 PM, said:

Here's the oil chart. Nothing moves this fast unless it's a developing bubble or there are dynamic market fundamentals causing a supply shortage.

http://futures.tradi....com/chart/CO/M

Look at the meotoric rise in oil vs the same thing that happened to the Nasdaq in the late 90's because of the intense speculation over every Internet company that went public. Just look at the similarity of the right side of the oil chart) and the left side of the Nasdaq chart. It was as that Nasdaq bubble neared it's peak that talk of Nasdaq 12,000 and Dow 36,000 became a daily subject. Then of coures it all collapsed (as you can see in the Nasdaq chart because long-term the only thing that can maintain a real run-up are true market fundamentals. It got so bad that AOL actually thought it was worth a lot more than any media company and we know what happened to AOL.

http://bigpicture.typepad.com/comments/200..._of_the_we.html

Lol, that was unreal, Ice. Remember when Yahoo! was $300 per share and the analysts were still screaming "BUY!"?

[Mike_The_Golfer]

Mike_The_Golfer, on May 9 2008, 04:02 PM, said:

you're so right...anytime there is a situation that may affect output temporarily even the slightest bit it gets major attention and allows for another run-up another few bucks.

Here we go again. Case in point, today there was a rumor that Iran may cut production. However, most "experts" agreed that it is unlikely to actually happen. Yet, this rumor caused another spike to record-high prices. It's ridiculous.

[icehater]

Mike_The_Golfer, on May 13 2008, 12:43 PM, said:

Here we go again. Case in point, today there was a rumor that Iran may cut production. However, most "experts" agreed that it is unlikely to actually happen. Yet, this rumor caused another spike to record-high prices. It's ridiculous.

Meanwhile the quake in China means usage there will drop but that is not even taken into consideration. You have people who look at a two way street and see only the traffic in one direction. That is the time when you know a market has lost its mind. It makes as much sense for Iran, a country whose economy is in shambles and whose only source of income is oil, to cut production as much as it does for a person who badly needs money to take a lower paying harder job. But common sense means nothing if your purpose is to drive prices up. I'll tell you when this market runs out of steam, and I think we are getting closer and closer to it, you may see a 30-40% drop in less than a month. Then all of a sudden the stories that are causing a rapid drop will be all the news you'll read and you'll hear some "expert" on CNBC tell us that what had been propelling the market up was a mis-interpretation of data. I've seen this story play out too often in the past.

[lab94]

icehater, on May 13 2008, 03:51 PM, said:

Meanwhile the quake it China means usage there will drop but that is not even taken into consideration. You have people who look at a two way street and see only the traffic in one direction. That is the time when you know a market has lost its mind. It makes as much sense for Iran, a country whose economy is in shambles and whose only source of income is oil, to cut production as much as it does for a person who badly needs money to take a lower paying harder job. But common sense means nothing if your purpose is to drive prices up. I'll tell you when thgis market runs out of steam, and I think we are getting closer and closer to it, you may see a 30-40% drop in less than a month. Then all of a sudden the stories that are causing a rapid drop will be all the news you'll read and you'll hear some "expert" on CNBC tell us that what had been propelling the market up was a mis-interpretation of data. I've seen this story play out too often in the past.

Ice, also I heard today that the US is stopping the purchase of oil for the oil reserves untill it drops below $75 a barrel. I think they said 70,000 barrels aday.

[icehater]

lab94, on May 13 2008, 04:13 PM, said:

Ice, also I heard today that the US is stopping the purchase of oil for the oil reserves untill it drops below $75 a barrel. I think they said 70,000 barrels aday.

Mainly a political issue with an anectdotal sidelight to let investors know the US may step in and do something disruptive and throw water on the flames of rising prices. I've seen this market react to higher inventory numbers and drive prices up, which is a much bigger deal then this announcement. That's like waliking in to Macy's and seeing a clearance rack of clothes and telling the sales person you'd rather pay full price than the markdown. When you see things like that you just need to wait for investors to come to their senses. Right now the assumption is that the frenzy to buy oil will not end. But sooner or later someone will realize the most they can make in 12 months is 5-10% and will abandon the market for the next best thing. When that happens you will see many others follow and it'll be like looking at whales coming ashore at the beach.

[Mike_The_Golfer]

Yet somehow...this news gets ignored by the market:






IEA slashes oil 2008 demand forecast, warns of further cuts UPDATE
Tue, May 13 2008, 09:14 GMT


LONDON (Thomson Financial) - The International Energy Agency has slashed its 2008 oil product demand forecast again in its monthly report, this time by 390,000 barrels per day, and hinted at more cuts in the future.


Oil product demand this year is now seen at 86.8 million barrels per day (bpd), against 87.2 million bpd forecast in last month's report, said the energy adviser to 27 oil consuming countries in its May monthly report. Slower growth in the United States and other industrialised nations will weaken demand, said the IEA.


"This report sees further downward adjustments to demand, and they may not be the last. Despite an aggressive cut last month in our U.S. demand forecast, further downward revisions are needed this month," the IEA said.


"Official March European data are also exceptionally weak. We are currently treating this as a symptom of an early Easter, together with price and weather distortions, but if it extends into April, we may have to trim demand further," added the IEA.


"European consumers are to a certain extent shielded from the rise in oil prices, due to the weak dollar and high tax rates, but higher prices are nonetheless weighing on demand," said the IEA's in-house analysts.


They also warned that faced with higher prices which look likely to stay high for some time, some countries, like Indonesia, are investigating the budgetary reality of sustaining subsidies.


"It will not be easy to unwind them, (as) many countries are wary of civil unrest and may therefore try to cushion low-income earners with other payments, but when such shifts do come, they could cause temporary downward shocks to demand," said the report.


Meanwhile, although demand from fast growing economies such as China and the Middle East will remain strong in the short term, that looks unlikely to outweigh such falls from elsewhere.


"On balance though, continued strength in China and the Middle East, it would seem that the risks to demand remain on the downside. While consumers may be adjusting to high oil prices, the full impact of current high oil prices in excess of $120/bbl, if sustained, has yet to be factored into either behaviour or forecasts."


Oil prices have doubled over the past year. They have gained around 20 percent since the start of 2008 and are up 12 percent since May 1.


"The key question is how to halt the upward spiral in prices. Clear evidence of a seasonal stock build would help," said the IEA. "OPEC could kick-start the process by giving at least a clear indication that it will rapidly provide more oil if stocks do not build in the very near future. An even more powerful signal would be to provide more oil now. To the extent that current prices also embody an element of concern over future supplies, an ongoing commitment to investment would also help," suggested the IEA.


OPEC has repeatedly insisted the world is amply supplied with oil and that it is not responsible for higher prices. The cartel has rejected consumer calls for more oil at its last three conventions since September 2007, and is unlikely to meet again until September this year to discuss production.


Effective OPEC spare capacity stands at 2.3 million barrels per day on paper, although refinery outages, crude quality and high prices mean much of this oil would be difficult to market under current conditions, said the IEA.