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Thread: How long can it last?

  1. #1
    Vulture of The Western World Eric's Avatar
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    How long can it last?

    Oil Prices Fall Below $52
    By MADLEN READ
    AP
    NEW YORK (Jan. 11) - Oil plunged below $52 a barrel Thursday to its lowest price since May 2005, extending a sharp decline that has been led by dampened heating oil demand.

    Crude oil has tumbled by 15 percent so far this year in a huge sell-off that was kicked off by investment funds last year, and then stoked by a historically warm U.S. winter that has left supplies of heating fuel barely touched.

    Trading was choppy, with crude declining in pre-market electronic trading, rising to nearly $55 a barrel in morning trading, and then plummeting to settle below $52. Factors that could cause oil to rise again are the possibility of escalating tension in the Middle East, growing global energy demand, violence in Nigeria and production cuts by OPEC.

    "The impact of the weather should not be overstated. Heating demand is a comparatively small part of global consumption," said Antoine Halff, an energy analyst at Fimat. "There's potential for a rebound."

    Light, sweet crude for February delivery dropped $2.14 to settle at $51.88 on the New York Mercantile Exchange, after dropping as low as $51.80. It was the lowest settlement price since May 27, 2005 when the front-month crude contract closed at $51.85.

    Brent crude for February delivery plunged $1.99 to settle at $51.70 a barrel on the ICE Futures exchange in London.

    The National Oceanic and Atmospheric Administration said Thursday that it expects warmer-than-normal weather in the Northern United States to continue through March. This winter has caused a glut in petroleum products; on Wednesday, U.S. government data showed big increases in domestic gasoline and heating oil inventories.

    Adding to the price slide Thursday was the resumption of oil shipments through Belarus to other parts of Europe, and the belief that the Organization of Petroleum Exporting Countries won't announce another production cut just yet to stall the market's drop.

    OPEC decided late last year to reduce production by 1.2 million barrels of oil a day starting last November, and 500,000 barrels a day set to begin Feb. 1.

    Halff said because the cuts started in November, they have not fully hit the market yet, but he said estimates based on shipping reports and confidential sources indicate that out of the 1.2 million barrels a day OPEC promised to cut, around 800,000-900,000 barrels were actually cut.

    It is hard to say where the oil market is headed: up to the $60-a-barrel level it had been hovering at since September until recently, or down to the $40-a-barrel level of two years ago.

    Large speculators, mostly commodity funds, have been betting prices will keep falling, while commercial accounts - companies that deal with oil in their business and use the market to hedge losses - have largely bet on a rebound.

    Last week, large speculators added more than three times as many short positions (bets that prices will fall) than long positions (bets that prices will rise), and commercials added nearly twice as many long positions as shorts, according to Nymex data.

    "Funds seem to be selling as aggressively as they once had bought. They have accumulated a large line of shorts, and it continues to grow," wrote Peter Beutel of Cameron Hanover in a research note. "Commercial accounts were buying, but they also sold new shorts. There was no long liquidation and that could lead to huge losses for longs who have not yet taken losses. They seem to have doubled up their long positions, which could be deadly."

    Halff said funds began liquidating long commodity positions in September because commodity indexes had shown meager annual profits. The liquidation trend snowballed and has come to a head now, the first quarter of 2007, as large institutional investors shift their strategies.

    "They're not leaving the market, because commodities are still attractive ... Rather, we will see them come in and out of the market much more frequently," Halff said.

    Crude oil's steep decline follows an eight-year bull market, which led oil from a low of $10.35 a barrel in 1998 to a record high above $78 last summer.

    In Nymex trading, heating oil futures dipped 4.51 cents to settle at $1.4804 a gallon. Gasoline futures fell 3.87 cents to settle at $1.3905 a gallon. Natural gas prices dipped 46.3 cents to settle at $6.292 per 1,000 cubic feet, after the U.S. Energy Information Administration said natural gas in storage fell by 49 billion cubic feet - around what most analysts were expecting.

  2. #2
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    Re: How long can it last?

    Over time it will continue to ratchet up. After all, China is now second only to the US in car sales and India is working hard at it.

    Both countries continue to increase use of oil in other ways, too.

  3. #3
    mrblanche
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    Re: How long can it last?

    One of the very few people I know still in the oil biz says the world is balanced on the razor's edge of not enough oil and sky-high prices, and so much oil the prices could collapse to junk-bond levels.

  4. #4
    Senior Member Kwozzie1's Avatar
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    Re: How long can it last?

    Here in Australia prices have NOT been reducing at the pump and now the Australian Competition and Consumer Commission (ACCC) has got in the act

    http://www.abc.net.au/news/newsitems...1/s1827493.htm
    Rex
    On the Sunshine Coast, in the Sunshine State Queensland (QLD), Australia

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    Re: How long can it last?

    Quote Originally Posted by mrblanche
    One of the very few people I know still in the oil biz says the world is balanced on the razor's edge of not enough oil and sky-high prices, and so much oil the prices could collapse to junk-bond levels.
    What does that mean?

    I think that long term oil prices will remain on an upward path with each drop being at a higher level than the previous bottom. Kind of like an upward sine wave.

    Oil could bottom at $35.00, but thats a lot higher than its previous bottom of like $11.00 per barrel back in 1998-99. That bottom was hit right after the Assian currency crisis is 1997. The last time oil was that low was in 1986-87 when oil was $9.00 on the world market. Even taking into account the dollars decline in value, even at 35 bucks oil is relatively more expensive than it has been historically. That would suggest that something fundamentally is affecting the oil market. That would be that the global aggregate demand for the product is higher than it has been.

    The geopolitical situation has also pushed the price higher. Thanks to Bush 1 getting us involved in the first Iraqi war and setting up bases in Saudi Arabia, it has spawned an increasing level of terrorism that has affected oil supplies worldwide. We are just beginning to pay the price for Bush 1 and Clinton. The pricetag of this bufoon we have now will possibly turn this country upside down, if it isn't already happening.

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    Re: How long can it last?

    Quote Originally Posted by swamprat
    Even taking into account the dollars decline in value, even at 35 bucks oil is relatively more expensive than it has been historically. That would suggest that something fundamentally is affecting the oil market. That would be that the global aggregate demand for the product is higher than it has been.
    Yes, I think you have it. Your guess of a likely low of $35 might be a bit low, given the increase in demand in Asia.

    I was listening to a radio program about 1970s politics in NZ here, and we nearly nationalized our small oil industry, throwing out Shell, BP Mobil and Texaco etc., given that we have a fair reserve of fossil fuels. But our PM died young, some say with the help of the US.. after we went anti-nuke... Today it would be extreme heresy to even imagine life without oilcos!



  7. #7
    mrblanche
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    Re: How long can it last?

    Quote Originally Posted by robmcg
    I was listening to a radio program about 1970s politics in NZ here, and we nearly nationalized our small oil industry, throwing out Shell, BP Mobil and Texaco etc., given that we have a fair reserve of fossil fuels. But our PM died young, some say with the help of the US.. after we went anti-nuke... Today it would be extreme heresy to even imagine life without oilcos!
    Man, it's fun watching the loony left adopt the "conspiracy under every rock" attitude of the loony right!

  8. #8
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    Re: How long can it last?

    Quote Originally Posted by mrblanche
    it's fun watching the loony left adopt the "conspiracy under every rock" attitude of the loony right!
    Tell that to Allende.

  9. #9
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    Re: How long can it last?

    Quote Originally Posted by robmcg

    Tell that to Allende.
    If you mean the South American, he's been dead for over 30 years.

  10. #10
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    Re: How long can it last?

    Quote Originally Posted by jdm


    If you mean the South American, he's been dead for over 30 years.
    I know. And guess who killed this democratically elected Chilean?

  11. #11
    mrblanche
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    Re: How long can it last?

    Quote Originally Posted by robmcg
    Tell that to Allende.
    Or Castro.

    But the idea that they would have anything to do with your PM dying young is as ridiculous as the the fundamentalists I once heard claiming that Pope John 23 was assassinated by his bishops for stating that he thought the fundamentalists were right.

  12. #12
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    Re: How long can it last?

    Quote Originally Posted by robmcg


    I know. And guess who killed this democratically elected Chilean?
    NZ secret police? Religious zealots from Aukland? Crazies from ChCh?

    Allende was a stinking socialist, who cares?

  13. #13
    Senior Member Kwozzie1's Avatar
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    Re: How long can it last?

    Quote Originally Posted by robmcg

    Yes, I think you have it. Your guess of a likely low of $35 might be a bit low, given the increase in demand in Asia.

    I was listening to a radio program about 1970s politics in NZ here, and we nearly nationalized our small oil industry, throwing out Shell, BP Mobil and Texaco etc., given that we have a fair reserve of fossil fuels. But our PM died young, some say with the help of the US.. after we went anti-nuke... Today it would be extreme heresy to even imagine life without oilcos!
    Was that Big Norm? He died on the eve that I started my big OE... was tha a good idea ;D
    Rex
    On the Sunshine Coast, in the Sunshine State Queensland (QLD), Australia

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