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2004-10-12 Home Front: Economy

Oil heads to $54 a barrel as nationwide strike begins in Nigeria

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Posted by Mark Espinola 2004-10-12 00:59|| || Front Page|| [3 views since 2007-05-07] Top

#1 Crude oil should be $60 a barrel by the end of October (3 weeks) with current price trending due to numerous winter supply concerns.

Posted by Mark Espinola 2004-10-12 4:08:38 AM|| 2004-10-12 4:08:38 AM|| Front Page Top

#2 Do you have any for sale?

Posted by Mrs. Davis 2004-10-12 4:24:22 AM|| 2004-10-12 4:24:22 AM|| Front Page Top

#3 60.00 bucks a barrel is about where it should be. It's the only way we will ever free ourselves from mid east oil. Cheap oil will continue to make us slaves to unstable supplies owned by folks we don't get on with.

Posted by Sock Puppet of Doom 2004-10-12 4:31:10 AM|| [http://www.slhess.com] 2004-10-12 4:31:10 AM|| Front Page Top

#4 Mrs. D,
Being that crude oil has indeed jumped above $54 a barrel, if one holds long crude oil contracts which were purchased in late 2003 or even early 2004 they are worth a bundle. You could peel off (sell) some contingent on return and amount, or ride this market higher, all the way to $60 to $70+ which is projected, since the supply data indicates will continue climbing most likely until at least Christmas.

There are no real bearish energy market indicators out there, after all winter is around the corner...but. recall nothing goes up forever, the bearish ride down, when it transpires, and contingent on how much she drops, in my opinion will be even more rapid, and a greater, quicker profit then the current panic driven bull run which is being fuelled by various supply related justifications and the fact the speculators are throwing gasoline in the trading pits. Pun intended.

Think of this, what would the energy markets do if there was a devastating supply disrupting attack on the principal Saudi oil field of Gahwar? $100, $125 a barrel, nothing can be ruled out and should not be either. One other item, back in 1999 crude oil sunk like a lead weight all the back to $11 a barrel and then shot back within one year to over $30.

Different portions of the global economy, depending on which regional sectors most effected, will eventually be forced to scale back or just cancel costly imported energy products & certain high priced commodities out of necessity, and this will in turn start a general economic slow down. Bonds would then rise further and stock indexes would do the reverse. Depending on how hard a particular nation is being adversely effected by soaring energy costs, the greater the deleterious sell off in there paper markets.

Sock,
There is a basket of economic reasons behind this run up in oil/energy prices. One of the primary is Mainland China's building boom, thus demanding natural resources as never before, and once again, the is no visible end, if any thing, short of a major jolt in the global economy, China will expand its hungry demand of commodities and tasking international supplies of not only energy, but construction related metals such as copper, plus grains, as in soybeans ( for some reason there are more Chinese restaurants over there then any other type) :)

One passing thought; Back in March I posted my two cents worth on oil heading for $50 plus and listed the reasons why before the end of 2004. Some people online & off got a real kick out of that, had some laughs and said I was a 'promoter of bad economic news' plus a '******* idiot'. That's ok ....I wonder where they are now? At the local Sunoco station?

Posted by Mark Espinola 2004-10-12 5:21:20 AM|| 2004-10-12 5:21:20 AM|| Front Page Top

#5 I have long been prepared to a long term increase in energy prices. I think it's a good thing. Short term it will have a negative impact but I think long term it will spur new inovation in energy production and more effective use of energy. That is good for us here in the US and our ecconomy. I expect China to keep increasing it's demand on resources and driving thoses prices up. I don't see 60 dollar oil as long term bad. Short term it is bad, long term it plays to yankee strengths. But I can walk about every place I need to go locally to. Most people can't.

Posted by Sock Puppet of Doom 2004-10-12 6:41:36 AM|| [http://www.slhess.com] 2004-10-12 6:41:36 AM|| Front Page Top

#6 Sock's right. The price of oil now, if sustained, will encourage serious work into petroleum alternatives, as well as alternate petroleum energy sources. The Saudis know this, hence all the brouhaha about pumping to increase the supply of crude. It will be painful, but I think that it will be good in the long run. We will not change as a civilization until we are forced to, because of political considerations.

Posted by Alaska Paul 2004-10-12 9:52:56 AM|| 2004-10-12 9:52:56 AM|| Front Page Top

#7 Has anyone looked at the worldwide consumption numbers? I see articles mentioning that the tight supplies are due to high demand, especially in China. Could it be that China is actually stockpiling into a reserve, as part of a plan for disruption of supplies when military action is attempted over Taiwan?

Posted by Anonymous6176 2004-10-12 11:40:03 AM|| 2004-10-12 11:40:03 AM|| Front Page Top

#8 Crude oil should be $60 a barrel by the end of October (3 weeks) with current price trending due to numerous winter supply concerns.

Translation: Oil traders are running scared over something that may or may not happen. Unfortunately, everybody else ends up paying.

Posted by Bomb-a-rama 2004-10-12 12:55:41 PM|| 2004-10-12 12:55:41 PM|| Front Page Top

#9 Boomerang effect. If House o Saud allows oil to get to $60/bbl, the price fall will be at least as hard as it was in the mid-80's or the late 90's.

Posted by lex 2004-10-12 1:10:38 PM|| 2004-10-12 1:10:38 PM|| Front Page Top

#10 http://news.bbc.co.uk/1/hi/business/3654060.stm
China's oil imports for the first eight months of 2004 rose by nearly 40% compared with the same period last year, according to state media reports.
China imported a total of 79.9 million tonnes of oil between January and August, a 39.9% increase on the year, the Xinhua news agency reported.
The figure reflects a slowdown in domestic oil production at a time of rapid economic expansion.
Total oil imports for 2004 are set to reach a record 110 million tonnes.

That's about 3M barrels a day.

Posted by ed 2004-10-12 1:11:09 PM|| 2004-10-12 1:11:09 PM|| Front Page Top

#11 One more point: this short-term spike is potentially disastrous for Bush.

The voters who've yet to make up their minds are precisely the types whose vote depends on pocketbook issues. No more immediate or visible pocketbook issue than the price of gas at the pump. If that price increases another ~30 cents a gallon by Nov 2, Bush will be in serious trouble.

Posted by lex 2004-10-12 1:12:38 PM|| 2004-10-12 1:12:38 PM|| Front Page Top

#12 'Lex', very valid points. 'Ed', China needs, and needs more.

Bomb-a-rama, you do not require a lot of money to join energy traders in the largest price jump in history.

Posted by Mark Espinola 2004-10-12 2:04:41 PM|| 2004-10-12 2:04:41 PM|| Front Page Top

#13 That was very close to touting Mark.... Danger! Danger!

Posted by Shipman 2004-10-12 5:41:35 PM|| 2004-10-12 5:41:35 PM|| Front Page Top

#14 what would the energy markets do if there was a devastating supply disrupting attack on the principal Saudi oil field of Gahwar? $100, $125 a barrel, nothing can be ruled out and should not be either.

Acc to former middle east spook Bob Baer, these fields and especially the two main Saudi production facilities are easy targets for the jihadists.

Mark,
Do you hear any market participants factoring in the likelihood of such an attack in near future? If so, what probability do they assign to it?

Posted by lex 2004-10-12 5:50:31 PM|| 2004-10-12 5:50:31 PM|| Front Page Top

#15 If probability of such an attack is greater than 30%, then it's perhaps time to consider seizing those oilfields and placing them under protection of US forces.

Posted by lex 2004-10-12 5:51:30 PM|| 2004-10-12 5:51:30 PM|| Front Page Top

#16 Lex, the wild market card is what will Iran do when 'confronted' over the nuke issue, after the election, being that Iran is on the other side of the Persian Gulf and in easy range of those Arabian oil fields. Recall the mullah mindset if they think time is almost up for them.

I would have to say the main supply related trending factors are Nigeria, the coming winter, Norway's oil strike, the damage the hurricanes caused, China's consumption of energy products and heavy hitters wanting to make even more dough playing options & futures on the entire energy complex, plus other related contacts.

The Saudi oil fields for are of course a big unknown and not even on the radar for 'most', but 'not all' traders. If the Saudi supply is withdrawn during a cold winter, price hikes would be wild as in 73 & 79.

Baer is correct, since they enemy would attack in frame work of 'total jihad', i.e. go for broke.

In late 2003 some traders (granted just a few) foresaw the tangible potentials of $50+ oil in 2004, and even less acted, locking in prices but also having to wait & wait for the ride upward.

Many people jumping in now now are chasing this market and that is not always kosher, since she can crash and crash quickly when the reversal gets underway, once the big players start cashing in there chips for profits, which is what happened during the Iraq war in early 2003, when it became known Saddam's Scuds were 'no longer a threat' to Israel (broadening the war). That information was issued to the large volume traders, triggering a large block selloff, very quickly, leaving the little guys wondering what happened.

Ship, 'Danger, danger, Will Robinson, crude oil is only $52.28 as I send this...lol'

Posted by Mark Espinola 2004-10-12 7:39:58 PM|| 2004-10-12 7:39:58 PM|| Front Page Top

#17 Analyst warns of Saudi oil dropoff (link)

Posted by Mark Espinola 2004-10-12 7:49:39 PM|| [http://www.denverpost.com/Stories/0,1413,36~33~2461430,00.html] 2004-10-12 7:49:39 PM|| Front Page Top

#18 I heard an energy analyst saying $10.00 in the increase is due to pure speculation and has nothing to do with current reality. It may be the oil futures traders being nervous over a Kerry win along with other international factors.

Posted by Sock Puppet of Doom 2004-10-12 7:52:23 PM|| [http://www.slhess.com] 2004-10-12 7:52:23 PM|| Front Page Top

#19 Sock, that figure sounds in order. Maybe a little broader, $8 on the low end and $12 on high end.

The 'fear factor' plus 'the speculation factor'& the 'supply factor' which is directly linked to the 'winter factor' makes for a very nervous market, which is the 'main factor' in driving these type of markets up or down.

Volatility is the key. The more the better for broad price gyrations. Markets stuck in sideways mode do not benefit call or put traders.

There should probably be a 'geostrategic volatility index' to compile & chart critical data relating to historical price trending influenced by extremes governing prices, which would greatly assist in the prognostication of future trends if the same cyclical indicators are demonstrated in relation to international or regional zones effecting certain segments of key commodity markets.

Indexing data in this fashion, such as oil, could be a valuable trending guide when similar situations arise for those attempting to gage future price adjustments.

Sock, your overview is most welcome.

Posted by Mark Espinola 2004-10-12 8:36:49 PM|| 2004-10-12 8:36:49 PM|| Front Page Top

#20 Anonymous6176, As to your question, the linked charts/data should help. plus there are other web sources if needed.

Posted by Mark Espinola 2004-10-12 8:42:16 PM|| [http://www.eia.doe.gov/oiaf/aeo/assumption/international.html] 2004-10-12 8:42:16 PM|| Front Page Top

#21 ..you do not require a lot of money to join energy traders in the largest price jump in history.

I don't know what that means. I'm not some kind of expert or in possession of any knowledge of the intricacies of the trade, so I'm just going on what I've read.

My beef is that these various "factors" on the part of oil traders regarding supply concerns is nothing but speculating on something that may or may not happen. If these scenarios don't play out according to their "fears", then will we not all have paid more for crude oil derived products than was really necessary? Why can't these people wait until a problem actually exists instead of creating one in their heads and transferring it into our pocketbooks?

Posted by Bomb-a-rama 2004-10-12 10:20:01 PM|| 2004-10-12 10:20:01 PM|| Front Page Top

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