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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: energyplay who wrote (34617)8/21/2004 1:00:21 AM
From: schrodingers_cat  Read Replies (2) of 206097
 
Oil prices fell substantially today and I wouldn't be surprised by a retreat to the low 40s. When everybody agrees it is going to $50 then you know it is time for a pullback. It won't matter though, the uptrend will still be intact. Looking at the longer term chart it looks like oil is starting to go parabolic. The rocket has definitely cleared the tower.

On the fundamental side one of the biggest issues in the last IEA report was that they cut their estimate of " effective" spare capacity to only 500,000 bbl/day. That was followed by a 1m bbl/day cut in Iraq output due to the US military's failure to stabilize the country. That may very well have put the world into a shortage situation. The other thing is that Saudi output went down in July which make me wonder if they are presently producing flat-out.

In any case demand growth over the next few months will likely use up any spare capacity that exists.

If we get into an oil shortage then world economic growth will have to slow down tremendously. The way I see it is that either the US or the Chinese economy will get crushed. The oil price will go to whatever number needed to make this happen. It is possible that Japan or India or Latin America will get crushed first.

Bush has made the SPR irrelevant by insisting that it only be used in a disaster. Like the battleships of WW1, it has become to valuable to use.
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