Heinz on oil and treasury yields
Date: Mon Sep 20 2004 13:48
trotsky (silverrain@oil) ID#377387:
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the numbers have grown quite fast recently, since global demand growth has accelerated of late. instead of the long term average of 2% p.a., demand has lately been growing between 3 and 4% p.a.
since this growth rate compounds, the numbers add up quickly. we passed the 80m. bbl./day mark not very long ago.
in case the global Hubbert peak has passed already ( this is not certain, but it's likely ) we could see some real fireworks in the markets in coming years.
Date: Mon Sep 20 2004 13:24
trotsky (Mooney, 12:13) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
that's the problem. the figures you cite are not even remotely accurate. global consumption is 30 billion barrels per annum ( it's 83 million per DAY ) .
the last time 18m. bbl./day were consumed was in the 1930's i believe.
as for the ultimate recoverable reserve, it is estimated there are about 1 trillion bbl. in conventional oil left ( a little less actually, and this includes 'oil not found yet', as well as the disputable OPEC reserves data ) , which is about the halfway mark of the original reserve.
this is of course a crucial detail, since it doesn't only matter how much is left, it matters also how far depletion has advanced. once a field passes the 50% mark, its production begins to progressively decline by about 10% p.a.
furthermore, the global oil discovery peak was in the 1960's, 40 years ago. this is important because the production peak tends to lag the discovery peak by about 40 years ( which means the production peak either has already occurred, or is about to occur ) .
currently, 1 bbl. of oil is discovered for every 4 bbl. that are consumed.
Date: Mon Sep 20 2004 10:33
trotsky (frustrated@yield spread) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i think we're close to the end of the yield spread contraction. the main reason is that the major two sectors of the economy that have held up thus far ( housing and automobiles ) are entirely dependent on rapid debt growth and low interest rates - and both sectors are faltering. the Fed will probably do one more hike in order to gather some ammunition, but imo will be forced to lower them again in '05.
note also that there is no sign of a pick-up in capital spending. the technology sector in the aggregate is in its 4th loss making year in a row. corporarations overall have ceased to be demanders of funds ( i.e., they are reducing indebtedness instead of increasing it ) , so there will be no 'picking up of the slack' once the major consumer sectors of the economy stall out.
so we should see an increase in the yield spread and a resumption of the dollar's decline in '05.
Date: Mon Sep 20 2004 10:22
trotsky (re: t-notes) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
as a side note, with yields accross the maturity spectrum ( with the exception of the t-bill yield which takes its cue from the rising FF rate ) at fresh 6 month lows, one should perhaps begin to wonder about the shelf life of the current tightening cycle. it appears a bit misguided, since the bond market is signalling an economic slowdown and falling inflation.
ate: Mon Sep 20 2004 10:16
trotsky (t-notes) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i note that the t-note yield is below 4.1% as of today. looks like all those bond bears were wrong again. not only that, but they're wrong with some conviction. there's still almost 16 times as much money invested in Rydex bond short funds compared to the bond long funds ( 2.65 billion vs. 173 million ) .
we'll see new lows in yields yet...and probably in the not-too-distant future. |
