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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (28479)	3/12/2005 10:35:31 AM
From: Wyätt Gwyön	Read Replies (2) of 110194

a chunk of the oil and energy rally (maybe 7 bucks?) is speculator driven. this is a very common theory--the Bogeyman who is responsible for high prices. he is either a terrorist or a hedge fund manager, and maybe both. even OPEC and Lee Raymond agree with you, except they estimate it is like 20 or 30 bucks. this week Raymond was again calling for a price crash. can you imagine John Chambers calling for a crash in IT margins? one of the great things about the energy story in my mind is that the people who should be the greatest cheerleaders are in fact chronic bashers. not to mention the people on CNBC who think it is all specs and oil should be at $5 as predicted by The Economist. short term price swings are not my game, and i don't really want to speculate on the speculators, except to note a couple things: * small specs are still net short, whereas they were net long along with the funds for a couple months last spring * commercial net short is still not close to the 52-week peak * the spec net long position can be sustained at a pretty high level for months on end, and we have only had a big spec runup the past couple weeks. just take a look at the March-June period last year: softwarenorth.net big Asian demand growth, and figuring they can actually absorb it, and maintain their economies. Their timing is off once again, as $55, is a different animal than $40. the $55 number is very misleading, since that's just a paper barrel of WTI and not what the Chinese are buying. look at the heavy sour product coming out of SA and the spreads are still very wide. Saudis complain about this. in any case, the equities still seem to be discounting about $35 WTI, which is cheaper than any of the CL futures and well below the 6yr average. as for gasoline, i have no idea. but one thing to keep in mind w/r/t refiners is that cap-ute is still very high on a historical basis.

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