>>I am presently cautiously bullish on oil though quite concerned about its short to medium term prospects in case of a significant downturn. <g><<
How much of a downturn you are talking about and how do you define short and medium term? just curious.
I think where will the oil price go, up or down, all depends on what the speculators and hedge funds decide to do, continue buying the futures, or sell their positions? Even if they are going to buy more in short term to push oil to $100 (they may very well), they could not hold them forever. Just like flippers in housing, they bound to take profit some time. Hopefully, they are not going to do so at the same time when some major economy in the world going into recession.
The matter of the fact is that trillions of barrels of oil now OWNED by hedge funds, and this is the major reason why the oil price is so high now, NOT the so-called Peak oil and over demand.
BP CEO speaks from supply/demand/oil industry POV, while the current oil price is dominated by hedge funds and speculation.
itp.net
"Genuine event-driven spikes can be seen by a careful analysis of the history of oil prices. While prices might appear high today compared to any time during the last 35 years, when adjusted for inflation they actually remain far short of the $99 per barrel all-time record of April 1980.
In fact, oil traded above today’s real levels from September 1979 to December 1981. According to US Energy Department data, adjusting for inflation, oil exceeded $86 in early 1981, when Iranian production collapsed following the country’s Islamic revolution. It is therefore extremely misleading to portray “all-time highs” while ignoring the tremendous inflationary distortions of the past quarter century. Yes, oil is expensive, but it has certainly been more expensive.
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The question now on everyone’s lips is: how much more costly will it get in the short term?
Jim Rogers, co-founder of George Soros’s Quantum hedge fund, believes that oil prices could reach $100 a barrel within the next five months: “Unless somebody discovers something very quickly and very accessibly, we’re all going to be dumbfounded at how high the price of oil will go, including me,” Rogers recently told journalists in Singapore.
The commodities team at Merrill Lynch, the world’s biggest brokerage, apparently disagrees though. Oil supplies would have to stop from a country such as Iran to drive the market higher, its commodities research chief Francisco Blanch told Bloomberg at the tail-end of July. “It’s unlikely we will see another price rally from here,” he predicted, “unless the current conflict expands beyond its current borders. You’d need physical disruptions and large ones, to bring the price to $100.”
Cue Iran’s deputy oil minister, Mohammad Hadi Nejad-Hosseinian, who, on a visit to India last week, remarked that international crude oil prices could hit $100 a barrel, driven by political upheaval and an expected winter spike in demand.
Yet a growing number of Wall Street traders seem to be agreeing with the investment guru Rogers and the Iranian official. Louise Yamada, of Louise Yamada Technical Research Advisors, said that she expects oil to reach $84 a barrel in the “short term, then keep rising.” Back in July 2004, Yamada predicted that oil would reach $67 within months. Indeed bets on futures contracts for $100 oil tripled in the past three months: the number of options to buy crude at $100 this year stood at 53,047 in late July, triple the amount quoted on 21 April.
“Commodity investors looking for $100 oil will see it,” says Philip Verleger, Californian economist and visiting fellow at the Institute for International Economics in Washington. Only a US recession can stop the advance to $100 a barrel before the end of next year, in an echo of similar warnings heard over the last six months ranging from controversial Texan oil analyst Matt Simmons to Sir Bill Gammell, the chief executive of Cairn Energy.
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The challenge is not about resources but deliverability.
Not only have the US oil majors not built any domestic refineries since the mid 1970s, the number of working US refineries has fallen from more than 300 in the early 1980s to less than 150. Obviously this means that the superpower is largely dependent on foreign supplies and vulnerable to even small accidents and bad weather. Nevertheless, US oil majors are raking in record profits, a situation that is causing a fierce backlash among consumers. In June, The New Yorker asserted it was “rational” for oil refiners to seek production limits so that prices, and profits can continue to rise without the huge additional investment that new refineries would require. Energy analysts argue that a major obstacle facing the construction of new refineries is the public’s distaste for the idea of massive and polluting plants close to their homes."
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And maybe the US should move the rest of 150 working refinaries outside the US border too, then can blame other Developing countries for polluing the environment! |
