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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (79282)	5/21/2008 1:52:32 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 116555

I find it tough to believe that Crude Oil is putting in a top this early into the global recession. Last time around major economies had been on the ropes for a couple of years before oil prices began to plunge. They always say the trend is your friend. .

To: John Pitera who wrote (79282)	5/21/2008 7:52:25 AM
From: ajtj99	Respond to of 116555

John, how many commodities are currently traded that have a shrinking supply/discovery curve? You can always plant more crops, and there's lots of minerals in the ground still. Peak oil is what's driving the forward prices. Last year an additional 2-million barrels a day of demand came into the market, and only 800,000 barrels a day of new supply was discovered. From most reports I've read, Mexico, Saudi Arabia, Kuwait, Indonesia, and Iran have passed peak. Furthermore, some say Russia reached peak in 2007. Demand is now very close to the 86-million barrels a day supply. When oil had a single digit handle in the 80's, there was likely a 20-million barrel/day difference between the supply and demand. The Saudi's still claim their supply is 12.9 Million barrels a day, but more reliable industry observers now put their production last year at 7.5 million barrels a day. Who wouldn't pump out all they could at these prices? Some of the numbers I've seen regarding the Ghawar field suggest the depletion rate there is accelerating so fast that the maximum output the Saudis will have in 2010 could be as little as 5.5-million barrels a day. I believe the forward contracts reflect the anticipated future supply / demand equation. Barring 10% Fed Funds rates, I don't really see how the demand side is going to change much in the next 3-years with the demand growth from India, China, and the Middle East, so oil contracts are going to be like pro basketball or pro baseball contracts - escalating in cost as the contract goes further out. It will take the plug-in hybrid cars to put a dent in that equation, and those aren't hitting the market until late 2010 and probably will not have high volumes until 2012. If oil gets expensive enough, plug-in conversion for autos, especially SUV's, could be a lucrative business.