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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Seeker of Truth who wrote (43870)	12/14/2008 4:46:51 AM
From: elmatador	Respond to of 217917

Oil as undesirable good. "if you could find a place to store that oil, you could lock in a guaranteed 34% profit, less the cost of storage. Sounds like easy money. This is just something that shouldn't be. But what this tells us is that storage for oil is very tight. Oil producers are leasing very large ships to store excess oil, as they cannot find places to store it on land. Storing oil on ships is expensive, so that cost of storage gets figured into the price of oil a year out. The OPEC nations are not cutting back by any significant amount. Oil is backing up in the system. It is quite possible that oil could go a lot lower in the next few months as the world reels from a global recession, and that means the demand for energy will be down. Oil below $30? Without production cuts that is certainly in the realm of possibility." Message 25250368

To: Seeker of Truth who wrote (43870)	12/14/2008 5:08:42 AM
From: elmatador	Respond to of 217917

Next Week's OPEC Meeting "Looney Tunes" and the Contango "High Step" ... All that brings us to another oil patch fiction. The brilliance ascribed to those producers or major refiners playing the contango spread i.e. buying at today's prices, storing the oil wherever they can including VLCC tankers, and selling contracts for December 2009 delivery or beyond at significant premiums exceeding current cost of product, storage costs and financing. A good deal if you can organize it (but only available to the major major players because bank financing is now otherwise unavailable). And then to bask in the glory of the press and talking heads visiting praise and commendation on the acumen of the players of the contango game. A thought. Imagine you are a producer of oil. It is in your interest to keep the price of oil as high as possible, and to keep the psychology of the oil market conducive to high oil prices (bless those $147/bbl days). And then, suddenly the market becomes skeptical of all it has heard about oil from the oil industry flacks and pliant "experts" these many years. Then in addition economic realities bring about a crash in oil consumption. Suddenly the world is awash in oil to the point where there is virtually no storage. Oil production is not exactly a tap that can easily be turned off and on without ancillary costs and damage. And if you continue to produce to the point where your storage and virtually all other land storage brimming over, you are reduced to the last option available, you charter tankers, fill them up with your production or inventory for which you have no current use, and anchor them at sea. And if it were clearly understood that you are loading up tankers because the world is awash with oil and no longer any place to store it on land, what would that do to the psychology of the marketplace, and how to deal with it? ... huffingtonpost.com