The Price of Oil is dropping rapidly

taxes should be taken out i suppose. 6x increase vs 4x is a change, but nothing compared to the 13x move in the feedstock

i dont remember 55 cent gas occurring in the last decade. at some very low gasoline price, non-feedstock costs are going to set a floor.
 
Thanks to Tahoe and others for pointing out the issues in refining, and how this has been a rotten year for the downstream.

As to the crude price drop, and speculation, it might be better to not use a word that implies immoral behavior. There had been a rush of money into commodity crude contracts. Money flows from stocks to bonds to commodities and back are based on lots of factors. The oil runnup obviously attracted a lot of new money. The increase in number of contracts on NYMEX, based on my rough recollection, increased by about 8 or 9 million bpd during the end of this price runnup. There were simply more people wanting to invest in commondity contracts than there were contracts available.

Is it wrong to seek to invest in commodity contracts? By what analogy?

Anyway, like tulip markets, the combination of attraction to other markets and perceived risks in the crude market has evaporated much of this excess contract demand.

Mind you, these movements have been about contract supply and demand and not crude supply and demand. The crude demand and supply is about the here and now. The contract supply and demand is about expectations over varying time horizons. The expectations change in a manner not completely in sync with the here and now supply and demand.

So where is the floor? There was a ceiling that was somewhat tied to the level at which demand was materially impacted. There is a floor at which supply will be materially impacted. I don't know where that is, some opinions have been in the $70-80 range.

Yet, there is a long term expectation of continued world wide demand growth, and considerable doubt about the projections of supply capacity growth to match it. This long term expectation will be a market driver for some time, and I expect it will shore up prices well above the the $70-80 range. Some talking head this a.m. said the floor would be $112. How someone makes such a precise call is beyond me.... its ludicrous, this precision, but surely the guess is based on the persistance of this long term supply/demand picture.
 
Misha,

You're one of the ones who should edit my comments. You know the industry better than I do. I gave some generalities and guesses where you can speak with specific knowledge.
 
Well today Trichet whacked the dollar and crude shot up again. Even if crude drops the crack spread (no offense here) will widen and gas will not drop. There is a solution however. Buy USO (tracks the West Texas Intermediate light sweet crude) Sell calls at the money, buy out of the money puts, roll over every month. Put the delta in your tank and drive for free.
 
Leffe
No offense taken. Crack spread is one of the finest industrial terms ever coined. Long live the crack spread!
yippee.gif


Tahoe
I'm an upstreamer, mostly. I read your downstream oriented posts for learning. I appreciate your factual orientation to posting.
 
Panic in the markets.
Oil at $138, projected at $150 by Morgan Stanley.
Israel wants to attack Iran, Iran wants to attack Israel.
Continued dollar rot.
Unemployment up to 5.5%.
Look for $5 at the pump soon.

Fantastic day for the shorts :))
 
I should invest in ****, because it appears that's where everything is headed.

Seriously, they should make 2 stock markets. One for long-term investors who want to retire some day, and the other for lemming-like dickfuckingwads who **** **** up like today.
 
I quit making any such predictions in the fall of 1992, when I read the packet that came with my free Prodigy CD that came with my new Packard Bell 386 PC, and commented "'Internet?' Sounds like a scam!" and chucked the CD in the garbage.

My powers of prognostication have not improved.

But this oil thing IS beginning to piss me off.
 
this is ridiculous. I'm sorry, but someone can just say something and it makes a tangible resource change prices significantly. I'm sorry, but its ********.
 
In reply to:
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Well today Trichet whacked the dollar and crude shot up again. Even if crude drops the crack spread (no offense here) will widen and gas will not drop. There is a solution however. Buy USO (tracks the West Texas Intermediate light sweet crude) Sell calls at the money, buy out of the money puts, roll over every month. Put the delta in your tank and drive for free.



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I ran this through Babelfish and got it back in Portuguese...


In reply to:
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O poço hoje Trichet whacked o dólar e o tiro cru acima outra vez. Mesmo se o petróleo bruto deixa cair a propagação da rachadura (nenhuma ofensa aqui) se alargará e o gás não deixará cair. Há uma solução entretanto. Compre chamadas da venda da USO (trilhas o Texas ocidental petróleo bruto doce claro intermediário) no dinheiro, compra fora do dinheiro põr, rolam sobre cada mês. Põr o delta em seu tanque e conduza-o para livre.



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...which I understood about as well as the original.

That is to say: this injun heap no speakum financier man lingo.

So then I put the Portuguese back through Babelfish to English and got this:


In reply to:
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The well today Trichet whacked the dollar and the raw shot above another time. Exactly if the rude oil leaves to fall the propagation of the crack (no offence here) will be widened and the gas will not leave to fall. It has a solution however. It buys calls of the sales of the USE (tracks the Texas occidental person rude oil clearly intermediate candy) in the money, purchase it are of the money for, roll on each month. For the delta in its tank and it leads it for free.



--------------------------------------------------------------------------------



Oddly, this made sense to me.

_______________________

Ahhh, the power of Chinese (in this case Portuguese) telephone.
 
Here's a non-political post at politically driven site written by a guy (in Houston) who traditionally does a pretty good job of explaining vexing economic stuff in a language more easily understood by non-economists:

What's Going On in the Oil Market?

Meanwhile, I'm reminded of the phenomenon seen in very complex dynamic systems when supply is too close to demand - price volatility.




.
 
I will take a wild guess and say a bunch of lightweight shorts jumped in Thursday when it looked like the bubble popped and then Friday some smart players with deep pockets squeezed 'em. I'll bet after these guys have made their money they run. But there will be further wild gyration, and the key will be demand in the physical market. Do people worldwide start buying less or not? If they rein in demand for a bit the speculators won't be able to hold. If not it could get real ugly. That's my wild guess, and to show you my conviction I'm not going to bet a dime on it.

Thanks for the link, triple. It was better than I expected.
wink.gif
 
I, too, appreciate the link, Triple.

I understood two things from it:

1. Scapegoat

2. We need to bomb China and India back to the Stone Age.

Did I understand it right?
 
CTGA_Horn said:
The one group I've gotten suspicious of (without any evidence at all really) is the Russians -- Putin's Kremlin crony billionaires. They really benefit the most from high oil costs and have the money (and complete lack of ethics) to manipulate the oil market. So many of the big oil players really don't want prices this high -- they just don't know what to do with all the money, and the high prices make so many alternatives economically viable.

Russia, on the other hand, needs all the cash it can get to build itself up into a world power. It's the world's #1 producer, but it has few reserves compared to most OPEC countries.

So who knows? Just a thought that I've had recently.
Click to expand...
Interesting. Note that gas prices then were roughly where they are currently. Inflation would make the gas 5.49/gallon in 2021 dollars.

My house has carried about 35% in equity since 2008.
 
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