$200, $400 Oil by end of 2009, and 2010-12, respectively, competing now with 3.5 billion people on the other side of the planet Options

[Ker]

I just thought demand destruction is not going to be soon. This because governments (like China, Mexico, Russia, etc..) still have money to buy oil at 150, 200 or maybe higher and sell it subsidized, it is not their money, it is ours, and they don't care much. So we have to watch when governments will be going bankrupt, and the cost of oil will be transfered directly to the customer, thats when the demand destruction will begin.

[dooferdog]

Interesting article.

IEA more and more candid on the situation. Can't help thinking that the Russians will do anything they can to stoke the spec flames to maximise revenues though.

http://www.ft.com/cms/s/0/23928598-36c1-11...00779fd2ac.html


Gazprom predicts oil will reach $250
By Carola Hoyos in Deauville and Javier Blas in London

Published: June 10 2008 09:00 | Last updated: June 10 2008 13:22


Russia’s gas monopoly, on Tuesday predicted oil prices would reach $250 a barrel in 2009.

The prediction came as the developed world’s energy watchdog warned that record high oil prices were needed to choke off demand in order to balance the oil market.

The statement is the International Energy Agency’s most candid admission that oil supply is struggling to catch up with relentless Asian demand for oil and last week’s jump. The price of oil rose $16.24 in less than 36 hours to a record $139.12 a barrel by Friday.Speaking at a strategy presentation in Deauville, Alexey Miller, Gazprom chief executive, said: “Today we witness a very great change for hydrocarbons, the level is very high and we think it [the price of oil] will reach $250 a barrel.”

A company spokesman specified that Gazprom believed that level would be hit in 2009.

The prediction is substantially higher than those being made by analysts, who see oil prices in 2009 ranging between $100 and $200 a barrel.

In its monthly oil market report, the IEA said that “supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market”. It added: “Abnormally high prices are largely explained by fundamentals”.

The market responded by pushing prices back up after they fell below $134 a barrel earlier in the session. The IEA said “supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market”. Nymex July West Texas Intermediate rose 70 cents to $134.95, while ICE July Brent added 53 cents to $134.38 a barrel.

In its report, the IEA cut slightly, as expected, its oil demand growth forecast for the year, but surprised the market with a deep reduction in its non-Opec supply growth forecast, leaving the world economy more dependent than anticipated on Opec, the oil producers’ cartel.

“This is a case of supply and demand pulling in opposite directions to push prices higher,” the IEA said. “Global market fundamentals showed continued tightness, with constrained supplies and robust non-OECD demand growth.”

It cut its demand growth forecast further by 80,000 barrels a day to an annual increase of 800,000 b/d because of record high prices, the slowdown of the US economy and the partial removal of fuel subsidies in some Asian countries.

The agency said that every day there were fresh signs of demand destruction, particularly in sectors such as airlines, but it warned that so far there were “very few signs of slowing demand in non-OECD countries where economic growth is far more significant than price in determining demand”.

The reduction is oil demand growth was overshadowed by a larger cut in forecasted supplies. The IEA reduced its forecast for non-Opec supply growth to just 455,000 b/d, or 225,000 b/d below last month’s forecast. It expected most of the non-Opec fresh output to be in the form of biofuels, which would account for 72 per cent of the supply increase. The non-Opec supply growth forecast for 2008 is now below the growth achieved by the group both in 2007 and 2006 in spite of significantly higher oil prices.

The smaller-than-expected supply increase from non-Opec countries would reduce the spare capacity available to Opec to below 2m b/d for the first time since the third quarter of 2006. The IEA said that Opec continues to dominate global supply growth, as non-Opec production has languished at or below levels of a year ago for the past three quarters.

Opec supplies averaged 32.3m b/d in May, up almost 400,000 b/d from April. Iraqi supply hit a six and a half year high at 2.5 mb/d, the IEA said.

The agency warned that the imbalance between demand and supply forced a counter seasonal drop in rich countries oil inventories in April. It estimates that stocks fell in April by 8.1m barrels. This compares to a traditional increase in April of about 30m barrels.

The IEA warned that the current oil prices could “impinge upon growth prospects” even though the global economy is more resilient to rising oil prices. “Globally, the high oil price is contributing to inflationary pressures,” it said.

The warning from the IEA echoed Monday’s comments by Tony Hayward, chief executive of BP, who said that the oil market was not well supplied. “In a well functioning market where supply and demand are balanced, prices should be stable. Where prices are high, however, they show that supply is not responding adequately to rising demand ... and that is where we find ourselves today,” Mr Hayward said.

Francisco Blanch, head of commodities research at Merrill Lynch, said on Tuesday he was raising his forecast for West Texas Intermediate crude oil in the second half of the year to $121.5 a barrel on “a combination of lower than expected supplies and unrestricted demand. Non-OPEC output is really struggling to expand”.

Gazprom is said to have its sights on investing in TNK-BP. But Alexander Mededev, director general of Gazprom Export, said the company would consider any interest in TNK-BP only after the internal conflict between the company’s parent shareholders was resolved.

However, Gazprom has ambitions to increase by 2012 its share of oil to 15 per cent of its entire production, which is currenlty largely natural gas.

The company expects to invest $30bn this year and expects to have a market capitalisation of $1,000bn within seven to 10 years.

[dooferdog]

Does anyone believe we will get more chances to enter the oil market at below $130 prices? I'm looking at today's fall and wondering whether to jump in on the long side?

[GTG]

Does anyone believe we will get more chances to enter the oil market at below $130 prices? I'm looking at today's fall and wondering whether to jump in on the long side?

I'm faced with the same dilema, my buy in target was $110 when it started to correct last time and now I'm thinking perhaps I should have jumped aboard at $122.

My fears were that the CFTC would intervene as a result of their investigation into allegations that speculators were responsible for the higher prices. Inventories are n't going up so I've ruled this out as just another Fed/Gov machination to blame anything or anyone for their monetary expansion excesses.

My other fear which I'm not so clear about is that the countries which subside their oil prices may reduce these subsidies significantly enough to quell demand and bring down prices.

[dooferdog]

I'm faced with the same dilema, my buy in target was $110 when it started to correct last time and now I'm thinking perhaps I should have jumped aboard at $122.

My fears were that the CFTC would intervene as a result of their investigation into allegations that speculators were responsible for the higher prices. Inventories are n't going up so I've ruled this out as just another Fed/Gov machination to blame anything or anyone for their monetary expansion excesses.

My other fear which I'm not so clear about is that the countries which subside their oil prices may reduce these subsidies significantly enough to quell demand and bring down prices.

I sympathise. I was waiting for a pull back to circa $108 when the damn thing took off, and I've been burnt chasing market rallies before ! And yes, I also was then kicking myself for not getting in on the pull back to $122.

I do think capital restraint mchanisms will become more and more apparent as the authorities get more and more desparate to appear to be doing something, so I still can't rule out restrictions on the US market. In fact, its such a stupid thing to do from the US perspective (the death knell for $ based oil markets) that I almosst expect it.

Reductions in subsidies though I think won't damage demand that much. I appreciate the standard of living in the countries in question is lower than say US/UK standards but all the same costs in places like Malaysia are very low anyway I believe and there are few alternatives to using oil as fuel as growth accelarates.

[riggerbeautz]

I sympathise. I was waiting for a pull back to circa $108 when the damn thing took off, and I've been burnt chasing market rallies before ! And yes, I also was then kicking myself for not getting in on the pull back to $122.

I do think capital restraint mchanisms will become more and more apparent as the authorities get more and more desparate to appear to be doing something, so I still can't rule out restrictions on the US market. In fact, its such a stupid thing to do from the US perspective (the death knell for $ based oil markets) that I almosst expect it.

Reductions in subsidies though I think won't damage demand that much. I appreciate the standard of living in the countries in question is lower than say US/UK standards but all the same costs in places like Malaysia are very low anyway I believe and there are few alternatives to using oil as fuel as growth accelarates.

Same as both. Also fear short term correction, considered futures but again the deposit and calls puts me off, so trying to pick odd winners in the hope their may be a pull back that let's me in more comfortably.

[Ker]

I'm faced with the same dilema, my buy in target was $110 when it started to correct last time and now I'm thinking perhaps I should have jumped aboard at $122.

you still can. right now as NY closed we are at 130 support line, 131.71 as I am writing , asia will open and they should test 135 together with london. so if you buy now, by the time it will reach 132 you can lock profits and try to get into the (possible) train to 140 , the dollar rallied, but markets are random, so anything can happend and we go up again.

[GTG]

you still can. right now as NY closed we are at 130 support line, 131.71 as I am writing , asia will open and they should test 135 together with london. so if you buy now, by the time it will reach 132 you can lock profits and try to get into the (possible) train to 140 , the dollar rallied, but markets are random, so anything can happend and we go up again.

You saying "buy in" on an asian market?

[enrieb]

Oil price crisis threatens to reverse globalisation
The Times June 11, 2008
Carl Mortished: World Business Briefing
http://business.timesonline.co.uk/tol/busi...icle4107268.ece

With brutal efficiency, the oil price is beginning to duff up a monster of the 20th century: globalisation. Those great tentacles that gripped our world in a hideous embrace are suddenly weakening and the multinational octopus is looking a bit pale and sickly. The extraordinary rise in the price of crude oil is wrecking outsourced business models everywhere and distance from your customer is no longer merely a matter of dull logistics. Whether you are selling coiled steel or cut flowers, the cost of transport is a problem.

America's steel industry is enjoying an unexpected revival, its competitive edge sharpened by the tariff wall erected by the cost of shipping heavy, low added-value products across the Pacific. We hear fewer complaints from Americans about Asian steel-dumping; instead, it is Asian exporters who are feeling the pinch and the pressure is from inputs as well as shipping to customers.

China needs to import iron ore and coking coal, but the cost of shipping a tonne of ore from Brazil to China now exceeds $100, a cost that is equal to the value of the mineral itself. The oil overhead for passage from the Atlantic to the Pacific is proving to be a powerful bargaining chip in negotiations between some Australian iron ore mining companies and their Chinese steel mill customers. Antipodean miners are holding out for a higher price, arguing that some of the benefit of lower carriage costs belongs to producers. Proximity is suddenly more profitable and local solutions begin to look less like the expensive option. It would be rash to predict a revival of the Yorkshire textile mill and the demise of the Guangdong sweatshop, but you have to ask whether it makes sense to ship stuff from China when the price of a sea voyage from Shanghai represents half of the value of the product.

The economics of long-distance supply chains are being rewritten; if it is small and expensive - drugs and sophisticated electronics, for example - fuel costs have little impact, but bulky goods are under the cosh. Furniture, footwear, basic machinery, building materials - this is the stuff that China exports in vast quantities to America and it was very cheap, until now.

Economists at CIBC World Markets reckon that globalisation might go into reverse if the escalation in fuel costs continues. The freight cost of importing goods into America represented an effective tariff of 3 per cent when the oil price was $20 per barrel in 2000; it is now more than 9 per cent and will rise to 11 per cent if oil hits $150, CIBC says.

[Ker]

You saying "buy in" on an asian market?

yes. did tonight what I told you to do. but I exited at 133.75 because i thought they must retest 130 once again. and what may happen today is a spike to 136 on inventories at 10:35 am, but this may fall, I beleive they must secure 130 support very-very good to go for 140. (when I speak about 130 I mean it may be 130.50, 130.80, 131.20, 131.50, something like that..., but not 129.80, 130.00 because thats a signal of weakness)

I don't think a pullback could go lower than 125 , in my opinion this will never happen again. so you just have to watch the bottom, a strong bottom on some support line and get in

[GTG]

yes. did tonight what I told you to do. but I exited at 133.75 because i thought they must retest 130 once again. and what may happen today is a spike to 136 on inventories at 10:35 am, but this may fall, I beleive they must secure 130 support very-very good to go for 140. (when I speak about 130 I mean it may be 130.50, 130.80, 131.20, 131.50, something like that..., but not 129.80, 130.00 because thats a signal of weakness)

I don't think a pullback could go lower than 125 , in my opinion this will never happen again. so you just have to watch the bottom, a strong bottom on some support line and get in

Thanks for your insights Kerr, you seem confident that the speculator argument is for the most part invalid. Could I ask you what investment vehicle/s you use on which Asian exchange and the broker you use, thanks?

They are now blaming speculators on London ICE exchange for higher prices:

http://www.ft.com/cms/s/0/b962d938-3716-11...?nclick_check=1

I think this sums up the kerfuffle.

In a video interview with the Financial Times John Damgard, president of the US Futures Industry Association, warned against such a move, saying the CFTC was under “intense pressure” from Congress. US politicians “looking for somebody to blame” for high energy prices could result in retaliation from foreign countries, he said.

[Ker]

Thanks for your insights Kerr, you seem confident that the speculator argument is for the most part invalid. Could I ask you what investment vehicle/s you use on which Asian exchange and the broker you use, thanks?

They are now blaming speculators on London ICE exchange for higher prices:

http://www.ft.com/cms/s/0/b962d938-3716-11...?nclick_check=1

I think this sums up the kerfuffle.

well I use CFD trading with futures (oil,natural gas,gold,silver,copper,soybeans and us bonds, major indexes, just everything you need to trade on the global scale), if you are in london or us, you probably could not use it, google for "gci trading" , this is my broker, I am very satisfied with the software. Check out 'shorting nasdaq' thread on this forum about CFD trading before entering it, many people dont like CFDs because it has high leverage and risk, but personaly I like it a lot.

[wren]

Now the U.S. Navy predict $400 oil.

Oil Could Hit $400 a Barrel by 2018

That's the forecast from U.S. Navy Admiral William Owens, who sees rising tensions between the U.S. and China as they scramble for energy
<snip>
"The big story is productivity in China," he asserts, noting it is an incredible 9%, or three times the level of productivity in the US during its 1990s peak. Admiral Owens attributes this to the country's high-quality infrastructure. It will allow the Chinese economy to soon become the second-largest in the world, with a GDP big enough to justify comparison with the US.

That in turn means demand for energy will see oil prices reach $400 a barrel by 2018, he argues. This is not only because of demand in China, India and elsewhere, but because of the nationalisation of oil fields in countries such as Russia, Venezuela and in the Caucasus. And energy efficiency in China is not very high.

http://www.businessweek.com/globalbiz/cont...global+business

[GTG]

well I use CFD trading with futures (oil,natural gas,gold,silver,copper,soybeans and us bonds, major indexes, just everything you need to trade on the global scale), if you are in london or us, you probably could not use it, google for "gci trading" , this is my broker, I am very satisfied with the software. Check out 'shorting nasdaq' thread on this forum about CFD trading before entering it, many people dont like CFDs because it has high leverage and risk, but personaly I like it a lot.

I checked out your brokers website, they look good and as UK resident I'd be able to open an account, they say they have over 10,000 clients world wide. The Paypal funding option is very attractive also but I'm not so sure about the jurisdiction, Belize? In any case it maybe a one for the future, being relatively new to investing/trading I'm just finding me feet so futures and CFD's are a little further up the learning curve ATM. I'll be having a look at the "shorting nasdaq" thread with interest though, as it happens I've had a position open for about a week now shorting the DJ financial sector(got in before the downgrade of the monoline insurers). It's currently showing a 10% gain and I think it's got a fair way to go, the only thing I'm concerned about is the counter party risk in the event of a complete meltdown. Thanks again for sharing.

[Ker]

US crude inventories are suspiciously going lower. prices spike but are not sustained. so, what may happend, is that US stoped buying oil with the intention to drive the price down. maybe shorting oil is a good strategy in the short term.

[Ker]

US crude inventories are suspiciously going lower. prices spike but are not sustained. so, what may happend, is that US stoped buying oil with the intention to drive the price down. maybe shorting oil is a good strategy in the short term.

well market says we are going to consolidate in the 132 -138 area before jump to 140 area, some analysts predict 148, i am going up with the crowd

[GTG]

Oil's quite a scary looking chart ATM and as I'm not a trader averaging in is going to be my best bet.

[Ker]

looks like we need one more test in the 130 area to go for 150 oil. dont think a probable rally in $USD (in case of Irish people decision favors $USD) will drive oil below 130, but lets see it.

[Ker]

Oil's quite a scary looking chart ATM and as I'm not a trader averaging in is going to be my best bet.

well I believe that there is no such thing as traders & investors. We are all traders. It happends that investors are long-term traders. And if an investor do not times the market he will lose just as the day trader does. Even in physical business, you have to identify trends.
If you are interested in mega-trends here is an interesting discussion:
http://www.netcastdaily.com/broadcast/fsn2008-0607-3a.mp3
source (http://www.financialsense.com/fsn/main.html)

[Ker]

we just completed symmetrical continuation triangle between 131 and 139 price range on the daily. consolidation point 135.50 . jump probably monday ???