PeakOil is You
Oil keeps declining
Re: Oil keeps declining
by halcyon » Wed 13 Aug 2008, 06:34:11
$this->bbcode_second_pass_quote('MrBill', 'I') sense a real double standard. If the housing market or the stock market go down by +20% then it is considered a bear market. But when commodities or crude dip by +20% it is considered a mere breather on the way to ever higher prices.
You make a good point as always.
My take:
- A successive 10 month fall of lower lows, lower highs and a combined drop of c. 20% can be considered a bear market in the US stock market, especially when the economic, monetary and financial indicators are either worsening or not improving on the average
- A one month worth of decline in oil price against severe and very likely temporary cutbacks from China, do not necessarily yet constitute a bear market in oil commodities, esp. when the likelihood of supply meeting growing global demand up to and including 2010 is looking increasingly more dire.
Yet, the threat of worldwide severe enough recession looms, which could bring the world global oil demand growth to a halt or possibly even negative. However for that to happen, the recession would have to be according to oil economists pretty gargantuan.
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Re: Oil keeps declining
by MrBill » Wed 13 Aug 2008, 07:51:50
We'll no doubt ratchet higher in this 'super bull market' on the back of 'the Asia growth story' especially if some large consuming nations continue to subsidize energy imports that does nothing to inform energy users to cutback and otherwise ration demand. However, as BT said, we should expect higher volatility in both directions.
It would actually be healthier in the long-run to return to a $80 to $100 range to give food and fuel prices a chance to settle, inflation to come down and some more supply come onto the market. Then a gradual increase in price from $80-100 to $150-200 might be more managable for everyone involved. So long as they do not expect a return to low energy and commodity prices again.
Mind you what I would prefer and what might happen are often two different realities. If nations continue their growth at any cost policies of the past 6-7 years then we might resume the uptrend in energy and commodities without any meaningful pause. That could lead to a more severe crash later on.
It would actually be healthier in the long-run to return to a $80 to $100 range to give food and fuel prices a chance to settle, inflation to come down and some more supply come onto the market. Then a gradual increase in price from $80-100 to $150-200 might be more managable for everyone involved. So long as they do not expect a return to low energy and commodity prices again.
Mind you what I would prefer and what might happen are often two different realities. If nations continue their growth at any cost policies of the past 6-7 years then we might resume the uptrend in energy and commodities without any meaningful pause. That could lead to a more severe crash later on.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Oil keeps declining
by BigTex » Wed 13 Aug 2008, 09:01:08
$this->bbcode_second_pass_quote('MrBill', 'W')e'll no doubt ratchet higher in this 'super bull market' on the back of 'the Asia growth story' especially if some large consuming nations continue to subsidize energy imports that does nothing to inform energy users to cutback and otherwise ration demand. However, as BT said, we should expect higher volatility in both directions.
It would actually be healthier in the long-run to return to a $80 to $100 range to give food and fuel prices a chance to settle, inflation to come down and some more supply come onto the market. Then a gradual increase in price from $80-100 to $150-200 might be more managable for everyone involved. So long as they do not expect a return to low energy and commodity prices again.
Mind you what I would prefer and what might happen are often two different realities. If nations continue their growth at any cost policies of the past 6-7 years then we might resume the uptrend in energy and commodities without any meaningful pause. That could lead to a more severe crash later on.
It would actually be healthier in the long-run to return to a $80 to $100 range to give food and fuel prices a chance to settle, inflation to come down and some more supply come onto the market. Then a gradual increase in price from $80-100 to $150-200 might be more managable for everyone involved. So long as they do not expect a return to low energy and commodity prices again.
Mind you what I would prefer and what might happen are often two different realities. If nations continue their growth at any cost policies of the past 6-7 years then we might resume the uptrend in energy and commodities without any meaningful pause. That could lead to a more severe crash later on.
I hope I'm not missing something here, but it seems to me that the oil services sector is going to be incredibly profitable in coming years whether oil is at $80, $100, $150 or $200. At the lower prices, there will be more economic activity, and thus more drilling activity, and at higher prices there may be less economic activity, but as we have seen in the recent runup, many people believe that more drilling is the proper response to high prices, so this will be good for the oil services sector too.
Oil services profits seem safe in either scenario (higher prices or lower prices).
What is the counterargument to this approach?
I am especially interested right now because I think that the oil services sector is priced very attractively.
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Re: Oil keeps declining
by MrBill » Wed 13 Aug 2008, 09:23:48
I like oil service cos. in the current environment. Which ones in particular are you looking at? Cheers.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Oil keeps declining
by BigTex » Wed 13 Aug 2008, 12:39:09
$this->bbcode_second_pass_quote('MrBill', 'I') like oil service cos. in the current environment. Which ones in particular are you looking at? Cheers.
My pet for a long time has been DRQ (note that it just picked up its second analyst).
The ETF XES tracks the sector well (that's primarily what I'm doing).
RIG looks like it will lead the pack.
HAL is strong.
I just can't formulate any argument for why this sector won't perform well going forward. The stocks might get beat up, but the companies' growth and profits look reliable.
The only assumption I am making is that oil stays at or above about $80 a barrel, and that seems like a safe assumption.
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Re: Oil keeps declining
by Starvid » Thu 14 Aug 2008, 05:12:55
$this->bbcode_second_pass_quote('mos6507', '')$this->bbcode_second_pass_quote('Ferretlover', 'W')e should enjoy the lower prices while we can. The next upwards spike is going to be a doozie!
This winter?
No one knows... And really, does it matter much?
Peak oil is not an energy crisis. It is a liquid fuel crisis.
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