[rwwff]

$this->bbcode_second_pass_quote('', ' ')From a MonteQuest message..
From 2004...
Oct. 17 (Bloomberg) -- Crude oil prices, which rose to a record $55 a barrel in New York on Friday, may increase further and peak at $75 a barrel, said Bernard Dan, President of the Chicago Board of Trade, the second-biggest U.S. futures market.

``Given that some production is going on around the world, I can't see it much higher than $75 unless there are disruptions in supply lines,'' Dan said on Publishing & Broadcasting Ltd.'s Nine Network's Business Sunday program in Sydney. ''I think that the U.S. economy is strong enough to absorb that.''

[MrBill]

$this->bbcode_second_pass_quote('rwwff', '')$this->bbcode_second_pass_quote('', ' ')From a MonteQuest message..
From 2004...
Oct. 17 (Bloomberg) -- Crude oil prices, which rose to a record $55 a barrel in New York on Friday, may increase further and peak at $75 a barrel, said Bernard Dan, President of the Chicago Board of Trade, the second-biggest U.S. futures market.

``Given that some production is going on around the world, I can't see it much higher than $75 unless there are disruptions in supply lines,'' Dan said on Publishing & Broadcasting Ltd.'s Nine Network's Business Sunday program in Sydney. ''I think that the U.S. economy is strong enough to absorb that.''

[truecougarblue]

God bless America!!!

I've been away for a couple of weeks and have been avoiding financial news as much as possible.

Before I left my stops were set wide on my longs in GLD and HL. I haven't been disappointed. This cycle has been good to me, looks to turn into my best trading month ever.

I expect the AU to continue upward for another week, then we'll see what kind of correction comes around. I'll probably move my stops in closer once I get back to work on Thursday.

[MrBill]

Still quite busy and not able to contribute as much as would like to. However, the market in general found reasons to buy after the long weekend in the USA in the form of sum Kim young Sun lobbing a few long range missiles over its immediate neighbors to the east.

Iran is also taking its sweet time in responding to EU proposals over aid and technology in return for suspending their enrichment program. Hey, with all the goodies that the Hermit Kingdom gets in exchange for its beligerance you cannot expect other would be trouble makers not to sit-up and take notice can you?

Never the less, it is all about supply and demand. The threat of supply interuptions and continued demand despite higher prices. Goldman Sachs has this to say in their latest research about today's high prices versus tomorrow's increased supply.

$this->bbcode_second_pass_quote('', ' ')Improved market flexibility is reducing price and time spread volatility

We have long argued that the depletion of excess capacity along the oil supply chain earlier this decade that resulted in physical shortages has forced the market to shift from a two decade- long “exploitation” phase to an “investment” phase in which supply growth comes from new investments.

Increased investment has begun to expand overall delivery and storage capacity, creating more flexibility in the system and reducing volatility. Long-term investment requires higher prices, creating near-term surpluses The higher prices required to motivate investment in large-scale, long-term projects have also weakened demand and brought on too much marginal supply near term that would otherwise not have been produced. Net, long-term shortages have created near-term surpluses, further
exacerbating the decline in volatility.

Current investment phase is far from over as capacity needs to expand

Despite the near-term surplus in the market, continued investment is required to prevent the market from slipping back into a shortage environment and to eventually create excess capacity in the market that is more than a “thin layer” – especially as part of the recent inventory build is required for system and pipeline fill in the new infrastructure.

We are raising our WTI price forecast on rising production costs

As large-scale investment is putting enormous stress on production inputs such as labour, rigs, and equipment, the industry costs have been escalating. Combined with substantial investment risk, we are raising our five-year-ahead WTI price to $67.50/bbl from $60/bbl and our forecast for 2H2006 WTI crude oil prices to $75/bbl from $70/bbl.

Price risks are becoming more symmetric due to near-term surpluses

Price risks, however, are becoming more symmetric and less skewed to the upside due to near-term surpluses and expanded delivery and storage capacity. This does not represent a shift in the long-term balance which is why it shifts the risks, but not the price outlook.

[MrBill]

In Mr. Roger's Neighborhood, driving is going to get very expensive.
$this->bbcode_second_pass_quote('', 'O')il prices will soar to well over $100 a barrel and stay high as part of a sustained commodities bull run that has another 15 years to run, billionaire U.S. investor Jim Rogers told Reuters in an interview.

One factor that could bring down the price would be a bird flu epidemic, which would send all asset classes plummeting, he said, although oil would probably fall less than other markets.

"We're going to have high oil prices for a very long time. The surprise is going to be how high it goes," Rogers said.


Reiterating earlier comment oil prices would hit at least $100 a barrel, he said: "It will be much more than $100 before the bull market is over."

[Chaparral]

Took profits on the Euro shorts today. Staying short in HU-Q06 for the time being. I think we could see 20600 or lower. Getting creamed in the corn and wheat shorts. Still long on GC-Q06. I shoulda taken profit Fri afternoon.

[Marklar]

what about oil short term price swings?

Anyone seeing a downtrend on the horizon, say starting yesterday lasting for the next 7-10 days?

[MrBill]

$this->bbcode_second_pass_quote('Marklar', 'w')hat about oil short term price swings?

Anyone seeing a downtrend on the horizon, say starting yesterday lasting for the next 7-10 days?

[MrBill]

Latest report from GS on oil & base metals market. Particular attention paid to the transition from the exploitation phase of existing capacity to take advantage of higher prices to the investment phase which is dependent on continued higher prices.
$this->bbcode_second_pass_quote('', '"') The Goldman Sachs Group, Inc.
July 10, 2006
Commodity returns continued to outperform during 1H2006
Global Commodity Research
Halfway through 2006, commodities returns are up 5.3% year to date, lower than the gains achieved during 1H2005, but still well above returns across most of the major financial indices. A closer look at the oil and metals sub-sectors suggests that strong oil returns have been led by rising long-dated prices required to continue to motivate investment in long-term projects given escalating costs and uncertainty. In contrast, explosive base metals returns have been led by strong near-dated timespreads given the current supplied-constrained environment.

Going forward, we believe a continuation of these dynamics is likely to continue to support commodity returns. We therefore maintain our recommendation for an overweight allocation to commodities. However, we are modestly lowering our energy returns forecast to 9% from 10%, and are downgrading our recommended allocation for energy from overweight to neutral. As a result, we have lowered our GSCI total returns forecast over the next 12 months to 9% from 10% previously.

Commodity returns continued to outperform during 1H2006

Halfway through 2006, commodity returns are up 5.3% year to date, lower than the gains achieved during 1H2005, but still well above returns across most of the major financial indices (see Exhibit 1). A closer look at the oil and metals sub-sectors suggests that strong oil returns have been led by rising long-dated prices required to continue to motivate investment in long-term projects given escalating costs and uncertainty. In contrast, explosive base metals returns have been led by strong near-dated timespreads
given the current supplied-constrained environment.

Going forward, we believe a continuation of these dynamics is likely to continue to support commodity returns. We therefore maintain our recommendation for an overweight allocation to commodities. However, we are modestly lowering our energy
returns forecast to 9% from 10%, and are downgrading our recommended allocation for energy from overweight to neutral. This revision leaves our GSCI total returns forecast over the next 12 months at 9%.

Specifically, petroleum returns have remained strong – up 14% over 1H2006 – as higher prices have been required to induce spending on new infrastructure following the depletion of excess oil supply and delivery capacity earlier this decade, which generated the shortages, price volatility and backwardation that characterized the oil market in the late 1990s and early 2000s. Higher prices have been particularly required to motivate
investment in oil capacity as costs to build new capacity have continued to escalate, as have the risks involved in developing capital-intensive, long-lead-time projects. However, while continued spending is required to generate excess capacity, it is
important to note that five years after the transition of the oil market from an “exploitation” phase – in which supply was increased by simply increasing utilization rates or “exploiting” the existing capacity – into the current “investment” phase – in
which new investments have been required to grow the supply base – increased spending has begun to expand overall oil delivery and storage capacity (see Exhibit 2). Moreover, the higher prices required to motivate the increased spending in recent years has slowed oil demand growth and led to a rise in marginal, quick-to-market production, such as from stripper wells, pushing the market into a near-term surplus. These factors have increased the flexibility in the system, better equipping the oil market to absorb shortterm supply and demand shocks. The reduced dependency on price to force physical adjustments has muted spot price/timespread volatility.

Thus, while petroleum returns have been strong, in line with the typical rise in prices during investment phases, they have not been explosive given the lower spot/timespread volatility that is also typical several years into an investment phase. It is also important to note that despite the strong performance from oil, the large surplus in natural gas inventories and historically high natural gas prices entering into 2006 have led to extremely negative natural gas returns so far this year, which have weighed on overall energy returns, up just over 2% year to date.

In contrast to oil, investment in non-energy mining has just begun to increase (see Exhibit 3). The impact of increased spending has therefore yet to be felt, leaving base metals supply capacity constrained and struggling to keep pace with demand growth. In other words, the base metals markets are several years behind the oil market in terms of supply capacity growth.

With inventories across most of the base metals complex already at exceptionally low levels, the inability to increase supply in the near term has left the market dependent on price spikes to force demand down in line with supply. The general inflexibility in supply
has also left the market extremely sensitive to news flow, particularly related to the economic growth outlook and near-term supply disruptions, given the very limited ability to deal with fundamental shocks. As a result, spot price and timespread volatility has surged across most of the base metals, with the recent volatility in base metals reaching the extreme volatility of the oil market back when its constraints were binding (see
Exhibit 4). This environment of constrained capacity and near-term shortages that has led to strong near-dated timespreads has generated explosive returns in base metals, up 46% over 1H2006.

Going forward, we believe similar dynamics will drive oil and metals returns over the next year. We maintain that despite the near-term surplus in oil and the increased flexibility in the oil complex, continued investment will be required to prevent the oil market from slipping back into a shortage environment and to create the excess capacity necessary to move prices sustainably lower (see Goldman Sachs’ Energy Watch, July 5, 2006 for more details). As result, we believe prices will need to remain at the recent higher levels and could continue to rise should production costs and uncertainty continue to escalate.

We also still believe that oil demand growth will reaccelerate during 2H2006 as yearover- year increases in prices continue to decline and consumers become more comfortable with the higher-price environment, which we expect to draw inventories to lower levels and tighten timespreads. However, the combination of increased delivery and storage capacity, together with near-term surpluses has reduced our expectations on the extent that timespreads can tighten as well as on the upside skew to price risk. As a result, we are modestly lowering our forecast of energy total returns over the next twelve months to 9% from 10% and downgrading our recommended energy allocation from overweight to neutral.

[truecougarblue]

I sold my longs in GLD and HL today, I may have been premature but I think a good part of today's run was due to India.

I'd been in long since the 555 level last month, so I did indeed end up with a record month. Don't worry though, I won't quit my day job.

I'm expecting a pull back these next couple of days, possibly tempered by news of terrorism. If spot prices open in the morning below today's close I'll be shorting.

[Chaparral]

$this->bbcode_second_pass_quote('truecougarblue', 'I') sold my longs in GLD and HL today, I may have been premature but I think a good part of today's run was due to India.

[MrBill]

Blasts in India and bad news out of Iran (is there any other kind?) were the initial driving forces behind the sudden rally in the crude, but behind that I noticed that heating oil unexpectedly took the lead, so probably more than just the headlines at work. The spread between unleaded and heating oil was wide, so perhaps some heating oil shorts covered their positions as well as some long spread were terminated?

Today's DOE inventories are forecast as following:

Crude f/c -1.3 mio to 340 mio vs. 3 yr ave 301 mio bbls
Distillates f/c +1.7 mio to 129 mio vs. 3 yr ave 117 mio bbls
Gasoline f/c unch'd at 213 mio vs. 3 yr ave 209 mio bbls
Refinery runs +0.5% to 93.6% vs. 96.2% YOY

In the big picture China's June exports slowed to +4.8% in June from +19% in May, but monthly breakdowns can be ignored as has to do as much with domestic margins and timing as overall demand. Overall demand however is still very strong. Imports year to date are up 15.6%. Not to be sneezed at as adds up to +4 mbpd extra world demand and Chinese growth (+10%) along with the rest of Asia is still booming. And as imports are still outstripping growth in nominal terms we can deduce that growth is coming at the expense of energy efficiency gains.

$this->bbcode_second_pass_quote('', ' ') Crude/Products: Main Features to Today’s Trade

While reasons behind today’s price strength appeared vague, statements out of Iran suggesting that a freeze on uranium enrichment activities was not in the cards, was widely mentioned as a bullish driver. Although the statement provided no fresh news, it apparently provided enough ammo to the institutional speculative community to reenter the long side.

Since the upside leadership in the heating oil had no basis in fundamental developments, the market was apparently item of choice due to technical considerations or some possible value selection in the heating oil crack spreads. However, sustaining today’s bullish heating oil leadership through tomorrow’s trade will prove difficult since surprises in the weekly distillate data could fall to the bearish side as implied demand could drop sharply since PADD 1 storage availability is becoming limited. This is evidenced in the recent widening in the “front to back” heating oil spreads to record wide levels and cash discounts of more than 9 cents.

In spite of the heightened price volatility, we’re maintaining an opinion that sustaining price rallies across the complex will require renewed upside leadership from the gasoline markets. For now, such lead appears unlikely because the refinery snags that drove the sharp late July advance have virtually been neutralized. Furthermore, another gasoline stock increase is possible in tomorrow’s reports. Spot gasoline markets appear balanced as partially reflected in a newly established contango in the front unleaded switch.

The monthly EIA Short term Energy Outlook didn’t appear to be a major factor in today’s trade. While continued strong annual global consumption growth estimates in the 1.6% area help to maintain a bullish macro view, domestic gasoline growth projections of only 0.7% for this year are providing a cautionary note to the bulls, in our view.

The natural gas trade covered an unusually wide 30 cent range but failed to prove new clues to near term pricing direction. While the upcoming increase in cooling demand is providing support, sustaining price gains is still proving difficult in the absence of any significant storm threats.

Tomorrow’s trade could be influenced to some degree by the petroleum stats while Thursday’s storage figures could have some brief impact on nearby values.
Global Derivatives Research

[jahmahn]

Hi,
i like to lurk here to learn something from the guys/gals who make the price go up and down. I have noticed that the price of oil for delivery in august has passed 76$ (both wti and ice). I've heard that this might be a signal of a new trading range, where 75$ is close to the bottom. My question is: Is this oil rally based on fundamentals or is it a speculative rally, based on fear of possible future (and unknown) threats to the supply? What is your opinion of the current price of oil?

sincerly,
johan

[Chaparral]

Shorted gold at 658 in after NY closed when I saw it spike upwards on low volume. Went for a cup of coffee. Came back and saw Israel had bombed the Beirut airport and say CL-U06 pushing 79 bucks a barrel. Went long at 7890. I figure the YG short and the YL long will hedge each other a bit.

I am trading the September contract to give myself a little more wiggle room. The last trading day is barely a week away for August crude.

The grains collapsed today but not before I took profits on more C-Z07 that I'd been holding since last March. I must be short upwards of 50 corn and wheat contracts, all for Dec 06. I don't believe that now is the time to take profits; They will likely have farther to fall. I wouldn't be surprised to see a rally when the electronic market opens in two and a half hours based on geopolitical concerns and a technical bounce.


note: post edited Sun 7/16; I'm shorting Dec 06, not 07; big difference there!

[Chaparral]

$this->bbcode_second_pass_quote('jahmahn', ' ')What is your opinion of the current price of oil?

sincerly,
johan

[truecougarblue]

Well, the mideast tension and terrorist stuff seems to have killed my purported correction. I just managed to squeak by and come out even on my shorts, and now I'm long again the AU and the miners. The miners are holding about even, but I expect a slingshot effect in the next couple of days.

I agree with Chapparal on the oil. I just don't see a lot of slack in the supply chain in the near term.

However, we Americans continue to borrow and spend ourselves into oblivion and that credit spigot will inevitably get closed at some point. If and when that happens I expect to see some significant demand destruction, and that will be what I would see as the next major correction ($10-$15/bbl).

I have not concentrated much on setting up indicators, but I'd expect our next recession to feed on itself and not respond well to stimulus, so maybe an official recession would be a good clue for a medium term short.

If we see little or no increase of production capacity through the end of this year then I think the fundamentals will be that much more pertinent to pricing, and we'll have much less chance of a major correction.

I meanwhile plan on considering my oil play a long term thing, and I'll stick to the gold for the short term. I understand the game a lot better.

[Chaparral]

Reversed position on GC-Q06 so I'm long now. It will be interesting to see what the Japanese do. They seem to be bidding it up a little bit. I notice that margins for crude are now north of $9000.00 USD; guess that'll cut liquidity and put a bit of a damper on speculation.

[MrBill]

I had gotten long Brent under $7400 on Wedsnesday ahead of the DOE numbers, but as I had preplaced my sell order, I was immediately taken out at a profit before the market fell back to Wednesday afternoon's low ahead of this dramatically rally. I played around with it yesterday, but could not time it right, so missed the big move up.

At least my oil company stocks will benefit some from this positive sentiment, but recent gains have not kept pace with the crude futures. My feeling is that investors do not feel as good about equity markets going forward, as they are afraid of higher product prices due to geopolitical events, therefore even oil company shares will suffer from a dampening effect if the broader market loses its upward momentum which certainly looks to be the case if I look at bell weather stocks like GE and others.

The best I can say about my trading this week is that I am up, and so far I have resisted the suicidal tendency to try to pick the top! At least I have that. Ahead of the weekend I just will not try to get clever and sell. Too risky!

$this->bbcode_second_pass_quote('', 'C')rude/Products: Main Features to Today’s Trade

Without repeating all of today’s geopolitical headlines, suffice it to say that renewed mid east tensions and heightened concerns over the Iran/UN nuclear standoff were the main drivers behind today’s fresh record crude highs. In view of current strong upward momentum, a further rally appears likely tomorrow ahead of a weekend that could bring fresh bullish news on several geographical fronts. Although the front spreads in both the crude and gasoline weakened appreciably, expansion in the crack spreads tended to reinforce bullish sentiment.

The ability of the August unleaded contract to push above resistance at the $2.30 level also provided a bullish consideration given our opinion that sustained price strength will require upside lead from the seasonal commodity. However, gasoline buying is being stymied to some extent by a significant rebound in refinery activity that should find reflection in next Wednesday’s data. The latest facility to go into restart procedure is the Sunoco unit in the Philadelphia region that was downed a couple of weeks ago.

The heating oil futures were the strongest component of the complex in spite of near burdensome supply levels that have forced huge carrying charges into the spread term structure. Reasons behind the heating oil strength appeared technical and related to spreading against the gasoline. However, the European gasoil market also appeared to provide upward pull in conjunction with a strong August Brent trade ahead of tomorrow’s expiry. But, despite these factors, we would note that upside heating oil leadership in recent months usually isn’t sustainable.

Much of today’s natural gas strength appeared to reflect spillover from the strong petroleum gains as the market’s initial response to the weekly storage stats proved bearish. The 89 bcf injection was above average street ideas for about an 80 bcf hike and was about equal to last year’s build. Although the excess against the 5 year averages narrowed by about 10 bcf, the current 580 bcf overage against average levels continues to provide a major bearish consideration to this market. This negative factor will eventually need to be tempered by an active storm season once hurricane activity becomes more pronounced seasonally by next month. In the meantime, hot temperature forecasts appear to be providing only limited support, partially due to the fact that the early summer hot spell failed to translate to a major reduction
Global Derivatives Research

[drew]

Hey Mr Bill, you could always put some gold in that portfolio....

of course, it seems not to care about the sentiments to which you referred..

(I noticed that too, yesterday...and it was nice to see my gold carry the weight for my oils, which were kinda flat)


Drew

[Chaparral]

Took a quickie profit on the sept crude at 7965. I didn't like the chart action so as it was sliding back down from 7980 i got the heck out and got back in this morning. I don't know what gold is going to do. My hunch is that people will want to go to bed long over the weekend but the heights are a bit dizzying. The grains are staying down nicely though.


edit; also got out of gold at 668. I think I will go to bed substantially out of the market this weekend. I won't short anything though, not until electronic access opens on Sunday.