Oil prices to stay below $70 for 3 or 4 years!

by **KevO** » Sat 07 Oct 2006, 07:27:10

Pick a statement about oil and say it!
Opec will cut, opec won't, oil will nosedive to $45, it'll be $200 by 2008, a war with Iran won't dent prices, Saudi have peaked, no they haven't - now the market 'don't believe' that Opec will cut production so oil is dropping again!

"Credit Suisse said in a research note Friday that it expects oil prices to stay below $70 for the next three or four years as spare capacity builds up within OPEC.

"We believe this resolution process will likely take several years and will entail a period of widely fluctuating prices in the $50-$70 range," the note said. "We also note that the bulk of industry spare capacity, as has always been the case, will lie within OPEC countries, with attendant political and policy risks."

"Oil prices fell below $60 a barrel Friday as the market grew skeptical of reports that OPEC planned immediate cuts to production"

"Traders said they doubted that all 11 OPEC members would go ahead with any informal agreement intended to stem a 24 percent decline in prices since mid-July.

"The issue now becomes one of the OPEC moves versus the abundant stocks currently being held," said Paul Harris, analyst for Bank of Ireland Global Securities"

who was it who said, 'no maneth shalleth knoweth the dayeth'?
well, she got that right!

by **Dajm** » Sat 07 Oct 2006, 08:50:54

$this->bbcode_second_pass_quote('KevO', 'P')ick a statement about oil and say it!
Opec will cut, opec won't, oil will nosedive to $45, it'll be $200 by 2008, a war with Iran won't dent prices, Saudi have peaked, no they haven't - now the market 'don't believe' that Opec will cut production so oil is dropping again!

by **JustinFrankl** » Sat 07 Oct 2006, 09:20:45

If the last several years' run-up in price is indicative of the underlying peak oil supply problem, oil will hit $100 by the end of March, 2007.

The current drops in price for oil and gasoline are too steady and without variation that they smack of market manipulation.

by MD » Sat 07 Oct 2006, 09:40:51

Wild swings in energy prices have been predicted to occur all along the plataeu. Expect them to continue.
Name your price anywhere from $35-$135 and you will have a good shot at seeing that price one or perhaps even many times over the next five years.

by **AirlinePilot** » Sat 07 Oct 2006, 13:50:22

I am too Gideon, I think it's a good bet.

by **KevO** » Sat 07 Oct 2006, 14:06:57

agree

by **threadbear** » Sat 07 Oct 2006, 14:18:20

$this->bbcode_second_pass_quote('Gideon', 'G')ideon's Prediction:

The key moment will be when it becomes inarguable that SA is in terminal decline. When the world notices that, and no SA excuses will cover the decline, then oil will breach 100 bucks and, even accounting for inflation, it will never come down.

I think w/in 36 months.

In fact, I'm betting on it.

by **DantesPeak** » Sat 07 Oct 2006, 15:04:42

Predicting the short term price of oil is difficult, if not impossible. Longer term it's clearer.

Usually when we refer to the price of oil, we are talking oil light sweet crude from a Texas, US shipping point. Reasons that light sweet crude might rise in price long term are:

1. We possibly peaked out in light sweet crude production in 2005
2. The mix of heavy to light crude seems to be increasing
3. There is no sign of slower worldwide monetary expansion. More fiat money creates more inflation
4. More people
5. More military conflicts, possible embargoes or attacks on oil supplies

On the negative side is:

1. Slower economic growth

The factors that might move oil higher may outweigh the negative implications of reduced demand in a recession.

by **chris-h** » Sat 07 Oct 2006, 15:14:54

Re: Oil prices to stay below $70 for 3 or 4 years!
Are the USA elections ending after 3 or 4 years ?
If yes then oil will stay below $70 for 3 or 4 years . :razz:

by **Last_Laff** » Sat 07 Oct 2006, 15:15:49

Who said that? who is she? Where did those qoutes come from?

by **threadbear** » Sat 07 Oct 2006, 15:16:58

$this->bbcode_second_pass_quote('DantesPeak', 'P')redicting the short term price of oil is difficult, if not impossible. Longer term it's clearer.

Usually when we refer to the price of oil, we are talking oil light sweet crude from a Texas, US shipping point. Reasons that light sweet crude might rise in price long term are:

1. We possibly peaked out in light sweet crude production in 2005
2. The mix of heavy to light crude seems to be increasing
3. There is no sign of slower worldwide monetary expansion. More fiat money creates more inflation
4. More people
5. More military conflicts, possible embargoes or attacks on oil supplies

On the negative side is:

1. Slower economic growth

The factors that might move oil higher may outweigh the negative implications of reduced demand in a recession.

by **DantesPeak** » Sat 07 Oct 2006, 23:23:20

Gideon - well done. I first posted on the Chinese SPR about last new year's - with perhaps the most interesting point is not that China is building a 1 billion barrel reserve, but doing so with the help of Saudi Arabia. The implication being that Saudi oil will be coming to China (and not going somewhere else).

I forgot to add point 6:

6. Global warming, hurricanes/typhoons

Weather in the Gulf of Mexico couldn't get much better than this year, although there were some smaller isolated storms and incoming Atlantic Ocean waves that did cause some minor trouble to the GOM energy industry.

by **AirlinePilot** » Sun 08 Oct 2006, 00:17:16

I think threadbear has a point with her outlook on the economy. I happen to agree with her on that (someone sound the alarm!) Right now some of the signs show possible weakness but it's nothing more than speculation that a collapse is coming.

Doomerism on a slightly different plane I guess.

I just dont think it will be big enough to put a dent in consumption for long enough to matter. It WILL push the horizon for rising oil prices out a bit into the future but I still think Gideon's scenario is far more plausible.

I'm curious what your angle for investment will be Gideon. Care to share?

by **TreebeardsUncle** » Sun 08 Oct 2006, 02:32:12

Well, there are a number of regions -- in the Gulf of Mexico, in Brazil and Venezuela, off the West Coast of Africa, in the Middle East, and around the Caspian Sea -- that are expected to have significantly increasing production within several years. With increasing consumption in Asia and the US etc, geopolitical challenges, and depletion this should keep prices in the $45 to $80/barrel range in today's dollars through at least 2012 or so. Demand destruction has been minimal so far. And in the early 80's oil was in today's terms up over $80 a barrel or so and the only significant change was a lot of people were driving smaller cars so even at $100/barrel the economy should not collapse. Folks could get cars a bit smaller on average than in the 80s and/or just go deeper into debt in the states.

g

by **manu** » Sun 08 Oct 2006, 03:10:56

I agree with the previous posts that it is market manipulation. Any new oil finds will be expensive to extract and the growing economies will need more oil to fuel them. However, a world economic collapse and then a world war and by 2012 all the kings horses and all the kings men wont be able to put Humpty Dumpty together again. End of the oil age is just around the corner.

by **AirlinePilot** » Sun 08 Oct 2006, 03:17:52

Gideon,

Thats cool, It's why I asked the way I did, kind of expected the response. I don't think there are a lot of folks who can move with a large amount of money in here anyway. Thats not meant as an insult to anyone, its just not all that common.

I'm looking at oil ETF's for now with a decent sum of money, but I have one or two other ideas also which should work. I feel like you do, not looking to get personally wealthy, just make enough to bail from this train wreck of an industry I am in then do something a little more creative with my life.

by **pup55** » Sun 08 Oct 2006, 13:18:13

About a year ago, we built a model using sine waves, and one of the things that came out of it was the following little model which kind of illustrates this increasingly chaotic market situation:

This is the base model, with the trendline taken out. As time goes on, the market gets wackier and wackier.

When we applied it to the data we had at the time (by adding back in the trend line) we ended up with the following:

So you can see what's happening: As time goes on, the peaks and valleys are increasingly severe. The model seems to have more or less correctly called the last spike and the current low spot in the market. Kind of interesting. Got outa whack in the spring and summer though. (off phase a little bit).

I am still not at all sure you can use this type of predictive modeling in any kind of a reliable way, but interesting to think about this as kind of illustrative of possible upcoming price behavior. If it is right, we will see an upturn shortly. Probably right after November 6.

by **DantesPeak** » Sun 08 Oct 2006, 13:38:28

Great point pup55.

There are many 'time delays' built into our commercial energy system that may help create these 'waves'. For example, the time it takes before oil is produced and it is actually shiped to the receiving country, and then the time for the oil or prodcut to be further processed or transported to centralized locations.

For example, high prices may induce a surge of imports but then when they are finally received at the consuming location it may create a temporary oversupply - causing a drop in prices.

Human behavior also acts with a delay, and governments with even more delay.

Perhaps needles to say, the actions of the hedge fund community have also accelerated volitility. Remember for the most part, trading between hedge funds in a zero sum gain - that is the $6 billion in losses at one fund is offset by $6 billion in gains at other firms. This is because the ratio of trading relative to actual accumulations (or dis-accumlations) of energy inventories is very high.

by **sicophiliac** » Sun 08 Oct 2006, 16:27:46

Well I think 70 a barrel for the next 3-4 years might be believable. Maybe we arent AT peak but near it and OPEC and many of the oil producers were caught off gaurd especially when it comes to the booming demand for oil in India and China, so spare compacity got nearly whiped out. Lets assume that maybe OPEC can push production up a bit for at least awhile, factor in healthy demand destruction (hybrids, general conservation and slightly weaker economic growth) and that buys us a tad more time. Then you have all these small oil discoveries of a few hundred million barrels or so, plus the tar sands and the stop gaps of ethanol and biodiesel. Combining all of this we might get another 5-10 years before SHTF. Not saying its for sure but who knows, most peak oil doomers always sight the most pessimistic numbers for peak oil and claim its 2004-2007ish. I think its unlikely to be the MOST pessimistic estimate, probably closer to 2010 maybe 2015... after that it'd really be a strech to see us going further with no serious shortages. The one killer will be China and India, 2 billion people getting a taste of the good life and wanting to drive cars.

by **pup55** » Sun 08 Oct 2006, 21:22:14

$this->bbcode_second_pass_quote('', 'a')ctions of the hedge fund community have also accelerated volitility

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