No reason for $80 Oil?

by **GuyFawkes** » Thu 20 Sep 2007, 22:06:36

http://money.cnn.com/2007/09/20/news/ec ... topstories

Just read this article about the price of oil. At the end of the article they are talking about excess capacity, and that the excess capacity is growing. To me this does not compute in my little pea brain. Demand is growing, but they are claiming that capacity is still growing faster than demand? What am I missing here? Are dealing with a work of fiction here or are they just not telling the demand vs capacity story?

A quote:
"The world currently consumes about 86 million barrels of oil per day, and EIA estimates current spare production capacity is about 2.17 million barrels a day. Yet that's projected to grow to 2.25 by the end of the year, and average 2.70 million barrels a day in 2008 - still tight, but not exactly supportive of the 'rising demand static supply' scenario.

But maybe it is. EIA economist Tancred Lidderdale said that all of that spare production capacity lies in OPEC countries, which could turn off the tap at anytime.

"Worldwide demand for petroleum is still growing faster than non-OPEC production" and that's what caused the price run-up over the last four years, said Lidderdale."

Guy

by **mistel** » Thu 20 Sep 2007, 23:30:17

I believe that the recent run-up is purely speculation. On CNBC a couple of days ago they reported that the traders were chanting "GO-GO-GO" as oil passed $80 per barrel. I bet when there is a pullback, it will be fast and steep as they all take profit at once.

by **Morpheus** » Thu 20 Sep 2007, 23:58:33

Considering the level of dependence and what the drug does for us, $80 is cheap.

by **americandream** » Fri 21 Sep 2007, 00:54:45

Heck peak oil is just a fallacy...it's all the fault of them traders and OPECeckers. All ya gotta does is stick a peg in the ground and the stuff'll come gushing out. (removes sarcasm hat).

Do you honestly believe that the price of oil is being driven by these two forces?

by **mistel** » Fri 21 Sep 2007, 01:36:52

I honestly believe what I posted. I believe that the recent run-up, and I mean the past few days only as WTI broke $80, has been fueled by speculation. Believe me, I am a firm believer in Peak Oil, with three vehicles running on alternative fuels, but I think the last short term rally has been driven by speculation. Again, watch when this little spike ends, oil will drop sharply in just a few days as all the guys on the floor close their positions.

by **syrac818** » Fri 21 Sep 2007, 02:04:59

So there was this rate cut...

Tremendous addition of cheap money pumped into the markets, and that money has to go somewhere. Preferably into something that simply can't be created out of nothing.

Trust - had the FED imposed a shocking rate hike (which would never happen), you'd see oil prices take a dive.

by **mkwin** » Fri 21 Sep 2007, 04:59:14

The only explanation is the spare capacity they talk about is in unmarketable sour crude.

by **seahorse** » Fri 21 Sep 2007, 08:54:08

No reason for $80 oil? If a growing demand and a stagnant production isn't enough, how about a dropping dollar? Isn't that enough of an economic reason for you, you bunch of wankers?

by **EndOfGrowth** » Fri 21 Sep 2007, 09:12:41

GF, global oil production is now down 850k bpd to 84.5mbpd from this time last year according to EIA, projected demand is expected to reach 86mbpd by the end of this year, perhaps this has something to do with the recent run up in prices? However you could be right in predicting a short term drop in prices, but this will be short lived. We could very well see $90 per barrel in the next couple of months. Somebody correct me if I'm wrong.

by **rostov** » Fri 21 Sep 2007, 09:48:57

Steve Hargreaves, is that you posting that link on cnn?

You have a previous article debunked here

Credibility is a bit of a problem when it comes to your "solutions" to dwindling cheap energy

by **Ming** » Sat 22 Sep 2007, 05:55:22

$this->bbcode_second_pass_quote('EndOfGrowth', 'G')F, global oil production is now down 850k bpd to 84.5mbpd from this time last year according to EIA, projected demand is expected to reach 86mbpd by the end of this year, perhaps this has something to do with the recent run up in prices? However you could be right in predicting a short term drop in prices, but this will be short lived. We could very well see $90 per barrel in the next couple of months. Somebody correct me if I'm wrong.

by **mkwin** » Sat 22 Sep 2007, 06:35:04

What makes you think there will be a short-term price drop?

by **GuyFawkes** » Sat 22 Sep 2007, 11:17:06

No I am not Steve. Thanks for the link however. I wasn't aware of this writers past or slant on things. Seems to me the IEA's numbers really don't make sense. That is why I posted that link. I wanted to bounce it off you guys.

I agree I think in the short term we will have a pull back in price and some sideways price consolidation before it continues it march through the $100 a barrel number. It is just part of a healthy pattern to see consolidation. I would get more concerned if it just keeps pushing higher and we don't get the consolidation. I am no financial wizard, but you should add to your positions in energy stocks on any weakness. We are in for a wild ride over the next few years. Diversify if you haven't already. Look at other energy producers or commodities. Now isn't a bad time to look at natural gas as an investment. It has shown recent weakness in price due to the light storm activity in the gulf this year. Also uranium plays not a bad place to put some money either.

Thanks for the replies.

Guy

by **Ferretlover** » Sat 22 Sep 2007, 11:39:12

$this->bbcode_second_pass_quote('GuyFawkes', ' ')At the end of the article they are talking about excess capacity, and that the excess capacity is growing. Demand is growing, but they are claiming that capacity is still growing faster than demand? What am I missing here? Are dealing with a work of fiction here or are they just not telling the demand vs capacity story?
But maybe it is. EIA economist Tancred Lidderdale said that all of that spare production capacity lies in OPEC countries, which could turn off the tap at anytime.
"Worldwide demand for petroleum is still growing faster than non-OPEC production" and that's what caused the price run-up over the last four years, said Lidderdale."

by **Ming** » Sat 22 Sep 2007, 14:49:05

$this->bbcode_second_pass_quote('mkwin', 'W')hat makes you think there will be a short-term price drop?

by **Ming** » Sat 22 Sep 2007, 14:53:34

$this->bbcode_second_pass_quote('Ferretlover', '')$this->bbcode_second_pass_quote('GuyFawkes', ' ')At the end of the article they are talking about excess capacity, and that the excess capacity is growing. Demand is growing, but they are claiming that capacity is still growing faster than demand? What am I missing here? Are dealing with a work of fiction here or are they just not telling the demand vs capacity story?
But maybe it is. EIA economist Tancred Lidderdale said that all of that spare production capacity lies in OPEC countries, which could turn off the tap at anytime.
"Worldwide demand for petroleum is still growing faster than non-OPEC production" and that's what caused the price run-up over the last four years, said Lidderdale."

by **Denny** » Sat 22 Sep 2007, 15:52:33

In reality, $80 per barrel is no more than $70 a barrel two years ago, as the US$ has lost that much on the exchange rate value.

by **Ferretlover** » Sat 22 Sep 2007, 18:24:15

Ming, "what is impossible?"
Did I misuse a term?
My interpetation of capacity is the ability to contain something (we can continue to 'build containers."
My interpetation of supply is the total amount of something available.
As for: If you have a glass of chocolate milk, it does not matter how quickly or how slowly you drink it, there is still only so much milk in the glass!,
glass is the earth, milk is the oil, your body is the container, the amount of milk is the supply, and quickly-n-slowly is how it is extracted.
I will read the site you cited-what am I looking for specifically?

by **aa20** » Sun 23 Sep 2007, 05:50:19

I think all this press is trying to talk down the price of oil. As breaking to new highs is very significant. When things break out of a range and get into new territory that is when you want to jump in for the next leg up.

From the oil exporters perspective they also want to sell the product for what they can get. The old fear was demand destruction as the price went up. But we see even with sustained high oil people are still by and large driving the same vehicles and using the same amount. So as the seller you naturally keep increasing price.

by **mkwin** » Sun 23 Sep 2007, 06:19:07

$this->bbcode_second_pass_quote('Ming', '')$this->bbcode_second_pass_quote('mkwin', 'W')hat makes you think there will be a short-term price drop?

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