buddha Wrote: ------------------------------------------------------- > how do u know that oil market were not inefficient > before, and derivatives markets only helped to > unlock intrinsic value based on fundamentals. > > The one thing that I notice people never > understand is that they stick by “oil was $40/b so > $133/b must be mispriced”. > > What’s to say $40/b was not mispriced? > > Are u willing to suggest that equities markets are > not overpriced as well compared to 3 decades (or > more) ago? So tell me how after the Saudi’s increased production, Kuwait and UAE will probably follow, oil surged another $8+. What fundamentals have changed in the last 4 months to warrant a $50 price increase. Please, point to any hard data, because *ALL* data I have seen has shown that this whole fiasco is nothing but a speculative bubble that is doing nothing but sucking wealth from the entire world and concentrating it into “investors” who are doing nothing but harming the entire global economy. But if you have an alternative theory, one based in facts, data, and not supposition or “what if” open-ended strawman questions, then please, produce them. The oil market has been in existence and relatively sophisticated for more than 50 years, there isn’t anything “new” here and when people start suggesting “new” things, it’s usually the biggest sign of a irrational bubble. Otherwise, this is nothing more than a highly leveraged uber-bubble which has no foundation in actual hedging activities, nor any physical manifestations in the fundamental oil market. Personally, I think that they should tax derivative capital gains from non-hedgers (speculators) by 80%. Do you know how quickly this market would collapse? If Congress enacted that by June I think that you’d see oil at $70 by July.
buddha Wrote: ------------------------------------------------------- > how do u know that oil market were not inefficient > before, and derivatives markets only helped to > unlock intrinsic value based on fundamentals. > > The one thing that I notice people never > understand is that they stick by “oil was $40/b so > $133/b must be mispriced”. > > What’s to say $40/b was not mispriced? > I’m pretty sure that it was mispriced then. Those oil sheiks could barely earn a living wage on less than $60/barrel. Fortunately, derivatives markets have ensured them a decent living now.
spierce Wrote: ------------------------------------------------------- > > So tell me how after the Saudi’s increased > production, Kuwait and UAE will probably follow, > oil surged another $8+. > > What fundamentals have changed in the last 4 > months to warrant a $50 price increase. Please, > point to any hard data, because *ALL* data I have > seen has shown that this whole fiasco is nothing > but a speculative bubble that is doing nothing but > sucking wealth from the entire world and > concentrating it into “investors” who are doing > nothing but harming the entire global economy. > > But if you have an alternative theory, one based > in facts, data, and not supposition or “what if” > open-ended strawman questions, then please, > produce them. > > The oil market has been in existence and > relatively sophisticated for more than 50 years, > there isn’t anything “new” here and when people > start suggesting “new” things, it’s usually the > biggest sign of a irrational bubble. > > Otherwise, this is nothing more than a highly > leveraged uber-bubble which has no foundation in > actual hedging activities, nor any physical > manifestations in the fundamental oil market. > > Personally, I think that they should tax > derivative capital gains from non-hedgers > (speculators) by 80%. > Nice way to eliminate derivatives markets. That’s just nuts and speculators are what make derivatives markets work. > Do you know how quickly this market would > collapse? If Congress enacted that by June I > think that you’d see oil at $70 by July.
JoeyDVivre Wrote: > Nice way to eliminate derivatives markets. That’s > just nuts and speculators are what make > derivatives markets work. Then propose a change that would eliminate or mitigate this problem. Obviously the commodities market isn’t set up correctly to deal with “investors” en masse. Otherwise you wouldn’t see this massive runup in *ALL* commodities without a similar change in fundamentals. There is a severe disconnect and one that will lead to people dying and/or economic ruin if it isn’t solved.
Spierce, before you start commenting on oil fundamentals… Do you have any idea of how deep they have to drill to find oil nowadays? vs. just 10 years ago?
spierce Wrote: > > So tell me how after the Saudi’s increased > production, Kuwait and UAE will probably follow, > oil surged another $8+. > > What fundamentals have changed in the last 4 > months to warrant a $50 price increase. Please, > point to any hard data, because *ALL* data I have > seen has shown that this whole fiasco is nothing > but a speculative bubble that is doing nothing but > sucking wealth from the entire world and > concentrating it into “investors” who are doing > nothing but harming the entire global economy. > > But if you have an alternative theory, one based > in facts, data, and not supposition or “what if” > open-ended strawman questions, then please, > produce them. > > The oil market has been in existence and > relatively sophisticated for more than 50 years, > there isn’t anything “new” here and when people > start suggesting “new” things, it’s usually the > biggest sign of a irrational bubble. > > Otherwise, this is nothing more than a highly > leveraged uber-bubble which has no foundation in > actual hedging activities, nor any physical > manifestations in the fundamental oil market. > > Personally, I think that they should tax > derivative capital gains from non-hedgers > (speculators) by 80%. > > Do you know how quickly this market would > collapse? If Congress enacted that by June I > think that you’d see oil at $70 by July. Why do u focus on change over 5 month, entertain the thought that u can evaluate supply/demand at any given point independent of where it has been. World demand is at 87 mbpd and steadily rising as non OECD countries specifically China and India continue to grow. World supply is at 84-85 mbpd. Saudis have TOTAL excess capacity of 2mbpd (compared with as high as 14 in the early 90s). Yes, brazil is growing production in mid-high single digits but russia is experiencing declines in production (because the base is bigger on russia those two factors roughly negate each other out) More importantly, until china removes it fixed pricing on oil products demand will not curb, and therefore what will happen is demand will continue to grow beyond this 87 number and supply will inevitably fall from this 84 as we drain (must i remind u) a NON renewable resource. Is there alot of trading money in crude? Most certainly. But they are in it because of this excess demand that likely will never reverse. Can there be short term drops to oil? sure i can easily see oil trade 100-110ish but i can guarantee that it also touch 150 this year. I’m not a trader but long term the fundamentals are undeniably attractive. It is people like you who, base your fundamentals on 1. where was it trading yesterday 2. what has transpire in the last day 3. where should it trade now methodology of investing that has kept crude underpriced for so long. News items like Saudis increases in production are spit in the ocean, go read about the emerging middle class in china and india and the expected amount of cars that will be purchased. Or maybe think about US not growing at 0.6%? If we grew at 2-3% the US demand would be added to the strong emerging markets demand.
^ and great point VirginCFA, the oil from PBR in brazil plays tupi and Caricoa are coming from rigs that have day rates of $400k to 500k (some contracted as high as $660k). By comparison a GOM jackup rig has day rates of $80-90k. As oil becomes more scarce and we move deeper and deeper, the cost go higher and higer
virginCFAhooker Wrote: ------------------------------------------------------- > Spierce, before you start commenting on oil > fundamentals… Do you have any idea of how deep > they have to drill to find oil nowadays? vs. just > 10 years ago? What about compared to 10 months ago when oil was less than half the cost? Did they suddenly, in the last 10 months, have to drill twice as far?
> Why do u focus on change over 5 month, entertain > the thought that u can evaluate supply/demand at > any given point independent of where it has been. > > World demand is at 87 mbpd and steadily rising as > non OECD countries specifically China and India > continue to grow. World supply is at 84-85 mbpd. > Saudis have TOTAL excess capacity of 2mbpd > (compared with as high as 14 in the early 90s). > Yes, brazil is growing production in mid-high > single digits but russia is experiencing declines > in production (because the base is bigger on > russia those two factors roughly negate each other > out) > > More importantly, until china removes it fixed > pricing on oil products demand will not curb, and > therefore what will happen is demand will continue > to grow beyond this 87 number and supply will > inevitably fall from this 84 as we drain (must i > remind u) a NON renewable resource. > > Is there alot of trading money in crude? Most > certainly. But they are in it because of this > excess demand that likely will never reverse. Can > there be short term drops to oil? sure i can > easily see oil trade 100-110ish but i can > guarantee that it also touch 150 this year. > > I’m not a trader but long term the fundamentals > are undeniably attractive. > > It is people like you who, base your fundamentals > on > > 1. where was it trading yesterday 2. what has > transpire in the last day 3. where should it trade > now > > methodology of investing that has kept crude > underpriced for so long. > > News items like Saudis increases in production are > spit in the ocean, go read about the emerging > middle class in china and india and the expected > amount of cars that will be purchased. Or maybe > think about US not growing at 0.6%? If we grew at > 2-3% the US demand would be added to the strong > emerging markets demand. So you’re telling me that it’s pure coincidence that the debt markets blew up in June/Jul/Aug 07 timeframe and suddenly investing in volume and notional commodity futures exploded, leaping oil, in a matter of 10 months, to 2.5x the price. Yeah, ok, this “news” you have, which has been known for decades, suddenly got priced into the price of oil while economies contract and new finds and techs are coming online? (Bakken fields and such). Please, every time some bubblehead speaks of “new fundamentals” I start to laugh a little bit. I bet people justified tulip bulb prices the same way. What about Enron, remember how they changed “fundamentals” by saying energy loads were too high? Yeah, that was a fricking joke too. There’s no doubt oil is getting more expensive to extract or find, but this isn’t a 10 month phenomena. Just like the knowledge that god doesn’t build any more land wasn’t new in 2001. Yet a global liquidity glut of trillions flooded into a market to drop long-term rates, accelerating lending, creating artificial demand, raising prices. Same shit, different day. What’s sad is that people justify the same shit in ways that damage the whole world. “free market”'ers and EMHutopians cause irrational exuberance. Too bad they do it at the cost of the entire world now. What’s funny is that in Jan of 07 I was on here speaking of how housing prices, on an inflation adjusted basis, were going to decline 40%, the credit markets were going to collapse, and that it would drive us into a recession as credit tightened to unprecidented levels. Many of the same people who nay-sayed me, saying it would never happen, or the “fundamentals” didn’t support me, are the same ones here doing the same. People forget history, it’s repeating itself now. I’ll remind you of that probably in less than a year’s time.
Spierce, I don’t know the “world” oil situation but I kinda know Alberta’s situation and nobody can find oil anymore unless they go really deep, get very technical AND get really lucky… this is all in the last 5 or so years. Since oil men tend to capitalize their costs the true cost of the oil isn’t immediately reflected in the current finding costs… so that might explain the lag/lack of correlation. I believe Alberta is a legit sample for making pricing observations because in a lot of ways they are a high cost marginal producer. So, if you’re an oil speculator you could justify $100+ because it costs that much to find oil in Alberta, and every bit of Alberta’s oil is being consumed somewhere, nobody else is stepping up to supply it for less, etc. That’s just one way of looking at it. I’m sure there are pumps producing oil for $2/barrel still but they certainly can’t add them as fast as they’re declining.
Spierce… even the CFA teaches that oil is good in inflationary times so I wouldn’t be surprised if quite a few took to oil after the bailout/debt blowup. Strange thing is… nobody sold. Oil companies aren’t selling. If they had the supply they would. Every drop is being consumed somewhere… unlike natural gas in the glut like we had '05-'06 winter.
A Senate hearing weighs charges that speculation by big investors and sovereign wealth funds is behind the rise in commodities and energy prices. http://www.spiegel.de/international/business/0,1518,554488,00.html
virginCFAhooker Wrote: ------------------------------------------------------- > Spierce, I don’t know the “world” oil situation > but I kinda know Alberta’s situation and nobody > can find oil anymore unless they go really deep, > get very technical AND get really lucky… this is > all in the last 5 or so years. Since oil men > tend to capitalize their costs the true cost of > the oil isn’t immediately reflected in the current > finding costs… so that might explain the > lag/lack of correlation. I believe Alberta is a > legit sample for making pricing observations > because in a lot of ways they are a high cost > marginal producer. So, if you’re an oil > speculator you could justify $100+ because it > costs that much to find oil in Alberta, and every > bit of Alberta’s oil is being consumed somewhere, > nobody else is stepping up to supply it for less, > etc. That’s just one way of looking at it. I’m > sure there are pumps producing oil for $2/barrel > still but they certainly can’t add them as fast as > they’re declining. Did I ever say that oil should go to $2bl? I have always maintained that it probably should go up a bit over last year’s price, to take a SWAG, let’s say $70. Even if all oil is being consumed somewhere, that’s actual physical delivery and consumption, not this bullcrap futures market creating massive supplies of artificial demand. This is the key disconnect. Oil has turned out to be the latest “big bet”, it’s better than housing in many ways, which is why people flock to it. Super high leverage, captive market, limited near term substitutes, relatively low taxation, and a market which has very few legal and regulatory constraints. It’s a perfect arbitrage pocket to exploit. This is why oil has increased in price by 200% in the last year and nearly 70% in the last 4 months. If you think fundamentals support this let me go back in my Way Back Machine ™ and sell you a $800,000 400sqft house in LA in 2006. I’m sure you’ll think it’s a great deal, since housing *NEVER* loses value according to David Lereah. Weren’t you the one I was debating with regarding housing Jan/Feb last year? I’ll have to dig that thread up. I am not somebody who has oracular powers, but I can smell bullshit pretty easily.
virginCFAhooker Wrote: ------------------------------------------------------- > Spierce… even the CFA teaches that oil is good > in inflationary times so I wouldn’t be surprised > if quite a few took to oil after the bailout/debt > blowup. Strange thing is… nobody sold. Oil > companies aren’t selling. If they had the supply > they would. Every drop is being consumed > somewhere… unlike natural gas in the glut like > we had '05-'06 winter. That’d be great, if only oil weren’t a huge feedback into inflation. Thus you get a death spiral. Same thing with housing.
It’s true about it being the latest bet… I went to a beer making class and an Indian beer investor told me not to invest in ag tech, but to just buy oil. That was $20/barrel ago so I guess he was right. However, that alone doesn’t make it a bubble and I wouldn’t short it… ouch.
maratikus Wrote: ------------------------------------------------------- > A Senate hearing weighs charges that speculation > by big investors and sovereign wealth funds is > behind the rise in commodities and energy prices. > > http://www.spiegel.de/international/business/0,151 > 8,554488,00.html That article is right on and something people need to read 3-4 times before they finally get it through their thick skulls. But then again, fools never learn until it’s too late. What’s sad is that banks are just going from quick return to quick return pocket, while the ones who perpetuate the problems are never really punished. How soon do you think these idiot banks will be running to the Fed begging for a bailout? “ZOMG, we never knew massive speculation in uber-leveraged derivatives could turn negative! We never knew that taking huge bets in a bubble would fail! We never heard of LTCM, Amaranth, or Enron!, SAVE US OHH HOLY FED WHILE WE FUCK OVER CONSUMERS AGAIN IN A DIFFERENT WAY!” History repeats itself. Amazing ain’t it? Joey and Virgin, don’t you guys hate when the Fed bails out banks for making stupid decisions? What happens when this bubble that you’re now defending with “fundamentals” blow up? Are you going to put your own salary into paying for the inevitable bailout the Fed will have to do? You hate it so much, yet you defend the action. Just like many defended housing before it happened and decried it in hindsight.
virginCFAhooker Wrote: ------------------------------------------------------- > It’s true about it being the latest bet… I went > to a beer making class and an Indian beer investor > told me not to invest in ag tech, but to just buy > oil. That was $20/barrel ago so I guess he was > right. However, that alone doesn’t make it a > bubble and I wouldn’t short it… ouch. Did the shoeshine boy give you a great tip too? ROFL, an “indian beer investor”. This is what happens when idiots, egomaniacs, and big-bonus bankers run rampant.
SPierce the only answer you have given me to my point of excess demand has been it has been known. I agree that the Bakken play is a new find that has only really been feasible with technological advancement in horizontal drilling, but how many more of these can be discovered? for every potential 7mb/d field we discover. It gets negated to by a 200% growth in car ownership in china. I posted the stat in some other thread that for every 1000 people china has 16 cars. By comparison us is at 880+ per 1000 people. So maybe 100-150 cars can be reasonable for china? What would that do, make them the largest consumer of oil at 30-35 mbpd? Does the single digit discoveries even matter at that point? As for housing, I probably could not have called the timing of a collapse but it was inevitable taht it would. Historical home ownership rates at 30% had doubled. It was only a matter of time that there would be a glut of supply, and given a shock like a slowing economy or resetting of floating rates the impact is greatly exacerbated given the poor fundamentals. But it is hard for me to see the bearish data on oil from both supply and demand. The only thing i might entertain is that China removes it’s caps, energy goes up 40%, china’s GDP slows dramatically, chinese oil consumption falls off a cliff. And oil topples and goes to $60. However, depsite the rumors this morning about the govt cutting subsidies, i highly doubt that they will go as far as eliminating subsidies completely.
<<> The fed printing money like madmen to bail out all the fools who use statistics instead of simply looking at balance sheets… THAT causes inflation. All the bankers are saying "look at the oil speculators… " so no one will look at their insane write downs and crazy sales antics. It reminds me of college… we used to go into 7-11. One of us would go to the far corner and freak out (distraction) while others would grab the cigarettes.
virginCFAhooker Wrote: ------------------------------------------------------- > It reminds me of college… we used to go into > 7-11. One of us would go to the far corner and > freak out (distraction) while others would grab > the cigarettes. NICE!!!