Think Tank Investing » Oil & Gas

Where Is the Price of Oil Heading?

ccurwick — Mon, 27 Jul 2009 03:41:27 +0000

I think everyone is curious, with the recent surge in oil prices, about where the price of oil is heading. Are you bullish or bearish when it comes to oil prices? Obviously consumers are optimistic that prices will stay low, while conversely, oil and gas investors are praying for the days of July, 2008.

I found a recent article by Ben Levisohn in Businessweek that provided some interesting thoughts and assertions on this particular question.

The author discusses how the economic collapse spurred a surge in supply, some $600 million bbls over the actual demand. Because this surge in supply has been stemmed, the market is beginning to rebalance itself. If the market continues to rebalance, the price of oil will settle at around $75 a barrel.

Any thoughts as to the direction the price of oil is going? Are you an oil investor or are you a consumer with no investment interests in oil? Please include this in your commentary.

Posted by Corey Curwick at 9:27 PM MST on July 26, 2009

OPEC Cuts Production to Stem Plummeting Oil Prices

ccurwick — Tue, 04 Nov 2008 05:49:45 +0000

OPEC decided to cut its oil production by 1.5 MM barrels last week, about 5% of the oil cartel’s total daily output. But will this really stop the dead weight drop in crude oil prices?

“Venezuela’s Oil Minister Rafael Ramirez has said OPEC will need to cut production by at least another 1 million barrels daily to stop the fall.”

Energy analyst Victor Shum seems to agree that OPEC will have to tighten supplies further with a second cut in order to prop up oil prices.

According to an article from the Associated Press, oil prices dropped by 32% in October alone. I have addressed this same question in previous posts: Is OPEC losing its power over the price of oil?

“The power to influence oil prices is moving farther and farther away from OPEC,” said oil analyst Stephen Schork in a BBC article. Even after this massive cut in production, I wonder if oil prices will continue to plummet?

Sources: http://www.msnbc.msn.com/id/12400801/

http://news.bbc.co.uk/2/hi/business/7687944.stm

Oil Price Hits Lowest Level This Year

ccurwick — Sun, 12 Oct 2008 02:04:21 +0000

Oil hit a low of $84.19 a barrel on Thursday, the lowest price we’ve seen since October of 2007.

Prices for crude seemed to be about to run out of control, when just this summer, the price of oil had reached an all time high at $147.27 a barrel. This is an almost 43 per cent drop in price since July, according to a financial times article I found yesterday.

Something that the article also noted, which I found interesting, was that the oil price plunge was not mirrored by other commodities’ price drops. In fact, the price of certain agricultural commodities and base metals actually rose.

Something I posted on a few weeks ago is related to the primary driver in the price of oil being Wall Street instead of OPEC as it used to be. With this in mind, it’s no wonder that oil prices have experienced such a swing in the past six months. And of course this coupled with the uncertainty in the financial markets for the past year.

Any additional thoughts on why the price of oil has swung so dramatically the past year? I would also love to hear more about other drivers of oil in the economy.

Article Source: http://www.ft.com/cms/s/0/fc297918-9664-11dd-9dce-000077b07658.html

OPEC Calls Emergency Meeting

ccurwick — Fri, 10 Oct 2008 17:11:10 +0000

More Proof that U.S. Demand for Oil is Decreasing??

OPEC will be meeting one month ahead of schedule. “Emergency” meeting? I am posting on this topic again because of another assertion by the Financial Times on the reason for the said decrease. This post is related to OPEC’s “emergency” meeting which is said to be necessary to address the decrease in demand.

But what else is to blame for the 8% decrease in U.S. demand for oil other than the U.S.’s deteriorating economy? Is a large hoard somewhere, that has been driving up prices for so many months, slowly leaking out onto the market? Maybe from Russia? Could this be another reason for the slowed demand for OPEC oil?

At any rate, the OPEC meeting in Vienna in November is one meeting I would like to attend!

Source FT article: http://www.ft.com/cms/s/0/6005e14a-961c-11dd-9dce-000077b07658.html

Is the U.S. Demand for Oil Decreasing Significantly?

ccurwick — Fri, 03 Oct 2008 15:46:05 +0000

Green Minds Want to Know

The price of oil is down for the third consecutive day. Priced at $93.46 a barrel and down from a high of $147 in July, oil traders are watching the bailout very closely.

However, a Reuters article I found today did suggest something that appealed to my green thinking which was that oil demand really has slumped significantly in the U.S. thus a major cause of the recent dip in the price of oil.

“Total U.S. oil product demand over the past four weeks is down 7.1 percent from a year earlier.”

I wonder if oil demand in the U.S. has actually declined? This is comforting to consider, at least from a purely green perspective, however, I think any notable slump in U.S. demand would be offset by the growth in global demand, particularly in countries China and India.

But not so, according to Paul Ting, of the US-based consultancy Paul Ting Energy Vision LLC.

“The fate of oil prices over the course of the next year or so is very much a function of demand deterioration,”

“US demand has declined by a much greater amount than the growth coming out of China.”

Because oil price has gone from being controlled by OPEC to being controlled by Wall Street, I personally doubt a dip in U.S. demand is affecting the current price. Any further thoughts on this?

(Article sources:

Reuters Article: http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20081002&id=9209870

Arab News Online: http://www.arabnews.com/?page=6§ion=0&article=115073&d=3&m=10&y=2008 )

How Does the Devaluation of the US Dollar Affect the World Oil Industry?

ccurwick — Wed, 01 Oct 2008 16:25:21 +0000

This is a topic that I understand much better than oil prices and inflation so I thought I would say a few things about it. Dollar devaluation tightens oil supplies, increases demand, and keep oil prices high for an extended period of time. Dollar devaluation also creates problems for the world oil industry. Oil producing countries receive their oil revenues in US dollars but use their own currencies to buy goods and services from different nations. International oil companies sell their crude in US dollars while they operate around the world using local currencies to pay for wages, benefits, taxes, and various costs. Consumers in countries with non-dollar appreciating currencies enjoy cheap oil, while people in dollar-pegged countries pay a higher price for the same barrel of oil. Therefore, dollar devaluation affects world oil supply and demand.

Dollar depreciation also reduces oil producing countries purchasing power and increases domestic inflation levels, all other things being equal. Dollar devaluation increases demand for oil in countries with non-dollar appreciating currencies. It also increases demand for gasoline in the US as thousands of Americans spend their vacations at home instead of traveling to Europe or elsewhere.

Any additional contributions or opinions on this topic would be greatly appreciated!

Oil: How low can it go?

ccurwick — Fri, 05 Sep 2008 03:16:28 +0000

Article found on CNN Money

With the little bit of relief that we’ve all experienced at the pump, it is easy for people to lose sight of the fact that six months ago we all would have thought that $3.75 was high. (at about $108 a barrel, the price of oil is around 50% higher than it was a year ago). Referring to this recent CNN Money article, although the article is extremely pessimistic, I do agree with the Resler’s insight about the proliferating effects of the higher prices on the consumer mindset, “even if they (oil prices) continue to fall, consumers may be wary for the next few months.”

Any thoughts or comments on this?

http://money.cnn.com/2008/09/03/markets/thebuzz/index.htm?postversion=2008090311

Slight Reprieve in Oil Prices Won’t Last Long

ccurwick — Thu, 14 Aug 2008 21:19:00 +0000

I observed an interview of Robert Kiyosaki this week in regards to oil/fuel prices and the long term forecast. Kiyosaki claims that the primary reason for our current oil price situation is the devaluation of the dollar. Oil is purchased in dollars and as the United States continues to print more dollars the value declines which directly results in escalating oil prices. There are obviously other factors that cause the price of oil to rise including demand and oil speculators, however, the primary culprit is the declining value of the dollar. Kiyosaki also says to enjoy the slight reprieve we’ve observed over the past couple of weeks because in the long term, if the dollar continues to decline in value, we can expect to see gas prices well over $6.00 or $7.00 a gallon.

Posted by Glenn Crawford of Project Liberty

GASOLINE IS ACTUALLY CHEAPER TODAY THAN IT WAS 45 YEARS AGO!

ccurwick — Mon, 30 Jun 2008 15:19:00 +0000

What if I told you gasoline is cheaper today than it was 45 years ago! Its true and I can prove it!!

In 1963 gasoline was about $0.30 to $0.35 per gallon. Back then there were these things called silver dollars and they were interchangeable with paper dollars. So one dollar would buy you about 3 gallons of gasoline. (By the way when was the last time you received a piece of real silver as change?) Today that same silver dollar worth $17.50 will buy you over 4 gallons of gas! What’s going on?!?!!

Any comments?

Posted by Eric Malachowski of Project Liberty