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EScroogeJr (< 20)

oil bubble begins to pop?



June 04, 2008 – Comments (7)

When another portion of lies from Bernake creates a wave of selling, one can only conclude that oil had risen to an unsustainble level.


7 Comments – Post Your Own

#1) On June 05, 2008 at 12:53 AM, LordZ wrote:

Unless suddenly we can fuel our vehicles with liquidified coal or natural gas ~ I would not count oil out just yet... Look at the chart.... it may from time to time correct itself and retreat, but it only has a tendency to come back stronger each time.

Just wait till too much money shorts oil and watch a most painful squeeze.


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#2) On June 05, 2008 at 12:54 AM, JustWokeUp (89.71) wrote:

True... But I don't think it will drop too far... I have been following USO (United States Oil Fund) and it has dropped from 106 USD to 99 USD. Next trial is at 90 USD resistance, but it might never drop to that level before bouncing back up.

As long as crude oil stays above 120 USD (which I think it will, since there is really a problem with long-term supply vs demand in oil), the correction is not going to be that bad.

Of course, everything I have said is IMHO, I am no oil expert *grin*.

Stay long. Cheers!

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#3) On June 05, 2008 at 2:40 AM, DemonDoug (31.13) wrote:

chevy volt not scheduled until 2010.  tesla roadster is still not producing cars off the line.  we've got a long way to go to get off oil.  at least 3 years by my calculation before any fundemntal potential decrease in demand.

oil to 200/barrel by 2010. 

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#4) On June 05, 2008 at 5:45 AM, AnomaLee (28.78) wrote:

Contrary to belief it seems people are forgetting crude prices actually do decline. We can't reach all-time highs everyday, but I don't see a significant decline in prices.  The last time crude futures experienced an equal decline was in April*[1] but we may see prices stall as they did in January but this time around $120. I'd pay closer attention to the future dates. The gap forwards are showing narrower declines, but we are still in contango.

Today, I don't think traders are concerned about the dollar or chairman Bernanke nearly as much as they are about political and regulatory risks. I think buyers becoming concerned about increased margin requirements and profitability. There has been so much attention given to speculation. Right now petroleum prices are flooding the major headlines, talks on Capitol Hill, and even talks on CAPs.

Speculators are the reason exchanges even exist, but unlike stocks you can only speculate until the end of the expiring month or you end up with a delivery date. There is always speculation, but supply and demand are the ultimate factors for valuations. Someone is demanding oil and I doubt a hedge fund is sitting on a port of shipments of oil, natural gas, coal, steel, copper, meat, wheat, soy, etc... 

U.S. Senator Cantwell May Block CFTC Chairman on Oil, WSJ Says - Bloomberg

Washington Democratic Senator Maria Cantwell said Tuesday that she would block the appointment of the chairman of the Commodity Futures Trading Commission if the agency fails to tighten regulation of crude-oil trading on foreign boards of trade, the Wall Street Journal reported.

Wheat Climbs in Chicago as Importers Buy on Price Drop; Corn, Soybeans Up

Wheat futures rose for a second day in Chicago as importers, including Japan and South Korea, sought to buy the grain following a sharp decline in the price. Corn and soybeans extended gains, while rice fell.


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#5) On June 05, 2008 at 7:02 AM, climate (71.42) wrote:

Oil bubble is a lie buy the government.  Trust it at your own risk. As long as demand is rising faster than supply,  there is no way it is going down.  Yes there will be high volitility as the elasticity of demand and supply are both very high.  

Econ 101

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#6) On June 05, 2008 at 11:53 AM, FourthAxis (< 20) wrote:

"Oil bubble is a lie buy the government" =? "Econ 101"

Keep me outta that class.

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#7) On June 05, 2008 at 1:40 PM, saunafool (< 20) wrote:

Oil being overpriced due to volatility and being a bubble are two totally separate items. Oil could very well drop to $80 a barrel in the short term, but it isn't going back to $50.

The Saudis and Russians (#1 and #2 in oil production) have both stated that they won't (or can't) increase production. That leaves Brazil and Canada as the only nations capable of increasing rates, while Norway, Iran, Venezuela, the U.S., the U.K., Kuwait, Indonesia, and Mexico all have falling production.

Meanwhile demand in the oil producing nations is cutting their exports faster than whatever total supply growth exists.

In short, betting against oil long term is likely to be a lousy bet. 

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