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Vet67to82 (< 20)

The IEA says Crude going to $100 How about $40 - 50



November 07, 2008 – Comments (3) | RELATED TICKERS: XOM , COP , CVX

 Worlwide demand is down. Refiners don't feel pressured to order more crude as they no doubt feel they can work from what's in inventory and by doing so pressure crude down to $40-50 per barrel. If crude does drop to $40-50 per barrel, I believe the memory of $147 per barrel crude will encourage refiners to build inventory as a hedge against the threat of rising prices, and/or to seek long term contracts in that range. Unfortunately, that range is not beneficial to the Canadian Oil Sands group. OPEC may be willing to go along with long term contracts to undermine alternative energy developement. We certainly need to continue with that alternative energy developement to keep OPEC and the hedge funds from running the prices thru the roof again.

 My take on the build in inventory is already occurring, The US EIA recently reported the US Crude supply was about 311 million barrels, not counting the Strategic Petroleum Reserve (SPR) when as little as a few weeks ago it was under 300 million barrels. My take is that the Majors and the refiners won't build much of a hedge while prices are falling, but, at some point in time demand will stop falling, stabilizing, and then OPEC supply constrictions will start to force prices UP. If you're going to hedge against RISING prices, you have to do so before everyone is trying to do the same thing. Yes, inventory costs money, but if crude gets down to the $40 - 50 level, refiners will remember $147 per barrel crude AND the ranting and raving consumers made over $4 plus per gallon gas. 

 I am somewhat at a loss to understand why Congress was dragging Big OIl into hearings ... who passed the no drill laws?  Who in effect, told OPEC: "Charge us what you want, 'cuz we're idiots, and we won't allow drilling or competition to interfere with OPEC plans ... CONGRESS.    Effectively, it'll take about 10 - 12 years to survey the offshore potential and put finds into production.   That's why the USA needs a comprehensive Energy Policy.   We need to STOP sending money to countries that support, diectly or indirectly,  terrorist organizations.   There's a whole host of benefits to being Energy self-sufficient.        

3 Comments – Post Your Own

#1) On November 07, 2008 at 9:46 AM, lquadland10 (< 20) wrote:

If it goes to 50.00 the world dumps the dollar and then gold hits2,000. and oil goes to 200.00.

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#2) On November 07, 2008 at 10:00 AM, FleaBagger (27.51) wrote:

Vet - don't you know that you can't talk about congress that way on CAPS? We're all Obammunists, and we like no-drill laws!

Thanks for the new (to me) perspective on refiners and their effect on crude.

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#3) On November 11, 2008 at 1:24 PM, frankaj9 (78.57) wrote:

  Looks like you are right ... crude $59.30 per barrel  -3.11

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