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There Goes Crude...

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July 09, 2009 – Comments (17)

No question that one day the limited oil resources is going to cause prices to go through the roof, but when every oil producer and oil producer wanna be put their supply on the market at the same time, the price goes down.

Speculators that thought that oil couldn't possibly go lower have been buying it up and storing it .  The ability to continue to store and pay for the increasing storage costs is catching up to these fools.

This was so predictable...

The Oil Glut

Oil Going To Over Supply?

Oil Storage

A friend sent me a picture of a graph showing that there just aren't buyers right now.  I am no good at linking that kind of thing.

So, energy is an industry to watch as I suspect there will be a shakeout and money to be made eventually.


 

17 Comments – Post Your Own

#1) On July 09, 2009 at 3:18 PM, Entrepreneur58 (36.01) wrote:

Most of the people who put oil in storage, or possibly all of them, sold that oil forward with futures contracts, thus locking in a profit.

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#2) On July 09, 2009 at 3:32 PM, devoish (98.56) wrote:

China used to subsidize fuel prices with the goal of keeping them low. About one year ago China changed policy and is setting prices to more closely follow crude oil prices. Gasoline in China has risen at least 30% at the pumps in the last 12 months. Their demand, like ours, fell.

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#3) On July 09, 2009 at 4:56 PM, Crosshair (95.88) wrote:

I'm hoping when the recovery is in full swing, oil prices will only gradually increase. It's disheartening seeing oil getting ahead of itself while simultaneously stifling the economy. I understand there is another factor pushing commodity prices upwards -investors are looking to hedge against inflation, but this reason is also predicated on an outlook of future growth (unless one foresees a period of stagflation).

Given today's high oil inventory levels, why can't these keep oil prices from climbing with each reported green shoot in the same way that current slack in industrial capacity is keeping inflationary pressures at bay. Maybe someone can explain this to me.  

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#4) On July 09, 2009 at 5:51 PM, starbucks4ever (97.43) wrote:

And as usual, China is left holding the bag. They just signed a 10-year contract to buy oil from Russia for $57 a barrel. The most likely price in 2019 is $40, and most likely, there'll be no demand in China for that oil anyway.

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#5) On July 09, 2009 at 6:16 PM, blake303 (29.17) wrote:

The most likely price in 2019 is $40, and most likely, there'll be no demand in China for that oil anyway.

Really? What are you basing this on? If China is the bag holder, why are you shorting Gazprom?

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#6) On July 09, 2009 at 6:58 PM, chk999 (99.97) wrote:

And as usual, China is left holding the bag. They just signed a 10-year contract to buy oil from Russia for $57 a barrel. The most likely price in 2019 is $40, and most likely, there'll be no demand in China for that oil anyway.

How do you derive that price in 2019? That would involve continuing long term demand destruction and I utterly can't see that.

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#7) On July 09, 2009 at 7:09 PM, starbucks4ever (97.43) wrote:

blake303,

A good question. If Gazprom had honest management, I would never consider shorting it at this price. However, Alexei Miller is the stupidest executive ever, and the amount of embezzlement in Gazprom would leave Madoff jealous. Have you looked at their latest contracts? They just bought gas from Azerbajdzhan at $350 to be sold in Europe at $190. That came after signing (and breaking) a similar contract with Turkmenia. And now they have another multimillion pipeline project, choosing, of all places, Nigeria. So, in a nutshell, I have enough confidence in the ability of Gazprom management to divert any potential profits to personal Swiss bank accounts, to short this company even when its price looks cheap.

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#8) On July 09, 2009 at 7:30 PM, willmaster01 (< 20) wrote:

There is no way that 2019 price of OIL is going to be 40$. There is only a limited amount and a growing about of tools (cars, boats, airplanes, Space Ships) that will use it.  That just doesn't make sense.

 -Will

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#9) On July 09, 2009 at 7:34 PM, starbucks4ever (97.43) wrote:

willmaster01,

It's very simple. Prices revert to the mean. And it's NOT different this time around. 

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#10) On July 09, 2009 at 7:49 PM, SwampBull (92.96) wrote:

Also will, just thought you'd be interested to know that spaceships burn liquid hydrogen and other compounds, not gasoline.  Maybe you were being facetious...

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#11) On July 10, 2009 at 1:11 AM, NOTvuffett (< 20) wrote:

my spaceship runs on asymmetrical dimethylhydrazine and nitrogen tetraoxide, but it is an older model, it even has tail fins, lol.

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#12) On July 10, 2009 at 8:59 AM, dwot (42.57) wrote:

I can't see the $40 in 2019 either. 

Prices can't revert to the mean when the cost of extraction is increasing.  As oil reserves decline the reserves that are left are more expensive to extract and process.  There are huge reserves that cost about $70 a barrel to get to market and in 10 years I think we'll be far more dependent on these kind of reserves.

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#13) On July 10, 2009 at 9:12 AM, catoismymotor (51.71) wrote:

My space ship was built by Ed Bagley, Jr. It is powered by kitchen scaps and my own sense of moral superiority.

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#14) On July 10, 2009 at 9:17 AM, catoismymotor (51.71) wrote:

If oil is $40 a barrel in 2019 that should signify a "dip" in pricing. That would be a opportunity to buy. After consulting my Magic 8 Ball I would say that $90 - $110 will be the approximate median price at that point.

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#15) On July 10, 2009 at 9:35 AM, wrparks (61.53) wrote:

Are any of these numbers forecasts accounting for the possible devaluation of the dollar?

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#16) On July 10, 2009 at 9:54 AM, farmnut1985 (34.51) wrote:

LOL, just like the shorters of BAC and Ford, go ahead and short oil for $40 in 2019, I would buy that contract.  How do you come to this conclusion?  Maybe I am missing something, but considering supply and demand, devaluation of the dollar (from wrparks, good point), and world growth, especially China, we will be heavily tapping into those reserves unless there is a heavy replacement.  I mean I am all for wind, solar, and biofuels, but we won't be replacing crude that quickly in 10 years.

I bought DXO a couple months ago and sold early this week, I agree with you dwot that we are currently oversupplied for our use but with recovery eventually there will be more profit to be made.

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#17) On July 10, 2009 at 10:05 AM, Dividends4ever (< 20) wrote:

Lots of ways to play crude both on the US exchanges and elsewhere.

 Let it fall then load up on those investments. 

Buy them when nobody wants them.

The only way to win.

Just my opinion.

 www.compdivplan.com 

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