Apparently, oil demand is set to drop by 3% or so year over year against 2008. I don't know about you, but I saw oil was around $147/barrel about a year or so ago, and then it went to like $30/b, and now is bobbing around $60/b.
Now, my maths isn't maybe the best in the world right, but somehow I think that $60 is something more than a 3% drop from $147, and that $30 was even less like a 3% drop.
I also believe in the Peak Oil theory, that available oil is actually running out pretty quickly, and that the Saudi's (among others) are feeding us all a lot of BS about the amount of oil they still have available to pump in the future. Nobody can pump billions of barrels out of the ground, and truthfully report they have a static number of barrels still in underground reserves, year after year after year. This is total BS, and is a result of the OPEC quota system -- the more you have in reserves, the, the more you are allowed to sell this year.
At $30/b, anyone with a tanker was buying a load of crude and parking it up at sea somewhere, waiting on a rebound in the price, looking at making a significant mark-up on that trade. I would say it is fair that many of them will be looking at the price recovering to $60/b now, and thinking "100% profit is good enough" -- they sell (if they hadn't already). So this is a short term glut of supply on the market, that is likely to weigh on the price again for a while. Also factor in speculators who bet long on the price, with a trailing stop to close the trade for them, and any modest drop in the price from here will see a whole cascade of sell stops activated -- turning a small price drop into a major move. Pile on some people playing it short, because if a dumbass like me can see how that works, you can be sure there are some uber-smart players in offices around Mayfair and Wall St who are going to jump on it.
But the world isn't making more oil to replace the stuff we are burning, and we stopped finding enough new reservoirs of it to replace what we were taking out long ago.
Meanwhile the currency the oil price is calibrated in [at the moment], the US$, is being inflated massively through virtual money printing at the Federal Reserve and Treasury.
To my mind, oil back at $100+ is not a case of if, but when. Probably it will go to like $30-$40 range again first though, and maybe not just once. How long could you wait, if you were to buy some and park your tanker out at sea? Is it long enough to see all the forces in the system work through and show the inevitable results (serious commodity price inflation)? That is the real question.
Do you feel lucky? Well, do you?
Thursday, 14 May 2009
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