Today, a story from CNN caught my eye:
Here comes $100 oil, and $3 gas
“Three dollar gasoline in this market is unavoidable,” said Stephen Schork, publisher of the industry newsletter the Schork Report. “At this rate, we’re going to see $4 a gallon.”
Norrish said it was fundamentals, not speculative investment money, driving oil prices – strong demand, falling inventories, no production increases from OPEC.
“The underlying market balance will continue to tighten, and if the geopolitical situation worsens we’ll get to $100 very quickly,” he said.
Barakat said there are now more traders betting oil will rise to $100 than there were betting it would cross $90 back when crude was still in the $80s.
And Schork noted the sheer amount of oil contracts trading, and the fact that OPEC tried to cool prices back in September with a production increase, did nothing but send prices higher.
“There’s a tremendous amount of bull energy in this market,” he said. ‘There’s no reason we can’t get to $100.”
The funny thing is that last month, they ran this one:
“If $80 a barrel holds, then it will trickle down to the pump,” said Sal Gilbertie, an energy trader at Fimat in New York. “But I have no faith in it staying up there.”
Gilbertie said the end of hurricane season should bring oil prices down, and also agreed that, with the end of summer driving season, the demand just isn’t there to push gasoline processing much higher.
“We have no specific, identifiable shortages,” he said. “The product is out there.”
One wonders if next month they will tell us that $60 oil is inevitable. I guess Yogi Berra was right: “It’s tough to make predictions, especially about the future.”
It is just amazing to me that market sentiment is so fickle. The fundamentals didn’t change that much in the past month. But it seems like once a critical mass of talking heads repeats a point, it becomes conventional wisdom. A month ago, oil was overpriced at $80. Today, $100 is all but certain. Again, this is why I invest based on the fundamentals, and ignore this short-term whiplash.
If market fundamentals is driving this, I wonder where the $90 incremental supply is?
once a critical mass of talking heads repeats a point, it becomes conventional wisdom.
Isn’t that the very definition of conventional wisdom?
I think that there is no difference between 90 or 100 dollars per barrel.
This video, SIVs Explained has a good bit on market sentiment.
once a critical mass of talking heads repeats a point, it becomes conventional wisdom.
Like human induced global warming.
And if you have a glitzy slide show made into a movie you can pick up an Oscar and a Nobel Peace prize.
talking heads != scientists with 20 years experience in the field.
in fact, “talking heads” is a little closer to “talking point spin-meisters” isn’t it?
BTW, Nobel Prize-winning economist Joseph Stiglitz:
“America’s energy policy has been based on “drain America first”; as we have used up a significant share of our scarce oil reserves, the country has become poorer, even if GDP has done well.“
interesting stuff
Incremental supply is not very great, given that OPEC has agreed on production limits, and thug oil states are busy letting their productive capability rot.
It’s a bull market, and a BM can go any way it wants, until it dumps. $100 a barrel? Maybe.
The hedge funds are in, with borrowed hundreds of billions.
The big Q: Can falling demand rectify the market? Will we get a crash, or a secular decline? And when?
I used to think earlier than later. But look at the thug states. The thuggier they act, the less oil they pump, the higher the price, the richer they get, the more influence they have, the thuggier they get.
Talk about perverse incentives for perverse people. Run a tinpot dictatorship, crush creative and intelligent people, destroy the work ethic, and get rich, rich, rich.
Look for global fossil oil consumption to fall, perhaps one percent to two percent, annually, for years.
Whither oil prices? They will be lower someday than today. With luck, they might even be lower in 30 years than today. (Crazy? Consider the crude price range from 1979 to present. 28 years, and oil is probably cheaper today, adjusted for inflation. Gas at the pump certainly is).
supply/demand may be part of the oil price prolem in terms of $$$/bbl. but the falling $ value vs other currencies is likely to have a continued impact, even if supply/demand problem lessens. big money sources will bid to own commodities[oil in this case]. dollars are the last thing they want to own. the more $ in circulation, the greater the demand for oil,etc.
a bit more supply won’t break this cycle, caused by falling currency value.
somebody said oil is the new gold? no, it’s just sharing the luster–gooey,dark and all.