Commodities Class: Oil
2011 is rolling along and class is officially back in session.
Today's topic is (arguably) bigger than the entire commodity industry from the ags and softs we put in our bellies to the tungstens and osmiums arming our battleships and M50 bullets.
Topic #3
Oil
With all of the talk about monetary policy, trading, investing, buyouts, IPO's, gold, etc...Oil trumps them all in terms of its daily dominance over our lives.
It is the one commodity and energy resource from which you can draw a direct line into the realms of economics, finance, politics, military and just about every hot button, hot topic industry on the planet today.
In the modern world, oil is king.
So, what else is new?
For starters, those who haven't should grab a quick primer on where the oil markets have been over the past 12 months.
For those even a bit more industrious, take a look here and see which WSO expert's picks came the closest to hitting the mark at the close of 2010.
I'm curious to hear what you guys have to say about oil in 2011?
I for one am a bit skeptical about the price sticking so close to $90/bbl when I find myself paying $0.30 more per gallon at the pump then I did a month ago.
In fact, I doubt anyone believes that oil won't break $100 soon...
What I am wondering about is whether we are approaching that (once upon a time) unforeseen world where $100 oil the norm. Or have we already gotten there and just don't know it yet?
Many of us mumble and fumble around alternative energy sources, a potential green-energy future and the geopolitics surrounding "Black Gold".
Well, here's the place to sound off about it...
Just to get the fire started...
I'm saying June 2011: Oil. $150. Who's with me?
Oil won't hit $150 by June 2010, unless the dollar collapses or there's a war with Iran or a terrorist attack at Ras Tanura or some other unforeseen, low probability event like that. Oil supply/demand fundamentals don't support a price that high (yet, give it a few years).
Agreed. There would have to be some real international issues to warrant $150 oil
+1
I agree w/r/t the fundamentals that oil will keep going up and up and up in price, but oil at $150 too soon will bring this recovery to a standstill, just as raising rates will.
So, oil within a $10-15 bound for 2011, and interest rates at the same levels. IMO.
Oil will be range bound in 2011...buy in mid to low 80s, sell in high 90s low 100s
Israel attacks Iran and we get to $150/Bbl. Short of that there's still too much spare capacity, particularly in Saudi Arabia, to warrant a rise that high again. The Saudis aren't dumb, and they know that $150 oil destroys demand. Look at what happened in '08. The market is very well supplied right now and within a very short period of time the Saudis can put a few million barrels per day on the market, that wasnt the case in '08. Now as we start getting out closer to '15 and that spare capacity numbers starts to decline I can see a case for a sustainable price above $100, but that doesn't happen in '11.
I would say up to $120
Depends on demand from emerging markets. If they keep growing th way they are and we get a full on recovery in 11' I see oil at $140 by july.
oil at $150/bbl may be a reality if the FED continues pumping $$$ into our economy... just sayin'
Oil at $100/barrel by end of February.
Factors to look out for: -USD where is it going? - Demand from China,Brazil other BRIC's and Emerging markets - OPEC output levels, will they increase or stay the same, will they meet sooner do to amounting pressures - Saudi Oil minister is stil happy with his "range of $70-80" per barrel showing no concern for $100/barrel
Very interested to see how this plays out
Seeing how everyone is bullish on Oil, are any of you invested in oil?
Also generally speaking, how does one invest in oil? -besides hoarding gasoline like in always sunny of philadelphia
I currently have a net long exposure of about $600K to oil via the futures markets (gross, it's about $2M). I have a wide variety of bets across the oil curve. I also have another few hundred K invested in energy companies.
I've also been wondering about the recent .30cent increase at the pump. Maybe one possible way we'd see 150/barrel by June, short of a major geopolitical event is if seafaring oil hoarders corner the market. An interesting dynamic to be considered.. A supertanker can hold about two million barrels of crude, more than France consumes every day. http://seekingalpha.com/article/145841-the-interplay-between-opec-decis…
^^^ Hoarding only occurs when the curve is in steep contango, since there is an incentive to store. Otherwise, the day rates for the ship are a cost and probably not worth your while to hoard it. I think it would be quite difficult to corner the market (I have a few guesses as to why, but I'm not extremely familiar with the minutiae of tankers/oil shipping to write them here).
Bullish on Natty in light of the divergence between the two...
Agreed, though there are fundamental reasons why the traditional ratio has fallen apart and as such so don't look for a convergence to historical ratios. That being said, there are various reasons why nat gas should go higher over the next year or two. Nat gas definitely can't go much lower; I sold some 1yr puts back in October when it was near its lows, very happy with how that trade is turning out, I'll probably keep the entire premium when all's said and done. For nat gas I am more comfortable betting on a price floor as opposed to going outright long.
I like this a lot. There's no real reasons for a trend going either at this point. I guess your main risk is the discovery of a field the size of America.
I'm thinking oil goes to 110-120 by year-end. Back in '08, I actually thought oil would stay over 100 forever which means not having any money to invest at the time was a very good thing. I'm expecting the global recovery to keep plugging along besides a temporary setback related to rising commodity prices both in China and the G7, which would imply a rise in prices by year end, but nothing too spectacular since we're well out of the snap-back phase by now and demand shouldn't go through the roof short of some major conflict.
I would say China's cooling economy will have a bigger impact this year than any potential geopolitical events.....predict around $70-90/bbl
http://www.marketwatch.com/story/china-growth-may-be-cooling-credit-sui…
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