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Crude Market Perspectives As WTI Passes $90
As West Texas Intermediate is now holding steady over the psychological barrier of $90, more speculators will shift their attention to this latest commodities market, which rumor has it has not been cornered by JP Morgan just yet. As Bernanke's liquidity gushes with no sign of stoppage, expect to see a prompt move into triple digit territory here. For those seeking a good overview of what is happening in he crude space, we provide the following summary note from FMX connect...
Morning Perspective (via FMX Connect)
Heating oil prices followed the lead set by gasoline prices on Monday, by breaking out over their critical resistance at 251.61 on Tuesday, finishing three points over that, at 251.64. Crude oil prices did not finish over $90.76, but they did finish at their highest level in two years at $89.82. And, now that gasoline and heating oil prices have both broken their critical levels, we expect that crude oil prices will follow rather soon. The main factors pushing prices higher were optimism over the economy and technical strength. Once gasoline had broken 236.25, spread-trading pulled heating oil prices up with them. It is just a matter of time before stronger refined products prices pull crude oil quotes higher.
Investors were not buying oil markets because of any movement in the US dollar, which moved higher on Tuesday. Instead, they seem, to have based their buying on a stronger stock market and on optimism in the economy. The DJIA was up 55.03 to 11,533.16, which was its highest level in more than two years. Oil prices ended at their highest levels in two years and commodities were generally higher, led by cotton. It looks like we are going to end 2010 on a strong note in a number of assets.
The fact that oil prices and other commodities prices, in addition to equities prices, were higher on Tuesday, despite a steadily stronger US dollar, tells us that the asset play may be able to start 2011 with support of its own. If assets can advance without any help from a weaker dollar, it would seem to open up a new vista of growth for these assets.
Canada’s Toronto-Dominion Bank agreed to buy Chrysler Financial for $6.3 billion and that helped put stocks (equities) in a positive frame of mind. With so many traders on the sidelines for the end of the year, it seemed that the only activity was on the buy side – just about everywhere. Some investors were buying assets before Wednesday’s GDP figure, which some analysts are expecting could end up being surprisingly strong. Durable goods, which could offer additional support, are expected out on Thursday this week.
This week’s API report showed a crude oil stock drawdown of 5.796 million barrels, well beyond the 2.3 to 3.5 million barrel draw being expected this week. Gasoline stocks were down 2.905 million barrels, where most analysts had been predicting a build. Distillate stocks were disappointing, showing a build of 16,000 barrels on expectations for a drawdown of 500,000 to 700,000 barrels. Refinery utilization was down 0.7% to 85.4%. Analysts are looking for this week’s DOE report to show a decline of as much as 0.2%.
If this week’s DOE report shows a large drawdown in crude oil stocks, we would expect to see it serve as a reason for crude oil prices to break over $90.76. In any event, a bullish report is much more likely to attract buying than a bearish report is likely to promote selling. The breakouts in refined products so far this week have given the oil complex a bullish frame of reference. We would be buying to hedge forward needs, here.
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"which rumor has it has not been cornered by JP Morgan just yet."
Only because the squid cornered it years ago.
All your tax cuts are belong to OPEC.
Not to change the subject, but the BDI is in free fall.
Talk about a 52 card monte eh?
They can shift attention, capital or panic in and out of so many commodities, so many places to hide, as of now.
And the psychological barrier for Oil was set at 140ish. Can you imagine the consequences of even $100 Oil? This time, the pain will be felt in logarithmic increments, since everything else is de-flating.
Talk about a merry merry X Mas coming.
While Europe freezes over.
Midwest freezes over.
California is drenched.
And what does war do to Oil and oil price? Hoard and Skyrocket are the two words that come to mind.
Valley oil, beaches!
ORI
http://aadivaahan.wordpress.com
High oil prices can only make the recession longer/worse by either reducing activity or reducing other expenses as salaries, if you have a job, are not going up anytime soon.
The inflation experiment is another failure in Bernanke's career. Well, unless his job is to make Americans poor, if not miserable, then it's been a thunderous success.
Well, unless his job is to make Americans poor, if not miserable, then it's been a thunderous success.
his job is to do what's in the best interests of the global bankers. are you starting to get it?
Example:
http://en.wikipedia.org/wiki/Understatement
Unlike gold, where every ounce mined is still on this planet, all oil extracted is burned into thin air within months. This fact shifts the supply/demand curve in favor of oil vs. gold.
COT reports shows a short for Crude and definitely all energy.
$4 gallon gas will not be acceptable this time around.....trouble is just around the corner
In normal market conditions , where fundamentals and technicals actually matter , WTI would be lower . Instead , in a holiday trading environment whose inhabitants either don't see , or don't want to see , the brewing inflation storm in China or the latest solvency issues in the US and the Eurozone , and with wafer thin participation and an inexorable bullish bias , crude has floated gently up past $90 a barrell and is set to just as easily prance above the 50% Fibonacci retracement level of the July 08 - December 08 decline around $90.50 , just as the S&P rose recently to the pre-Lehman collapse point without so much as the slightest jolt of resistance . This will likely continue , in my opinion , for the remainder of the month and into January . I'll be looking for a short between $95-$100 a barrell . Probably closer to $100 though .
Love all the mineral rights I own.
How many poor bastards believe oil comes from fossils......especially since the Russian deep well drilling programs get good oil flows from 40,000 feet out of 2 billion year old rock.... when there were no fossils....Lemme see,
who started that load of tripe? Why, that would be good ol' JPM of course, in the 1880's, and subsequently made sure all school curriculums explained how dead dinosaurs made up fossil fuel lol! Want to know the real reason gas is in short supply? Try looking up new refineries to see how many have been built recently...that's right , a big fat zero, see the good ol' boys from club exxon etc in the mid nineties got together with the likes of the Sierra club, and banned the building of such apparently appalling things...... But what a beautiful way to stick it to consumers..... here's another good'un, in Australia, the poor bastards pay more for diesel then petrol, because in 1922, the government of the day crapped it's dacks when trucks hit the roads with freight and threatened the freight monopoly...... and have been raking it in ever since.....of course they have lost all to GS etc re subprime..so now there's a LPG excise coming in...
Oil comes from Diatoms.
I'm afraid not Dapper Dan, you see, Diatoms only came in early Jurassic, so there blows your theory....
Petroleum forms from the breakdown of organic molecules under great heat and pressure, and recombination According to currently accepted theory, oil forms from hydrocarbon pyrolysis over geologic time Thomas Gold, noted Cornell astrophysicist also believed as you do. Because of his theories, Amoco actually did drilling in Sweden in the Siljan ring structure, now known to be a meteorite impact, This was a failure. Read:Some could have come from dino soft tissue, but algae and plant life is the likely source for decaying organic matter.
... 2 BILLION YEAR OLD ROCK.... IS WHERE THEY ARE GETTING OIL from....
Life has only existed up to a billion years ago.....
Admittedly I can not explain that, will get back to you.
Actually, it's 2.5 billion years old.......... found gas too............. no wonder the elite think the general masses are there for the taking.....
Please explain why Russian discovery and now production have peaked and continue to decline.
You would too spread such a tale if you could make the money these assholes do by constricting supply...
Been here already in the early 70's....we were screwed then for supply of oil.......... the elite no doubt will have another spin on things if this all gets mainstream...... check out wells on Eugene Island that have mysteriously replenished.........ah those naughty diatoms.........
Faults, fissures, and massive pressures.
There are no mysteries. Only that which is to be learned.
http://www.theoildrum.com/node/5576
Oil is Russia's ONLY export for hard currency. You really think that since 1987 the Russians have been sand-bagging production to create a false peak?
Hedgeless, I have russian friends.....they never complain about shortage of oil, just petrol/gas lol......
Wow, pass the bong, love my abiotic ganga....
So... 2 billion years at 40,000 ft, where the temperature is sufficient to cook heavier hydrocarbons down to methane. That's good. Is there an IPO I can get in on?
temp at 40000 is 200c....
Here is the TV version. Perhaps you have the attention span to complete it:
http://www.abc.net.au/science/crude/
If you read, then I suggest:
http://www.amazon.com/Oil-101-Morgan-Downey/dp/0982039204
Cooter
No, government authorized dribble I have no interest in sorry.....
You are more than welcome to explain them, poor mexicans, that Cantarell isn't really running out of oil. Or North Sea. Nobody's running out of anything, it's abiogenic, abiotic, it's magic! Just wait a million years or two.
"No Free Lunch"
http://www.fromthewilderness.com/free/ww3/102104_no_free_pt1.shtml
http://www.fromthewilderness.com/free/ww3/011205_no_free_pt2.shtml
http://www.fromthewilderness.com/free/ww3/012805_no_free_pt3.shtml
Yep, those Russian drillers really should have known before they broke the rules....
Don't be so cunning, man. Nobody broke any rules. If you want to believe in fairy tales and make strawman arguments like "oil from dinosaurs" - good luck with that.
Depth of the Deepest Drilling
http://hypertextbook.com/facts/2003/AdamCassino.shtml
"On Russia's Kola Peninsula, near the Norwegian border at about the same latitude as Prudhoe Bay, the Soviets have been drilling a well since 1970. It is now over 40,000 feet deep, making it the deepest hole on earth"
"It is not oil or natural resources that are being sought at the Kola Peninsula, but an understanding of the layers and nature of the Earth's crust, including seismic discontinuities, the physical and chemical compositions of the earth's crust, and improving upon the techniques of deep geophysical sound interpretation".
Kola Superdeep Borehole (KSDB) - IGCP 408: „Rocks and Minerals at Great Depths and on the Surface“
The Kola Superdeep Borehole (KSDB-3) reached a final depth of 12,261 m. It was drilled since the seventies in the framework of the programme "Investigation of the continental crust by means of deep drilling" of the former USSR.
"The main results of the technical experience gained from this record-deep drilling, of the investigation of the cores and the geophysical logging were presented and discussed at several international congresses and conferences, including the 27th International Geological Congress held in Moscow (1984), and have been published in numerous papers and books. Of these, the following are the best known to the international community of geologists"
http://www.icdp-online.org/front_content.php?idcat=695
+
Abiogenic Origin of Hydrocarbons: An Historical Overview
http://static.scribd.com/docs/j79lhbgbjbqrb.pdf
I'm not making strawman arguments dude about dinosaurs, which was my word for fossils....
and I'm not going to post innumerable links to the story, however for those interested, just google russian deep well drilling and enjoy the read......
Oil could come out of fairy's asses and it'd still be as irrelevant to the matter at hand as your contention.
The issues are the ultimate rate of extraction, production, and new discoveries - all of which are past peak and in decline: ie Civilization as we know it is fucked unless somebody can figure out a way around the laws of thermal dynamics...
EROEI is a bitch. Time to get to know her and make your peace: ie Get to prepping for a low-energy future.
Yeeessssss....hissed the serpent, the masses now know that cars can run on water...........better educate the masses into thinking water costs money and control it...........
Club Exxon is easy to join! Only $73 membership fee.
This is from the shoot yourself in the foot head department. Higher crude prices = higher commodity prices in general, higher input prices for all goods and services. High prices mean allocation of demand from 'all' to 'this one or that one'. Businesses suffer then fail. Input price increases -- asset inflation bubbles -- are self- limiting for this reason.
Bidding oil to + $100 is folly just as + $80 is folly, just the former is folly faster! The higher the price the greater the crash. This time, unsupported credit crashes as well. I think we might be watching the final deflationary event taking place all around us.
No, not the final... just another tooth in the saw. Admittedly the blade is curved downward.
Not many people have made the connection that rising oil price is ultimately deflationary....
We should just get it over with, put a floor at $100 /bbl, increase it 5% a year and get people to adapt. Naw, probably better to let people to continue to believe in Santa Claus.
Maybe. Some people believe that declining oil supply is inflationary. I'm still trying to figure it out. The argument goes as follows...
It takes a certain flow of energy to maintain the real capital in the world. Think of having to periodically replace your roof or repair road potholes. As oil use declines, nature's depreciation force will dominate and thus real capital will decline. But the paper money representing the real capital will still exist. Hence inflation.
Ah, but an increasing fraction of the available capital is being consumed by energy costs. I don't think that Russian oligarchs and the Middle Eastern Emirs are going to share their gains. Morever, the economy, which is levered off the net energy we get, will have to shrink or increase the leverage to oil to compensate.
In some sense it is a moot point, inflationary vs. deflationary. The economy will have to change.
The best hedge? Have a fraction of your assets invested in PBT, SBR, HGT and similar companies.
Consumer will not be able to handle oil at $100 as it will prevent spending in other sectors.
So, buy dollar, short energy, short commodities.
The lesson from the past 3 years: avoid assets that "appear" overpriced, shorting is for cowboys playing with other peoples money. The rules can be changed and you can get blowtorched. Not that I disagree with the reasons for your thesis.