The economy *is* stupid ...
 

Oil fell below 90 bucks/barrel today on concerns of a economic slowdown,
according to the "experts".
So, if I understand correctly:

Rising oil prices generates economic concern.
Economic concern influences oil prices to be lowered.



Eisboch

The economy *is* stupid ...
 

On Tue, 22 Jan 2008 16:40:22 -0500, "Eisboch" wrote:


Oil fell below 90 bucks/barrel today on concerns of a economic slowdown,
according to the "experts".
So, if I understand correctly:

Rising oil prices generates economic concern.
Economic concern influences oil prices to be lowered.

What's interesting is the actual proof that the oil market is over
inflated with speculation.

Now, let's see what happens from here.

The economy *is* stupid ...
 

On Tue, 22 Jan 2008 16:40:22 -0500, "Eisboch" wrote:


Oil fell below 90 bucks/barrel today on concerns of a economic slowdown,
according to the "experts".
So, if I understand correctly:

Rising oil prices generates economic concern.
Economic concern influences oil prices to be lowered.



Eisboch

As with many things in life, it seems self regulating and should reach
an equilibrium between oil prices and economic concern. Moral of the
story may be that we should be more concerned if we want lower oil
prices ;-)

Seriously, oil is VERY supply/demand sensitive and an economic
downturn will reduce demand. I also assume that there is a feeling out
there that OPEC will turn up the volume a little to drop prices just
enough to keep us sucking as hard as we can at their tit and will try
to keep their dollar based investments from going even further to ****
while keeping up oil revenues. All of which drives the equilibrium
between oil prices and economic concern ;-)

The economy *is* stupid ...
 

On Tue, 22 Jan 2008 22:08:45 GMT, Short Wave Sportfishing
wrote:

What's interesting is the actual proof that the oil market is over
inflated with speculation.

Everyone who buys or sells a futures contract is a speculator of
sorts. That does not necessarily mean they are greedy, nefarious
people however. A declining futures market is more a reflection of
expectations for reduced demand, rather than an indicator that present
prices are inflated by speculation.

The economy *is* stupid ...
 

On Wed, 23 Jan 2008 08:48:49 -0500, Dave Hall wrote:

I also assume that there is a feeling out
there that OPEC will turn up the volume a little to drop prices

The ability of producers to "turn up the volume" is becoming
increasingly more limited. The Saudi's are already pumping at a rate
that is causing long term damage to their oil fields. Iraq's output
is way down from pre-war levels and may never come back to what it
was. Iran, Venezuela and Nigeria have serious issues with political
stability. Mexico is pumping at or near capacity.

Canadian oil sands have a lot of potential capacity but only with big
environmental impacts and production process issues. Undeveloped
Alaskan capacity is a relative drop in the bucket.

The economy *is* stupid ...
 

On Wed, 23 Jan 2008 11:34:53 -0500, Wayne.B
wrote:

On Tue, 22 Jan 2008 22:08:45 GMT, Short Wave Sportfishing
wrote:

What's interesting is the actual proof that the oil market is over
inflated with speculation.

Everyone who buys or sells a futures contract is a speculator of
sorts. That does not necessarily mean they are greedy, nefarious
people however. A declining futures market is more a reflection of
expectations for reduced demand, rather than an indicator that present
prices are inflated by speculation.

I quite agree, but when you look at fundamentals, follow the money,
speculation is a major component of oil prices.

When you can move the price of a barrel of oil up $2. because of fog
in the Houston Shipping Channel or $2 because of a backlog at the
LOOP, that's pure speculation moving the market up - not fundamentals.

The economy *is* stupid ...
 

On Wed, 23 Jan 2008 17:13:03 GMT, Short Wave Sportfishing
wrote:

When you can move the price of a barrel of oil up $2. because of fog
in the Houston Shipping Channel or $2 because of a backlog at the
LOOP, that's pure speculation moving the market up - not fundamentals.

It's an expectation of a possible change in the fundamentals.

The economy *is* stupid ...
 

On Wed, 23 Jan 2008 20:35:24 -0500, Wayne.B
wrote:

On Wed, 23 Jan 2008 17:13:03 GMT, Short Wave Sportfishing
wrote:

When you can move the price of a barrel of oil up $2. because of fog
in the Houston Shipping Channel or $2 because of a backlog at the
LOOP, that's pure speculation moving the market up - not fundamentals.

It's an expectation of a possible change in the fundamentals.

Depends on what your metric of fundamentals is.

Delay of shipments for 8 hours is not a earth shattering fundamental
change in the supply or the demand that's worthy of a 5% change in
price.

The economy *is* stupid ...
 

On Thu, 24 Jan 2008 02:01:55 GMT, Short Wave Sportfishing
wrote:

On Wed, 23 Jan 2008 20:35:24 -0500, Wayne.B
wrote:

On Wed, 23 Jan 2008 17:13:03 GMT, Short Wave Sportfishing
wrote:

When you can move the price of a barrel of oil up $2. because of fog
in the Houston Shipping Channel or $2 because of a backlog at the
LOOP, that's pure speculation moving the market up - not fundamentals.

It's an expectation of a possible change in the fundamentals.

Depends on what your metric of fundamentals is.

Delay of shipments for 8 hours is not a earth shattering fundamental
change in the supply or the demand that's worthy of a 5% change in
price.

It's all in the circumstances. If you are in Houston trying to keep a
refinery running 24x7 and you are now at risk for running out of feed
stock, paying a $2 premium might be a small price compared to shutting
down the refinery and restarting it. Or, you might be contractually
on the hook to deliver a tanker load of crude by a certain date and
time with big penalties if you default. In that case it makes sense
to buy out the contract as long as the purchase premium is less than
the default penalty.