Oil nears $123 on $200 oil prediction, supply concerns - Yahoo! Finance
Oil futures blasted to a new record near $123 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks. A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of Tuesday's buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.
A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of Tuesday's buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.
Excellent. Exactly what everyone needs.
And if there were games going on in the spot/forward market we'd see the market in a big backwardation.
I don't know what it is, but I feel a bit like the guys in the Western who say: "It's quiet - too quiet..." - and then one of them gets an arrow in the back.
My take is that there's some weird shit going on in the market - it probably involves BP and Goldman Sachs - and it will end in tears before bedtime.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Ordinarily, I'd expect possesion would occur as dated, but it occurs to me any one contract could be structured so subordinate lots(?) deliver along a timeline ending at maturity.
Finance gives me gas. Diversity is the key to economic and political evolution.
Normally the future price of a commod would be the price today + the cost of storage, interest etc etc. If you can actually achieve that, traders will talk about "full contango". That's when speculators will really buy and warehouse material since they have a risk free bet (buy prompt, hedge way forward and hope something comes along to make the prompt jump up).
WTI goes off the board roughly the 20th of the month prior. has to do with pipeline scheduling. NYMEX products go off the board the last biz day of the month. Both are physical settles so if you go off long, you get oil in tank at the defined terminals, with the expectation of scheduling an immediate lift from the seller or into the pipe if WTI.
Brent is just a cash settle based on journalists' assessments of the market. Which is one main reason it's a crap contract. But since physical brent trades in 500 KB lots it's difficult to make a contract with physical settles.
The most striking thing about these graphs is that markets have no clue whatsoever as to where prices will be in the future. In the past, it used to be simple: whatever the short term price, future prices would be around $20, ie markets expected prices to be stable in the long run, whetever the short term variations. Today, they are in effect still clinging to the same formula, ie that prices will go back to some stable level from where they are today - but given that prices keep on increasing, that target can obviously no longer be $20, and given that they have not been stable at any level in the recent past, they are just taking last month's prices as a "safe" bet. Which simply means that they have no clue.
Which simply means that they have no clue.
Some See Oil At $150 a Barrel This Year A growing number of oil-market watchers say voters riled by soaring fuel costs may face far worse this summer, as factors ranging from unrest in Nigeria to slumping production in Russia could shove benchmark oil prices over $150 a barrel. (...) (...) "It's not that the genie is out of the bottle -- it's that 100 genies are out of the bottle," said Daniel Yergin, chairman of Cambridge Energy Research Associates. Normally known for optimistic forecasts of lowering oil prices, Mr. Yergin's firm now says the price could rise to $150 a barrel this year. The world's diminished spare production capacity remains the strongest single catalyst for high prices, Mr. Yergin says. The world's safety cushion -- the amount of readily available oil that could be pumped in a moment of crisis -- is now around two million barrels a day, according to most estimates. That's just 2.3% of daily demand, and nearly all of the safety cushion is in one country, Saudi Arabia. Everyone else is pretty much pumping all they can, which makes the world vulnerable to political or other shocks. (...) "We believe that the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent," Goldman Sachs said in a note to clients. The bank said oil could hit an average of $200 a barrel next year, a prediction that would have seemed outlandish just months ago. The U.S. Energy Department now predicts that oil will average $109 a barrel this year, raising its forecast by $9 from last month. The government also raised its prediction for gasoline prices, saying they should peak at an average of $3.73 a gallon on average in June, 13 cents higher than its previous forecast.
A growing number of oil-market watchers say voters riled by soaring fuel costs may face far worse this summer, as factors ranging from unrest in Nigeria to slumping production in Russia could shove benchmark oil prices over $150 a barrel.
(...)
"It's not that the genie is out of the bottle -- it's that 100 genies are out of the bottle," said Daniel Yergin, chairman of Cambridge Energy Research Associates. Normally known for optimistic forecasts of lowering oil prices, Mr. Yergin's firm now says the price could rise to $150 a barrel this year.
The world's diminished spare production capacity remains the strongest single catalyst for high prices, Mr. Yergin says. The world's safety cushion -- the amount of readily available oil that could be pumped in a moment of crisis -- is now around two million barrels a day, according to most estimates. That's just 2.3% of daily demand, and nearly all of the safety cushion is in one country, Saudi Arabia. Everyone else is pretty much pumping all they can, which makes the world vulnerable to political or other shocks.
"We believe that the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent," Goldman Sachs said in a note to clients. The bank said oil could hit an average of $200 a barrel next year, a prediction that would have seemed outlandish just months ago.
The U.S. Energy Department now predicts that oil will average $109 a barrel this year, raising its forecast by $9 from last month. The government also raised its prediction for gasoline prices, saying they should peak at an average of $3.73 a gallon on average in June, 13 cents higher than its previous forecast.
Either we'll see a drop, or prices are going to jump massively higher than these forecasts, which will prove to be too "optimistic" (if one things low oil prices are a good thing) as usual. In the long run, we're all dead. John Maynard Keynes
