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Countdown to 100$ oil (9) - I am taking bets

by Jerome a Paris Sat Aug 13th, 2005 at 03:50:22 AM EST

a timely topic, promoted from the diaries by site gnomes and updated by Jerome with the new highs

US energy costs surge as oil breaks $67 (FT, Saturday)

Oil futures broke through $67 a barrel to reach the fifth record of the week, while natural gas rose to the highest price recorded for a summer contract.

High oil prices boosted the US import bill in June, helping to widen the US trade deficit by 6 per cent to $58.8bn. Imports of crude oil climbed to $14.6bn compared with $13.7bn in May.

Oil Prices Briefly Touch $66 Per Barrel on Supply Concerns, Strong Demand (Yahoo)

Crude Oil Rises as IEA Says High Prices Aren't Slowing Demand (Bloomberg)

Oil price hits $66 for fourth record of the week (FT, Friday)

Oil prices on Thursday broke their fourth consecutive nominal record for the week, after a warning from the industrial countries' energy watchdog that rising prices had not yet dented demand.

The International Energy Agency also pointed to a sharp slowdown in production outside the Organisation of the Petroleum Exporting Countries. The comments from the IEA pushed US oil futures to $66 a barrel, while heating oil and petrol also hit records. "My long-term forecast is for $70 a barrel," said Phil Flynn of Alaron Trading in Chicago. Refinery outages and Iran's nuclear stand-off also supported prices.

The IEA cut its forecast for non-Opec output growth to 670,000 barrels a day half last year's increase and the weakest since 1999. In spite of two years of high prices, it raised its demand forecast slightly. That means that Opec, which is already producing near its limit, will have to fill a widening gap.

"Higher oil prices have brought about a limited demand-side response," the IEA said.

World oil consumption will rise by 1.6m b/d to 83.7m b/d this year and that rise will accelerate to 1.8m b/d next year.

Okay. I am taking bets. Please post below the price for oil (you can use WTI or Brent as a reference - just say which) on the last day of 2005.

The bet closest to the actual price will get a prize, a bottle, at your option, of fine French Champagne or fine Whiskey. If the winning bet is below 100$, the winner will get BOTH bottles.

Arguments welcome if you care to provide them, but not required!

Earlier "Countdown Diaries":
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)

Hedging my position...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Aug 11th, 2005 at 07:06:06 PM EST
care for a side bet on whether we have a 5 handle before we have a 7 handle?

One magic rule of commod trading.  Prices move in the direction that F===ks the most people.  Right now, the world is long.  

Interesting to look at table of wti prices.  As of today (aug 18) the price is nearly flat for 5 years forward..

by HiD on Thu Aug 18th, 2005 at 05:58:24 AM EST
[ Parent ]
I'd like a good quote on such a bet, because I would not be too optimistic to win it... Make me an offer!

Do you have a good site to have all the forwards in one place, and generally to get usable data on the oil prices, because I still miss that, strangely enough, and rely on the mainstream sites which are quite limited? Thanks

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Aug 18th, 2005 at 06:26:10 AM EST
[ Parent ]
I ditched my WSJ subscription which has the NYMEX quotes.  I found another site that had a table out to dec 2011 (people trade calender spreads off Dec usually).  Can't seem to find it again.  IIRC.  Front about 64, then in contango to $65 ish mid next spring then gentle backwardation to about $58 in 6 years time.  Pretty flat on a percentage basis.  I wouldn't trust NYMEX quotes much further out than that.  The locals fool around with the #'s out in the illiquid areas to minimize their margins.  I don't know of any place you can get free OTC quotes.

as for the bet, I'm just pulling on your beard.  One reason I was a very mediocre trader is I have no huge desire to gamble every second of every day.

by HiD on Thu Aug 18th, 2005 at 11:03:16 PM EST
[ Parent ]
$78 WTI, and they'll be crowing about how it's still way short of adjusted prices in the early 80s, so everything's fine as can be.

I've no doubt prices will hit $100 in the medium term, but this will play itself out over a slightly longer timescale than half a year. This is the slow thumbscrew, and it's got many excruciating turns left 'til we hear the crunch of bone.

Bitsofnews.com Giving you the latest bits.

by Alexander G Rubio (alexander.rubio@gmail.com) on Thu Aug 11th, 2005 at 07:26:56 PM EST

When is consumption going to start taking a hit?  It's crazy...people aren't driving less.  My commute was short anyway but now that I've switched positions, I can walk everywhere I need to get to.  That's pretty hard in North America.  

by aoxomoxoa on Thu Aug 11th, 2005 at 10:07:27 PM EST
I note that France's mass-market public service radio, France Inter, began this morning talking seriously about the rising price of oil and how to start thinking about economizing energy. The subject seems to be coming up in each half-hourly news bulletin.

It may or may not be a bellwether. Not, of course, as to the price of oil at the end of the year ;)

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Aug 12th, 2005 at 02:00:24 AM EST
Hell, put me down for 85 Brent...I agree with others, it will hit $100 eventually, just may take longer than a few months.
by byoungbl (byoungbl at mindspring.com) on Fri Aug 12th, 2005 at 04:29:16 AM EST
Call me an optimist: $75 WTI
by Texmandie on Fri Aug 12th, 2005 at 05:00:04 AM EST
(Takes a deep breath) $60.

My argument is: I think there is currently a speculation element in the rally, and it will take some falls from speculation highs before we reach and pass $100 due to real supply problems (but that'll happen in a few years).

We have recently some refinery breakdowns in the USA. Does this remind only me of the California 'Energy Crisis'? Is it outside the realm of possibilities that oil companies are manipulating prices, feeding the speculation bubble this way?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Aug 12th, 2005 at 05:57:41 AM EST
I forgot: WTI, February delivery.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Aug 12th, 2005 at 02:52:24 PM EST
[ Parent ]
Light crude oil for December or January delivery, $67.68.

I guess that's Brent. I'm just going by the futures market as of today.

When's the cutoff? Can I bet on December 30th?

by asdf on Fri Aug 12th, 2005 at 09:35:05 AM EST
I'll throw in for an even $90.

PS- You'll pay shipping charges on my bottle, right?

by US Blues on Fri Aug 12th, 2005 at 12:38:04 PM EST
You can call me a crazy cock-eyed pessimist on this one..I'll stand by my throwing in with Jerome some time ago on the 100 dollars by the end of the year prediction.

And although I absolutely love to win bets I'm  hoping I'll lose on this one. If not I'll take a nice chocolate liquor.

"People never do evil so throughly and happily as when they do it from moral conviction."-Blaise Pascal

by chocolate ink on Fri Aug 12th, 2005 at 03:32:44 PM EST
I'd say you're not particularly cock-eyed. The problem is that there are a bunch of unpredictable things that might happen to cause significant changes in the price of oil.

  • If some big bloc's economy collapses, the demand for oil will go down and thus the price go down also.
  • If France comes to her senses and invades Iran (do I have to put a smiley here?) then the supply will be reduced and the price go up.
  • If there is a big terrorist panic somewhere, tourism might be reduced enough to change demand.

It's pretty unpredictable given the current global situation.
by asdf on Fri Aug 12th, 2005 at 07:08:54 PM EST
[ Parent ]
My rationale? We're near the end of the current runup, because we're nearing the end of the summer driving and cooling season, and there's probably some excess speculation going on.

I suspect we'll hit $70-$75 before the end of the month. Then, as summer demand eases, prices will draw back substantially to around $50. All of the "oil is forever" folks will be claiming victory, despite the fact that $50 is significantly above the starting price for the year.

Then, as we enter November, demand will approach or even temporarily exceed supply. Prices will double to a new inflation-adjusted high, somewhere between $90 and $100. But some of that will be over-speculation and we'll ease off a bit to around $80 by Christmas. The "oil is forever" folks will declare victory yet again. $80 will become the new long-term sustainable price...until next summer and the next push above $100.

by Cascadia Progressive on Fri Aug 12th, 2005 at 04:13:30 PM EST
Why do I feel like I'm the sucker pulling up to a table full of card sharks?

I'm down for $92.50, Brent, because I spun a big wheel and that's the number that came up (and because I think there'll just be slow, steady, and inescapable upward pressure).

Now, which one of you is Brent?

"...psychopaths have little difficulty infiltrating the domains of...politics, law enforcement, (and) government." Dr. Robert Hare

by RubDMC (rubdmc at yahoodotcom) on Sat Aug 13th, 2005 at 12:53:19 AM EST
Put me down for $94/bbl WTI.

That's my best guesstimate with winter coming on.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Sat Aug 13th, 2005 at 05:43:39 AM EST
$78.17, WTI.
by wanderindiana on Sat Aug 13th, 2005 at 09:04:48 AM EST
$74.80 WTI
by northsylvania on Sat Aug 13th, 2005 at 09:34:12 AM EST
I think there is a danger of getting carried away with this. Whilst the supply conditions are tight, and the market is quite happy to price oil in the $52-58 price-range, the excess is due to external, "geopolitical" or environmental factors.

If the US, for example, bombs Iran then all bets are off - there is no way that prices will not skyrocket to the $150 or more level. If there is a major terrorist attack on key Saudi or Gulf oil facilities, then, again, the price will skyrocket. If there is a bad second half to the hurricane season and this knocks out Gulf of Mexico production, then $85-$90 per barrel is possible; if Winter comes early and there is a serious cold spell in the US, then $70-$72 is possible.

If, however, it just comes down to those boring supply and demand issues, coupled with a 15-20% risk premium, then we are looking at a trading range between $55 and $65 for the Autumn and into the first half of the Northern hemisphere winter. My best guess for the 31st December is $63.75 for Brent crude.

by londanium on Sat Aug 13th, 2005 at 10:23:47 AM EST
with oil prices skyrocketing, i'm sure some people must be absolutly happy in iran/ soudi etc...

but where the money is going ? i never read anything about that ? where are the investment in these countries or on our sharemarket?

by fredouil (fredouil@gmailgmailgmail.com) on Sun Aug 14th, 2005 at 08:27:47 AM EST
I actually think it may be in the $78-79 range, but I don't want to crowd the territory there.

I agree with londanium's reasoning, but I would add the winding down of the US involvement in Iraq as the US military sees the handwriting on the wall and the anti-war movement picks up a little steam. This sends some fears into the market as they really see how messed up the situation is.

There will be a new wave of attacks on oil installations in Iraq as this begins and as the insurgency realizes that creating oil uncertainty is easier and more effective than killing US and Iraqi forces.

The Bush saber rattling vis-a-vis Iraq will die down, but the nervousness in the markets that it is likely to create will remain.  

This will be countered by a serious "don't worry" PR push by big oil in order to calm the situation. It will be sufficient to slow the progress of the climb.

by gradinski chai on Sun Aug 14th, 2005 at 08:59:23 AM EST
http://tinyurl.com/8j8on This is a good link to check periodically ..the Iraq Pipeline Watch.  Since the invasion their have been 257 attacks on pipelines, oil personnel, oil installations and attacks such as on trains carrying oil.

This is never mentioned in the news-that there is really an attack somewhere at least every other day it seems. The last entry was on August 4-with 3 bombs going off at Kirkuk installation I believe.  It also sometimes takes several days for updates on the site.

"People never do evil so throughly and happily as when they do it from moral conviction."-Blaise Pascal

by chocolate ink on Sun Aug 14th, 2005 at 01:29:00 PM EST
[ Parent ]
Is it considered cheating if I ask my dad to take a poll at Statoil HQ before betting?

The world's northernmost desert wind.
by Sirocco (sirocco2005ATgmail.com) on Sun Aug 14th, 2005 at 07:01:49 PM EST
No please do! But Statoil HQ will only get one bottle, like everybody else here, if they win!

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Aug 18th, 2005 at 06:28:30 AM EST
[ Parent ]
No special formula here, I wrote down all the numbers and looked for a gap. I do find it hard to believe that a "normal" rise in oil prices would put it much higher though. However, the way things are going major terrorist attacks, US invasions, and large weather disturbances may be considered "normal". In which case betting over 100 might make sense.
by toad on Wed Aug 17th, 2005 at 02:54:21 AM EST
Sorry if this wager is late.  I just found this thread.  Okay, I'll go for 104.29, Brent.
by Media Revolution on Mon Aug 29th, 2005 at 12:11:31 PM EST
I meant to do this before Katrina came on-shore.

My bet is $105, Brent.

Before Katrina I considered this on the pessimistic side, basing it on a regular cold winter in the North and North-East as well as China's demand for heating oil.
But after Katrina, I wonder if I am being optimistic.

by linnen on Tue Aug 30th, 2005 at 09:09:46 PM EST

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