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Countdown to $100 oil (45) - time to bet again

by Jerome a Paris Mon Sep 10th, 2007 at 07:39:36 AM EST

I realize that I have not yet organised the oil price guessing contest like in the previous two years, and we're getting closer to the end of the year, so it's high time to do it now.

As previously, the principle is simple: post a comment with what you think will be the price of oil (the next-month forward WTI, as quoted on NYMEX) on the last day of 2007. The answer which is closest to wherever the price ends up being wins a bottle of (French) champagne, sent by me.

Meteor Blades won the contest in 2005 (see diary 20 below); wchurchill won in 2006 (see diary 38 below) and was kind enough to donate his bottle to Fran. Maybe you'll be next... all it takes is to write a number.

promoted by whataboutbob


The past two years ended at almost the same level, $61/bbl, which is also the level that oil had reached (for the first time) when I started this "Countdown" series over two years ago, and which was the price still seen as recently as May this year.

Some have occasionally made gentle fun of me for that lack of obvious movement of oil prices, and in particular for its failure to get anywhere close to $100 despite my best Cassandra-like encouragements. What can I say? They have a point - oil has not yet reached $100/bbl (although natural gas did in the UK (see diary 22) when shortages threatened in early 2006).

On the other hand, oil reaching $60 two years ago was huge, worrisome, news - today it's seen as a pretty low price. In fact, perceptions have changed amazingly quickly with regards expectations of future prices. As diary 24 noted, the most amazing change was with respect to futures - in the space of just a few months, the markets have gone from the expectation that prices would always come back to $20/bbl, to the expectation that they will stay above $60 for the foreseaable future (the current futures chart is flat near $70/bbl far into the future).

And we went from $50/bbl in January to $75/bbl right now, a 50% increase in 8 months. Going from $75 to $100 only requires an additional 33% increase, so it's likely to be an anti-climax more than anything else when it actually happens.

Anyway, to help you make your bet, here's the helpful hints from two oil major CEOs:



Price of oil will continue to rise, says Total chief

High oil prices are here to stay, according to Total, the French oil multinational, which has raised its forecast value of a barrel of crude from $40 to $60 as it predicts continuing strong demand for oil, rising costs and political constraints on production.

Total's decision to bet on a higher oil price is based on fundamentals, said Christophe de Margerie, the chief executive, who said the recent turmoil in the debt markets had shaken most of the speculative money out of oil futures. Despite the loss of the hot money, the price of Brent crude was about $77 per barrel yesterday, close to its peak of $78.

"Demand is still strong in Asia, there is strong demand in the Middle East for electricity generation and water purification. The price will remain high," he said.

The Total chief said that biofuels would not provide an answer for the world's energy needs, insisting that hydrocarbons and, increasingly, nuclear power, would supply 80 per cent of the world's energy for the next 50 years.



Fundamentals don't justify $70 oil price: Exxon CEO

CALGARY (Reuters) - Oil market fundamentals do not justify a crude oil price as high as $70 a barrel, which is below today's level, Exxon Mobil Corp's top executive said on Friday.

"I cannot explain why we have $70 oil. The fundamentals behind supply and demand do not support $70 oil. The fundamentals support something much less," Exxon Mobil CEO Rex Tillerson told a business roundtable at the Spruce Meadows equestrian facility on the outskirts of Calgary.

(...)

"There's something else going on there that I don't get," Tillerson said, speaking to an audience of business and political leaders about energy security.

He said he believes Saudi Arabia has the oil resources and technological ability to boost its daily output capacity to 12.5 million barrels. However, he did not give a timeframe for such an increase.

:: ::

And if you feel like sifting through the earlier Countdown diaries, here they are:
Countdown to $100 oil (44) - oil industry admits it cannot save us
Countdown to $100 oil (43) - IEA boss denies and confirms peak oil in same breath
Countdown to $100 oil (42) - IEA predicts shortages within 5 years
Countdown to $100 oil (41) - oil more expensive than it appears
Countdown to $100 oil (40) - Undulating plateau
Countdown to $100 oil (39) - BigOil running out of oil
Countdown to $100 oil (38) - Who gets Champagne edition
Countdown to $100 oil (37) - OPEC says peak oil (and $100 oil) is near
Countdown to $100 oil (36) - Free game! win champagne! no risk! (eurotrib)
Countdown to $100 oil (36) - Free game! win champagne! no risk! (DailyKos)
Countdown to $100 oil (35) - peak oil: the last skeptics capitulate (CERA)
Countdown to $100 oil (34) - Oil major CEO calls for demand reduction
Countdown to $100 oil (33) - Below zero
Countdown to $100 oil (32) - peak oil is, like, so over. Not!
Countdown to $100 oil (31) - $15 oil? The cornucopians are fighting back
Countdown to $100 oil (30) - senior politico fears looming oil wars
Countdown to $100 oil (29) - Alaska joins axis of evil (unreliable oil suppliers)
Countdown to $100 oil (28) - New records suggest more to come
Countdown to $100 oil (27) - 'Mission Accomplished' - High oil prices are here to stay
Countdown to $100 oil (26) - Time to bet again (eurotrib)
Countdown to $100 oil (26) - Time to bet again (dKos)
Countdown to $100 oil (25) - Iran vows that oil prices will not go down
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to $100 oil (21A) - The 4 biggest oil fields in the world are in decline *
Countdown to 100$ oil (21bis) - long term vs short term worries (dKos)
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006 (Eurotrib)
Countdown to 100$ oil (19) - Your bets for 2006 (DailyKos)
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets (eurotrib)
Countdown to 100$ oil (9) - I am taking bets (dKos)
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) (eurotrib)
Countdown to 100$ oil (1) (dKos)
* added to the series after the fact

Display:
http://www.dailykos.com/storyonly/2007/9/8/155922/0789

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Sep 8th, 2007 at 05:20:34 PM EST
by det on Sat Sep 8th, 2007 at 06:19:46 PM EST
[ Parent ]


You can't be me, I'm taken
by Sven Triloqvist on Sat Sep 8th, 2007 at 06:29:05 PM EST
[ Parent ]
Sorry € 91,70

You can't be me, I'm taken
by Sven Triloqvist on Sat Sep 8th, 2007 at 06:29:50 PM EST
[ Parent ]
Damn it. I mean 91,70 dollars. This is my final correction ;-)

It's a tactical guess of course.

You can't be me, I'm taken

by Sven Triloqvist on Sun Sep 9th, 2007 at 03:58:35 PM EST
[ Parent ]
... between $85 and $88, and now the bracket has been squeezed further.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Sep 9th, 2007 at 05:30:51 PM EST
[ Parent ]
When Oil does hit $100 it will be time to collect all your countdown diaries, format them and publish them in book form.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd
by Migeru (migeru at eurotrib dot com) on Sat Sep 8th, 2007 at 07:22:22 PM EST
[ Parent ]
$59.75

you are the media you consume.

by MillMan (millguy at gmail) on Sun Sep 9th, 2007 at 01:41:49 AM EST
$ 59.59

Based on two things:

  • All other numbers on this thread is higher (so far, go on take 59.58 if you dare), so if the price is lower then the suspected range I win the bottle!
  • It is a nice number


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Sep 10th, 2007 at 10:51:34 AM EST
[ Parent ]
$64.33  Feb WTI (should be the first contract on Dec 31)

Another warm winter and slumping economy put oil in a downward spiral.   Would go lower but for Iraq unable to export, Nigerian mess, and Iran/US tensions.

by HiD on Sun Sep 9th, 2007 at 05:34:58 AM EST
Do you know where to get historical data on the web for those various oil futures (WTI, Brent, ...)?

Same question for delayed quotes.

by Laurent GUERBY on Sun Sep 9th, 2007 at 06:37:09 AM EST
[ Parent ]
Yes.

http://tonto.eia.doe.gov/dnav/pet/pet_pri_fut_s1_d.htm

DOE has old futures data.

http://www.nymex.com/index.aspx

for current data.    

the DOE data base is downloadable into Excel.  But I really miss the proprietary databases we had at big oil/trading houses.  It was so easy to chart up relationships.

by HiD on Mon Sep 10th, 2007 at 01:07:22 AM EST
[ Parent ]
$90.00

or

€60

as the $ heads rapidly down the toilet.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Sep 9th, 2007 at 07:33:22 AM EST
$ 76.67

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Sun Sep 9th, 2007 at 09:49:40 AM EST
But who knows?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Sep 9th, 2007 at 12:00:10 PM EST
If oil hits $100 then perhaps you might offer the winner a gallon of gasoline instead, he might not be able to afford it otherwise...

I once speculated in (stock) options. I lost. What I learned from the experience was that it is hard enough predicting which way prices will go in the future, getting the date right at the same time is almost impossible.

I also learned that the winners are those who sell options. Since 95% of all options expire they have a good income stream from the premiums. This proves, once again, that you need money to become rich. $2 per share on a 100 options gets you $200, but if you are rich you can sell 10,000 options, then your activity is worth doing.

All this is a preface to my saying, I won't guess, I have no rational basis on which to pick a number.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Sep 9th, 2007 at 02:36:37 PM EST
Option seller will hedge the options (most of them, Warren Buffet does not for example): the premium is their (model based) estimate of the cost of hedging up to the maturity of the option plus of course a commercial margin plus a fee for the transaction. You can read the margin on the option market prices: it's around half of the ask minus bid prices.

The option seller main risk is in evaluating the parameters of the model used and the adequacy of the model used to future moves of the underlying price.

PS: I work for a big option seller.

by Laurent GUERBY on Sun Sep 9th, 2007 at 03:49:37 PM EST
[ Parent ]
as buying them.  Your risk is enormous whereas the buyer can only lose his/her premium payment.

But your point is well taken.  Trading this stuff is not for widows and orphans.

by HiD on Mon Sep 10th, 2007 at 01:10:06 AM EST
[ Parent ]
Actually I think it makes a big difference whether you are selling covered or naked options.

With covered options if the option gets exercised you have only an opportunity cost. For example the option is at $10 the stock goes to $15 and is exercised. You get the $10 and the option premium (say $2). So you end up with $12. If you had just held the underlying stock you could have sold it for $15 yourself, thus a $3 opportunity cost. Big sellers deal on a statistical basis, just like insurance companies, so this should all be allowed for in the cost of the option itself.

Naked options are another matter. In this case you can lose more than you invested. This isn't investing it's gambling.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Mon Sep 10th, 2007 at 10:02:41 AM EST
[ Parent ]
covered options are low risk. It's the only derivative I'll use with my own money.  But I thought you were talking about energy markets.  Not many individuals have oil in hand to write options against.

Gambling is not the right term.  Speculating is better IMO.

by HiD on Mon Sep 10th, 2007 at 07:18:26 PM EST
[ Parent ]
$83.27

that figure was achieved after carefully considering all the relevant data and information flow of, in, and between the various agents, actors, and entities on a Class IV Fitness Landscape carefully modeled using Advanced Information technology and deriving the figure from an n-level decision matrix.

In other words: I pulled it out of my arse.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Sep 9th, 2007 at 04:01:15 PM EST
I too depend on the Pulling It Out of My Arse Theory so based on that highly illogical logic I'll go with $81.81.

"People never do evil so throughly and happily as when they do it from moral conviction."-Blaise Pascal
by chocolate ink on Sun Sep 9th, 2007 at 07:47:44 PM EST
[ Parent ]
because that will be the age of my arse next year and I haven't needed a replacement yet.  I reserve the right to be paid in wine, or French lessons, though.

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Sat Sep 15th, 2007 at 06:03:24 PM EST
[ Parent ]
I'm a lousy guesser at the best of times, otherwise I'd have won the lottery at least once by now.

But it seems to me that the price of oil depends on what happens in Iran in the next coupla months. If the yanks start bombing, then $100 will be just a way station on the market's skyrocket. If they are bluffing, then a period of calm reflection in the markets is likely.

Seeing as I don't actually know the current price let's call it $65 if no bombing, $165 if there is.


keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Sep 9th, 2007 at 04:31:57 PM EST
My uneducated guess - $103.75
by Fran (fran at eurotrib dot com) on Sun Sep 9th, 2007 at 05:17:14 PM EST
Using advanced computer methods ;-)

$84.37

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Sun Sep 9th, 2007 at 06:17:55 PM EST
68,69$.

"If you know your enemies and know yourself, you will not be imperiled in a hundred battles." Sun Tzu
by Turambar (sersguenda at hotmail com) on Sun Sep 9th, 2007 at 07:44:59 PM EST
by Lasthorseman on Sun Sep 9th, 2007 at 09:43:51 PM EST
$88.88 -- and yes, I'm the person who chooses the winner of a racehorse by the name of the horse.  My champagne flute collection is itching to be fizzing, but I'm guessing I'll have to buy my own champagne.

Karen in Austin

'tis strange I should be old and neither wise nor valiant. From "The Maid's Tragedy" by Beaumont & Fletcher

by Wife of Bath (kareninaustin at g mail dot com) on Sun Sep 9th, 2007 at 09:47:59 PM EST
$71.30.

I expect a lot of volatility this fall, as oil is caught between peaking production and uneven demand.

And the world will live as one

by Montereyan (robert at calitics dot com) on Sun Sep 9th, 2007 at 10:25:18 PM EST
I don't like prices forecasts, they're useless at this moment of stagnant production, but for the fun of it here's a wild guess:

57 € for the Brent Blend.

I don't use the $ because I have no idea where it'll be by year's end.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Mon Sep 10th, 2007 at 03:39:53 AM EST
$70.0

I have always enjoyed that number....

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Mon Sep 10th, 2007 at 06:09:40 AM EST
$78.23

"The basis of optimism is sheer terror" - Oscar Wilde
by NordicStorm (m<-at->sturmbaum.net) on Mon Sep 10th, 2007 at 08:05:41 AM EST
$93.34
by nanne (zwaerdenmaecker@gmail.com) on Mon Sep 10th, 2007 at 08:18:42 AM EST
$64,10
by PeWi on Mon Sep 10th, 2007 at 08:34:40 AM EST
$67

Or $267, but somehow I think $63 is more likely.

And I think we should use the champagne to leverage its own future, so that if oil is over $150 or below $50 a champagne truck turns up outside Chez ET. :)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 10th, 2007 at 08:59:06 AM EST

$83.78

I'm a long time reader... finally got around to creating myself an account. Who knows, maybe one day I'll find the time to write a diary (in my copious spare time *snort*).



We're trapped in the belly of this horrible machine, and the machine is bleeding to death.
by davel on Mon Sep 10th, 2007 at 09:25:14 AM EST
Good to see new faces! No need to stress about diaries, just comment when you feel like it, and you will eventually feel like writing more.
by Trond Ove on Mon Sep 10th, 2007 at 09:33:46 AM EST
[ Parent ]
a yes, the bottle of Champagne gets them from behind the oven, maybe that should be incoproated in a recruitment drive? (-:
by PeWi on Mon Sep 10th, 2007 at 11:27:21 AM EST
[ Parent ]
Welcome, davel!  This is a friendly place, but don't dream that the winner will share the champagne... :)

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Sat Sep 15th, 2007 at 06:07:26 PM EST
[ Parent ]
Oh, what the hell.

$99

But you don't need to wait around for me to guess the correct price to send me some champagne. :)

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Mon Sep 10th, 2007 at 10:44:03 AM EST
Let's play !

70.25 $

by Renard (scio at free point fr) on Mon Sep 10th, 2007 at 11:28:43 AM EST
Welcome, Renard!  

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Sat Sep 15th, 2007 at 06:11:14 PM EST
[ Parent ]
Oh, shucks. An uneducated guess.

$86
 

by Nomad on Mon Sep 10th, 2007 at 01:56:08 PM EST
Living as I do in a country with virtually no decent public transportation, I put gas in the car once a week so I can go to work and home again, plus do necessary errands. Would you speak to whoever is in charge over there, Jerome, and ask if they can configure a car to run on Champagne?

$82.83

by Mnemosyne on Mon Sep 10th, 2007 at 10:32:13 PM EST
$98.70

Have you seen about the attacks in Mexico?

A leftist guerrilla group has claimed responsibility, and they've been mounting escalating attacks on Mexican oil and gas infrastructure.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue Sep 11th, 2007 at 12:18:16 AM EST
Jerome,

My bet is $81/bbl. I think late December/early January will be a "lull point", when prices cool down from the last big set of traveling holidays (Turkey Day and Buying Day = Xmas), prior to a steep increase in 2008, which will be when the "post $100/bbl" era starts.

nb41

by nb41 on Tue Sep 11th, 2007 at 11:22:47 AM EST
And I still think we will see $100 oil in 2008.  (That was my bet in 2006.)  I'm sticking with sometime in late August to mid-October as the time.  In the meanwhile, I'll predict that the price of oil will rise and fall at various times.  We've actually had some talk in the state (Colorado) of increasing gas taxes in order to fix the roads.  I hope we can get some mass transit money in there, too.  But, if nothing else, raising the price will be a net gain for the general population.

Glad I caught this post, I sometimes miss ET for days at a time!

by red moon dog on Wed Sep 12th, 2007 at 03:13:09 PM EST


Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Wed Sep 12th, 2007 at 09:12:13 PM EST


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Sun Sep 16th, 2007 at 04:19:46 PM EST


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