Premature Run Up in Oil Price?

mmasters · Posted: Sun May 11, 2008 9:30 am Post subject: Premature Run Up in Oil Price?

Anybody else getting the impression that this increase in oil prices is too much too soon? I think the market is being tested for demand destruction and to what Threadbear said in another thread: the beginnings of an Enron style manipulation of the energy market globally in oil. Furthermore, if people remember when Congress was re-elected last year we had the oil prices come down considerably prior to it. I sense we're going to have a repeat of that this election, a bit of relief before the storm. I'm thinking about going double short in oil especially if the price goes up another 20-30%
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Gandalf_the_White · Intermediate Crude Joined: Nov 21, 2007 Posts: 511

Hmmm, that's a strategy. But then United Airlines insiders were projecting $120 through the summer back in March. You must have a really big margin account.

There is enough volatility in the market though that you should expect a retracement. I'm sure someone made some nice cash off of this pull back to $110. I was supprised it was supported there but then again.

You should go short and let us know how it works out for you.

Smile

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Jack · Dark Lord Joined: Aug 11, 2004 Posts: 4957

It's clearly overbought...WTIC is well above the 50 day MA...RSA is above 70...Stochastics at 96...price is above the upper Bollinger band...there appears to be support at about 110.XX ($110 dollars and change).

I would guess we're getting ready to come down about 10%, maybe 12%...($10 - $15) soon.

That said, if one is going to short a powerful bull market, close stops are not necessarily a bad thing.

Cool

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DantesPeak · Last edited by DantesPeak on Sun May 11, 2008 12:19 pm; edited 2 times in total

The last six months has seen a very rapid debasement of the US dollar - which actually is the Federal Reserve dollar - since the US government issues only a limited amount of what would be caled real money. The flip side of the debasement of the dollar means that commodity prices should be rising rapidly.

Still, it is hard to quantify just how much oil should be worth in the present scenario. No doubt some type of market cycle will continue and the price of oil could fall rapidly for a short time.

My guess in late 2007 was that the price of would rise about 50% per year, but 30% price swings could occur from that mean increase level at almost anytime.

Also in reviewing first quarter earnings reports, apparently energy companies went short the energy markets in 2007 and now have to buy into high prices just to balance out their positions.

Cashmere · Light Sweet Crude Joined: Mar 27, 2008 Posts: 1449

Dante - your posts are usually English major perfect in editing. Did you skip that process for the last post? Smile

As for whether this is a "premature" spike, why would it be?

Once the money smells that oil production has flattened/is falling, you won't be able to stop it from pouring in.

Once in a species event, this is.

DantesPeak

I left out a few thoughts before. Sorry.

No this is not a premature spike, but all part of what we should expect in the post PO era. Price and supply volatility will only increase over time - probably dramatically so by 2010.

So yes, I agree at some point, the rate of acceleration of oil prices may increase from 50% per year - if not already.

My 'official’ recession forecast was a slow downturn in the economy in the first half of 2008, followed by a more rapid downturn in the second half. So far, my prognosis has been fairly correct. But this means predicting the price of oil in the second half of the year may become difficult.

Gandalf_the_White · Intermediate Crude Joined: Nov 21, 2007 Posts: 511

A 10% correction after Memorial Day would not be a surprise. Even with that gas will keep rising, it has to. We still don't know what gas should be priced at with $100 oil.

You guys are getting good at the Wall Street babble, maybe we should call it Wall Speak.

As far as I am concerned the money means nothing, it's what you do with what you got. If you get more, it's still what you do with what you got.

The ethics of getting rich off the stupidity of others at any time is questionable but during an energy crisis it is even worse. It's like lying in wait for someone to rob.

I feel comforted in knowing that someday know matter how many dollars we can hoard they won't be able to save us.
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I return to you now at the turning of the tide.

Cashmere · Light Sweet Crude Joined: Mar 27, 2008 Posts: 1449

mkwin · Intermediate Crude Joined: Jun 01, 2007 Posts: 557

I have been constantly surprised by how quickly prices have taken off.

The dollar/speculation factor is there but I am of the opinion the 87m barrel production no longer meets hypothetical world demand and there is little room to increase production. This is without any supply shocks.

Goldman Sachs, who predicted the winter surge, is now saying we could see $150-$200 oil within 6-24 months.

Homesteader

mmasters

threadbear · Expert Joined: Jan 22, 2005 Posts: 7134

Who's going to complain, after 126.00, when the ppb settles down to a very reasonable 90.00? They'll be dancing in the streets, quoting Ayn Rand and high fiving at the remarkably even handed nature of the "free" markets.

mmasters

ColossalContrarian · Intermediate Crude Joined: Jun 20, 2006 Posts: 562

threadbear · Expert Joined: Jan 22, 2005 Posts: 7134