According to the latest data from the Energy Intelligence Group, global demand for crude has risen 1.59% over the last 12 months to 83.2 million barrels/day. However, global supply has risen 4.17% to 84.9 million barrels/day. The price of a barrel of crude is up over 60% during this same period of time. Nobody talks about oil bubble. Why? It is because the bulls are long up to their eyeballs in energy-related stocks and the bears want oil to go to the moon to crash stocks and the economy. Morgan Stanley's Chief Economist in Asia made a call last week for an oil collapse and it got little attention. Goldman's $105 call was reported incessantly for weeks. If you have good stamina, shorting oil at this point could be very profitable. I expect oil to be in low 40s/ high 30s by the end of the year. Mind you, am not saying that long term oil is not bullish. They will probably hit 100$+ in the next several years. Itâs just not now. Slight decline in the Chinese oil imports could trigger brutal sell off.
this is a great post. we all ought to be watching chinese and indian economic data. i have no clue how reliable your data is but i appreciate the contrary approach. it very well could be a bubble, the way everyone is whining about it.
I question the validity of these stats. Oil is not in a bubble because China is growing at a unprecedented rate.. and the US continues to consume like there is no tomorrow. Opec themselves pegged fair value of oil at mid 40 range. Investor sentiment is getting used to oil in the 40/50's. We all know cheap oil is finished. Oil is in a major bull market.. and it will continue until it hits a price that most of us will puke at. Thats how major bull markets end. The only way oil will crash from these levels.. is US goes into full blown recession.. if economy continues growing.. oil will lead.
http://www.morganstanley.com/GEFdata/digests/20050616-thu.html#anchor0 "Chinaâs oil imports declined by 1.2% YoY in the first five months of 2005. US oil inventory increased by 6.4% in the first quarter of 2005. ..."
According to OPEC, oil demand is forcasted at 83.94 million barrels a day average for this year, and production as of may 2005 is at 80.61 (by the way world oil for 2004 demand was 82.17 million barrels a day.) Hmm i think that energy intelligence company must be short crude oil. Anyway...thats why there is no bubble and why oil prices will continue to soar. If we continue at our present consumption and no new oil sources are found, then we will run out of oil in approximately 20 to 25 years.
If US continues to consume like there is no tomorrow, then why are the inventories 10% higher than average?
This oil trend will finish one day, but there is no way someone can predict when. So at this time the best thing I can do is to remain long on oil and wait for a change in direction to go short.
Not sure, but oil production in iraq is 20% higher as of the end of 2004 than it was in pre-war iraq. Not sure but MAYBE, just MAYBE, that is where we are getting our extra oil.