Oil Froth Anyone.......

Discussion in 'Commodity Futures' started by libertad, Jul 13, 2005.

  1. Not surprising, but a good read nonetheless.

    Greed is a powerful driver.
  2. Look, I'd be the first to agree that oil futures have gotten a bit ahead of themselves. But if you want to argue that $20 of the price of oil is speculation, long dated futures are the last place to support your argument. Last October when oil hit record prices the calendar spread between 6 year and 1 year futures was about ten bucks of present value. Now, we're close to another record, and the calendar spread is near zero. In other words, 8 months ago the market expected oil prices to revert, now they do not.

    The commentators who believe that oil is a bubble, such as this article and Andy Xie at Morgan Stanley, are looking at the demand picture in the near term. Those who believe oil prices are justified are looking at supply in a longer time frame.

    There may be a temporary pull back and there may be speculation at work in this year's prices. However, I think the term "bubble" is completely inappropriate when the long term picture clearly indicates a serious shortage.

  3. I completely disagree. The DOE pegged fair value of oil at $55... there is no way oil will break $50 unless its from the demand side and the US goes into recession. If US expansion continues at %3 rate.. OIL will be in 70-80's

    There is no froth in oil.
  4. Agree... the froth is in U.S. equities. Lots of talk about the reduced deficit... too bad we're peaking in the economic cycle. :D
  5. Oil is going up. Demand is highly inelasticit to price and supply (oil extration) is limited. We will never again see $40 a barrel oil IMHO.
  6. Long oil on pullbacks {used to be able to buy in the 42 to 46 range-----not anymore} has been one of the best plays of the year in my opinion. I will start buying again if we even get to $50 a barrel until there is some actual period of reported slow down of growth in China, the US, and India. It was a gift that we had a run down to the 48 and change level weeks ago-------I will not hold my breath until we hit below those levels again. Until there is actual economic slowdown in several of the large economies I will keep buying oil below 50.