Why I believe oil will go to $35 per barrel...

Discussion in 'Economics' started by eagle488, Oct 6, 2006.

  1. Everyone is pumping as much as they can right now. Everyone from some guy who owns a small well in Long Beach, California to the Russian guys...Everyone with a well is pumping as hard as possible. The Arabs have invested themselves in expensive growth projects. Iran has involved itself in a very expensive nuclear program. Developing nuclear weapons is the most expensive project one can undertake. The UAE is trying to rival the likes of Las Vegas. Well, I could go on and on.

    The Arabs believed that oil would just continue to go up and up and up. The reality is that everyone was pumping so hard that it created a tremendous supply. Meanwhile, demand dropped as the consumers became more aware and technology advanced. It didnt help matters to see a B-52 bomber flying around on synthetic fuel.

    The Arabs then started on all these growth and military projects. Then oil pulled back 22% and they are now in a panic. They say they are going to cut back production, but they lie. They cant cut production otherwise they will make less money. Lets say they cut production by 1 million barrels per day, thats $55 million dollars per day that they are not bringing in. So they will say they cut production, but they wont. In fact, they will increase production to make up for the lower price. As production increases, the price of oil will go down still further. The oil inventory report will come in each week saying that there is more and more oil. More ships will be stuck at the ports because they have so much they cant even give it away to the local homeless.

    It wont be long until gasoline is at .99 a gallon and the SUV will come back in style once again. No SUVS for me, thank you, I would rather have a fast small car.

    Yes sir, Im not kidding. The Arabs will lose money if they cut production. When they say they are cutting production, it means they are raising it. Just like when you hear Jim Cramer telling you its time to buy or sell NYX. Iran is going to increase production so they can fund their expensive nuclear program. The UAE needs to build some type of weird islands with glass houses off the coast for moguls like Donald Trump. Overinvestment=the need for cash=the need for selling more oil....

    Imagine you have an oil store and the demand is high. The price of oil suddenly falls and the other area oil stores want to get together to sell less oil. However, your building a nuclear weapon in the backyard and a replica of the Las Vegas strip on the street and it costs lots of dollars. All of the guys who loaned you the cash to do it are looking at you funny now, they want to see the loans repaid. Are you going to cooperate with the other oil store owners, cut your production and then make less dollars? What will happen to the nuclear weapons and the Tropicana?
  2. bootize


    Although I have no idea where the prices of energy commodities will ultimately go, I don't believe a word OPEC says anymore. I think they have lost control of price manipulation. Upward or downward. I think they still have their "meetings" for public show.

    Just speculation on my part. :cool:
  3. pv150


    A lot of random chit here but no calculus for $35 ppb. Try again? Wait first, do you have any clue how/why it almost went to $80 this year? :confused: Hint: Does not involve SUVs (been popular since the 90s), nukes (those too) or Donald Trump (wtf does he have to with anything). GL joker. :eek:
  4. I believe its obvious why it almost went to $80. There was some fundamental reasons why the price of oil was rising in 2004 and part of 2005. Then demand suddenly was no longer the issue. The issue was the fear of a lack of supply. At the end of 2005, the paranoia was far and wide about hurricanes, nigerian militants, Iran-Iran-Iran, Chavez, etc. etc. etc.

    In 2006, the price was simply about a paranoid group of out-of-shape middle aged men yelling at each other in a room reacting to news like a bunch of teenage boys reacting to a good looking woman coming their way. They call it the NYMEX. It almost seemed like one big psychological experiment where we are charting the patterns on a candlestick chart.

    Eventually, these guys figure out that Iran isnt going to turn off the tap and Chavez is really a nice guy. The NYMEX guys run out of steam and there you have cheap oil.

    Done. Any question?
  5. It's unlikely that oil will significantly get over $80 for an extended period of time due to alternatives. Oil can be extracted from coal for less than the equivalent of $80 per barrel, and of course there are other alternatives.
  6. I see it somewhere between 48-56.50 for a sustained period in the future. The oil companies forecast and plan on 40 a barrel for profitable operations and healthy growth. So the rest is just icing on the cake for them! Natural gas is the real wild card for the majors to decide/bring on new projects right now. For instance, a lot of projects require natural gas prices of 8, so if you made an acquisition during the summer based upon a normal hurricane season, you are hoping for one harsh winter to save your ass right now!
  7. It was almost comical and certainly farcical to watch how 'bad news' translated into higher and higher oil prices. It is too easy to trade 'paper barrels'.
  8. SteveD


    Oil is the one commodity that unless you are actually in the business one should not try to predict and/or trade....

    It is truly a "big boys" game.....BUT the oil companies want the price around $35.....for a lot of reasons...

    Most of the oil producing countries have NO OTHER source of funds...they have to pump!!!....and pump they will..

  9. Cesko


    Since 1970s, OPEC share of oil production output has been steadily declining.
  10. Well, are you willing to test that assumption up with real money in a real trade??? Get back to us when you back up your statements with trades. Good luck.
    #10     Oct 8, 2006