Comments on: Crude Oil Support at $40

By: Mark E Hoffer

Mark E Hoffer — Sat, 13 Dec 2008 15:13:00 +0000

BR,

this, btw, turned out to be, another, severely Nice trading call..spiked over U$D 48 after this post.

By: DL

DL — Mon, 08 Dec 2008 21:54:08 +0000

Scientist @ 5:26

Are you long or short?

By: Mark E Hoffer

Mark E Hoffer — Mon, 08 Dec 2008 13:58:52 +0000

to those that, lightly, dismiss the Storing of Crude

see: http://www.bloomberg.com/apps/news?pid=20601087&sid=aSywZ2vJlJf0&refer=home

a timely missive on said phenomenon..

By: Scientist

Scientist — Mon, 08 Dec 2008 10:26:06 +0000

Charting is the present day equivalent of Astrology and Tea Leaf reading.
Millions of people believed in that stuff, so charting must work. right?

Clearly the madness of crowds didn’t dissipate at the turn of the 20th century.

By: Douglas Watts

Douglas Watts — Mon, 08 Dec 2008 10:09:26 +0000

Although a lot of the fall in commodity prices we have seen is demand driven, clearly we have not seen 60-70% decreases in demand!

Exactly. As if the 100% increase in crude oil prices from July 2007 to July 2008 was because of a 100% increase in demand.

I’d say the $30 dollar value looks like an even stronger support and $25-35 will be the range for the next 12 months. It is 6-12 degrees in New England right now — heating oil prices should be spiking due to oncoming very cold weather. Yet, crude prices are falling.

Odd.

By: Stuart

Stuart — Mon, 08 Dec 2008 03:59:14 +0000

speculators can push oil in both direction as we are witnessing. Keep it up boys. How do you spell supply shock as all new projects are shut in or shelved. O-I-L
This depression scenario that is unfolding better have legs else this spelling lesson is going to be taught to grade 1 students going forward as the 1st word they learn.

By: Mark E Hoffer

Mark E Hoffer — Mon, 08 Dec 2008 00:05:16 +0000

@jm yes, totally, LV=Lehigh Valley, “Home of the 2010 AAA All-Star Game”
~~

@AnotherGuy

with this: “So oil can probably keep falling to the point that its price equals the day to day cost of getting it out.”, this: “the point that its price equals the day to day cost of getting it out.”–has no bearing on anything, over the short-run..see: Pilgrim’s Pride for ex.
http://www.foxbusiness.com/story/markets/industries/retail/update–pigrims-pride-files-bankruptcy/

By: SINGER

SINGER — Sun, 07 Dec 2008 23:18:26 +0000

There was “Support” around $78 and around $50 as well…. Needless to say, those levels didn’t hold…

By: DL

DL — Sun, 07 Dec 2008 22:30:03 +0000

AnotherGuy @ 5:24

“What impact does me buying USO (for example) have on oil price? It seems one can impact the price of oil through futures trading without needing to store oil at all”.

In the futures market, there’s a short for every long. If you want to argue that buying a futures contract pushes up the price of the underlying commodity, you then have to concede that shorting it will lower the price. A zero sum game, it seems to me.

By: AnotherGuy

AnotherGuy — Sun, 07 Dec 2008 22:24:26 +0000

A couple of thoughts:
1. What impact does me buying USO (for example) have on oil price? It seems one can impact the price of oil through futures trading without needing to store oil at all.
2. Demand for oil doesn’t need to fall (or rise) *that* much to get significant price movements. The slope of the supply/demand curve can be pretty steep.
3. Related to #2 is that there is significant incentives for oil countries to keep production up. No one wants to be the one who suffers losses to bail the others out. So oil can probably keep falling to the point that its price equals the day to day cost of getting it out. Once they do decide to cut production there would also be a delay before the customer feels the shortage.
4. There have been some moves towards other energy sources that in the short term also reduce the demand for oil. (nuclear, wind, solar, coal, natural gas)

What do you think?