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Crude Oil Set To Tumble Below $100 Next Year, Lehman Predicts

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http://www.telegraph.co.uk/money/main.jhtm...4/bcnoil114.xml

Crude oil will unwind much of its meteoric rise next year, investment bank Lehman Brothers has predicted, as the OPEC increases its supply and the slowing global economy squeezes demand.

The bank expects the price of crude to fall back to about $93 a barrel. Oil, which hit a record high of $147on Friday, had eased to $143 today following last nights' sweeping move from the US government to bail out mortgage lenders Fannie Mae and Freddie Mac.

Soaring oil prices are ramping up pressure on cash-strapped consumers and businesses in the US and the UK alike - with US oil import volumes now falling rapidly - down 19pc in the three months to the end of May.

Ed Morse, chief energy economist at Lehmans, expects mounting signs of slowing demand, and an expected increase in supply to move oil prices lower to $130 in the third quarter of 2008, before dropping down to $93 a barrel.

However, Mr Morse insists he is not forecasting a "demand destruction" in line with the 1980s cycle.

Chinese import volumes have yet to show any signs of slowing, he said. Although the Chinese have yet to feel the full force of the rise in crude prices in recent weeks, he said. Mr Morse expects global demand growth to ease to 1.2pc in 2009, with a drop in prices owing to an expected "supply response" from OPEC, the Organization of Petroleum Exporting Countries, and others.

Mr Morse said: "Our forecast of lower crude prices in the second half of 2008 and 2009 relies more on increased supply rather than a demand drop.

Pie in the sky just to get the report published in the press???

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Yeah right, Lehman can't do their own accounts.

Oil price is driven by supply. Supply is being limited because companies like BP and Shell don't want to invest in supply in the countries where oil is found due to political problems.

I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil. It's a nice distraction from the real issues for politicans though, so expect to see more stupid laws passed. :rolleyes:

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Yeah right, Lehman can't do their own accounts.

Oil price is driven by supply. Supply is being limited because companies like BP and Shell don't want to invest in supply in the countries where oil is found due to political problems.

I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil. It's a nice distraction from the real issues for politicans though, so expect to see more stupid laws passed. :rolleyes:

Their senior oil trader thinks that the price of oil is mean reverting. I pointed out to him that this can't be true (peak oil). Seems he didn't listen...

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Yeah right, Lehman can't do their own accounts.

Oil price is driven by supply. Supply is being limited because companies like BP and Shell don't want to invest in supply in the countries where oil is found due to political problems.

I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil. It's a nice distraction from the real issues for politicans though, so expect to see more stupid laws passed. :rolleyes:

Contrary indicator. Lehman are notorious.

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I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil.

I buy from you a promise to deliver oil to me next year for $100 a barrel. I then sit on that until just before the delivery date and sell it to someone else who actually wants the oil for $200 a barrel.

At which point do I have to take delivery?

Ah, never.

As someone else pointed out, 'oil prices only ever go up' is just as much nonsense as 'house prices only ever go up', unless you're a Peak Oiler. China is ******ed if oil remains at current prices, let alone rises; and large amounts of outsourcing which was profitable at $50 a barrel is unaffordable at $150 a barrel due to high shipping costs.

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I buy from you a promise to deliver oil to me next year for $100 a barrel. I then sit on that until just before the delivery date and sell it to someone else who actually wants the oil for $200 a barrel.

At which point do I have to take delivery?

Ah, never.

As someone else pointed out, 'oil prices only ever go up' is just as much nonsense as 'house prices only ever go up', unless you're a Peak Oiler. China is ******ed if oil remains at current prices, let alone rises; and large amounts of outsourcing which was profitable at $50 a barrel is unaffordable at $150 a barrel due to high shipping costs.

So you think oil will get back down to $10pb one day then?

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I predict an Oil price crash, when the world recession really bites. Oils only worth what people can afford to pay.

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Yeah right, Lehman can't do their own accounts.

Oil price is driven by supply. Supply is being limited because companies like BP and Shell don't want to invest in supply in the countries where oil is found due to political problems.

I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil. It's a nice distraction from the real issues for politicans though, so expect to see more stupid laws passed. :rolleyes:

Lets apply occams razor

If there was loads of easy oil to be had out there and indeed the oil price is just down to speculators.....

Why are Shell / BP and other oil companies sinking billions into cooking 2 tonnes of dirt to get a barrel of oil (tar sands) which is reliant on high oil prices to make the process economic (well whilst cheap gas is available :blink: )?

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I predict an Oil price crash, when the world recession really bites. Oils only worth what people can afford to pay.

that's the point, I want to form a "deglobalisation party"

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I buy from you a promise to deliver oil to me next year for $100 a barrel. I then sit on that until just before the delivery date and sell it to someone else who actually wants the oil for $200 a barrel.

At which point do I have to take delivery?

Ah, never.

As someone else pointed out, 'oil prices only ever go up' is just as much nonsense as 'house prices only ever go up', unless you're a Peak Oiler. China is ******ed if oil remains at current prices, let alone rises; and large amounts of outsourcing which was profitable at $50 a barrel is unaffordable at $150 a barrel due to high shipping costs.

Or the speculators have done us all a favour and rung the alarm bell early.

Just a thought!

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I buy from you a promise to deliver oil to me next year for $100 a barrel. I then sit on that until just before the delivery date and sell it to someone else who actually wants the oil for $200 a barrel.

At which point do I have to take delivery?

Ah, never.

But that's future prices, someone has to take delivery eventually, hence their is no speculation in the spot price. This happened with gas prices in the UK, eventually the price went negative due to investors having to take delivery which they could not, so had to sell at any price even if that meant paying someone to take it off of them.

I don't dispute the oil price will fall, it has gone up much much fast than I thought it would. But I can't see how the speculation you describe would effect the spot price.

The USA's petroleum reserve is a good example of how the price of oil can be manipulated and therefore speculated on (By the US government in this case).

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I buy from you a promise to deliver oil to me next year for $100 a barrel. I then sit on that until just before the delivery date and sell it to someone else who actually wants the oil for $200 a barrel.

Unfortunately, because the market is totally driven by speculation (by hypothesis), there's no one who wants to buy it for $200. They're all going out of business and can only afford $50, so you either sell it to them and make a loss, or take delivery,

Peter.

P.S. Because the above is not happening, we conclude that the hypothesis is false and that the reason that oil is so costly is because there's a lack of supply relative to demand.

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Yeah right, Lehman can't do their own accounts.

Oil price is driven by supply. Supply is being limited because companies like BP and Shell don't want to invest in supply in the countries where oil is found due to political problems.

I've not seen a shred of hard evidence to support the theory that speculators control oil price, as they don't actually take delivery of the oil. It's a nice distraction from the real issues for politicans though, so expect to see more stupid laws passed. :rolleyes:

Oh dear – like others here, this reminds me of BTL justifications for ever-higher house prices: They used to say “everyone needs someone to live” and the inference we were invited to draw was “…. therefore any price for real estate, no matter how high, is justified”. By talking about limited supply you are being equally myopic (and also just plain wrong).

I suppose that given that you don’t understand how markets work, it shouldn’t be surprising that you don’t understand the relationship between forward/futures prices and spot prices. Rather than go into the detail, let’s just say that it all gets washed through: futures prices can and do move the spot price. After all, unless the link between them was water-tight there would be no point in having futures at all.

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Oh dear – like others here, this reminds me of BTL justifications for ever-higher house prices: They used to say “everyone needs someone to live” and the inference we were invited to draw was “…. therefore any price for real estate, no matter how high, is justified”. By talking about limited supply you are being equally myopic (and also just plain wrong).

But there is a limited supply of oil, which has not changed greatly for the past 3 years; whilst, at the same time, an awful lot of Indians, Chinese, Russians and Saudis et al. have decided that they'd like to consume a lot more.

I suppose that given that you don’t understand how markets work, it shouldn’t be surprising that you don’t understand the relationship between forward/futures prices and spot prices. Rather than go into the detail, let’s just say that it all gets washed through: futures prices can and do move the spot price. After all, unless the link between them was water-tight there would be no point in having futures at all.

Presumably the question is which is the driver in this relationship. For the reason given above, I believe that the high oil price is due to increasing demand, limited supply. Are the saying that you believe the high spot price is due mainly to speculation?

Peter.

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The most sensible points in your posts on this thread...

I didn't think my other comment (below) was that off the wall either :blink:

Lets apply occams razor

If there was loads of easy oil to be had out there and indeed the oil price is just down to speculators.....

Why are Shell / BP and other oil companies sinking billions into cooking 2 tonnes of dirt to get a barrel of oil (tar sands) which is reliant on high oil prices to make the process economic (well whilst cheap gas is available )?

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I didn't think my other comment (below) was that off the wall either :blink:

Lets apply occams razor

If there was loads of easy oil to be had out there and indeed the oil price is just down to speculators.....

Why are Shell / BP and other oil companies sinking billions into cooking 2 tonnes of dirt to get a barrel of oil (tar sands) which is reliant on high oil prices to make the process economic (well whilst cheap gas is available )?

For sure, I meant that..I worded it wrong. I meant to say, the most sensible posts in the thread rather than your most sensible posts. I meant each post you made perfect sense. To me it is obvious why oil prices are high. When the difference between supply and demand is tight,any little bits of news can cause large spikes in the price.

OPEC have been saying for years they would increase supply...If they have that much oil then why dont they dump it on the market...simple they dont have that much. Also the US monetary policy is playing a huge part in it. Speculators...YES. They are keeping the price from being even higher...

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For sure, I meant that..I worded it wrong. I meant to say, the most sensible posts in the thread rather than your most sensible posts. I meant each post you made perfect sense. To me it is obvious why oil prices are high. When the difference between supply and demand is tight,any little bits of news can cause large spikes in the price.

OPEC have been saying for years they would increase supply...If they have that much oil then why dont they dump it on the market...simple they dont have that much. Also the US monetary policy is playing a huge part in it. Speculators...YES. They are keeping the price from being even higher...

Ok :rolleyes:

Saudi production is increasingly bedevilled by high water cut in oil and dilute gas (co2 levels in gas). No matter how many new fields they find they are struggling to keep production up because of declines in the bigger fields.

People like BP and Shell wouldn't be investing big bucks in tar sands which is pretty marginal if there was plenty of easier stuff out there. That said Canada is a benign place to be for a western oil company given the wave of oil nationalisations going on round the world. However if they were just flush with funds another option would be stock buy backs - as Exxon seems to be doing a lot of lately.

Edited by Kurt Barlow

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Guest Steve Cook
Wait for OPEC to close the taps and let it rise again.

feck me...i give up....

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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