Oil Price Watch

[Chip Haynes]

Bloomberg has oil at $82.10 this morning- and apparently that's not news to anyone.

So let's see... If oil climbs fifty cents a day (as it seems to have this week so far), and we have about a hundred days until the then of the year, then oil could be at $130 by new years, seeing as how there's really no above ground mischief right now forcing the price up. Well, no more than usual.

Will we see $90 by October First?

At at what point does anyone (other than us) take notice?

[suburban_junkscape]

Seems to me like oil has been climbing about $1 week since bottoming out at $50 in mid January. At that rate Goldman Sachs $95 prediction by yearend will be right on. Also, at that rate, Stephen Leeb's and Matthew Simmon's prediction of $200 in 2010 will be right on.

I sure hope we don't see 50 cents a day continue, 20 cents a day is about all I can take.

[Chip Haynes]

Do I hear 25?

   The news in this isn't just the price of oil, but the fact that the price is climbing steadily with no obvious above ground factors. It really is fairly calm out there, all things considered. Oil has been busy this week, and seems to settled in on a steady rise. i know many analysts have for years tried to rpedict the "break loose" point in oil prices- looks like $80 was it.

   Now the real question is: When will we see these new high oil prices reflected in the price of gasoline? So far, gas prices had held steady or even dropped a bit in some areas. That can't continue. At some point, the price for a gallon of gas has to slingshot up to reflect the cost of the oil used to make it. The longer it doesn't, the worse it's going to be.

And the louder the lumpenprole will cry.   

[bkwillia]

Looking at today's oil report, its seems that there is plenty of room for growth in the price of oil.  We saw a 3.9mmbbl drop in national supplies which was lower than last week, but nearly half of that drop occurred in Cushing OK.  Its supplies of light sweet crude fell 1.7 mmbbls (8.5%!) from 20mmbbls down to 18.3.  There only gains of crude was in the rocky mountains and on the coasts, where the oil is inaccessible to the mid west refineries due to pipeline restrictions.

At the same, time the only area that had significant gains of gasoline were in the mid west, while the rest of the districts were flat to declining at a time of year when gasoline supplies normally rise.  Today's gasoline production numbers are unsustainable unless supplies at Cushing continue to fall. 

Obviously this year is much different than the last.  Oil traders are no longer betting on if there will be a supply imbalance in the future.  They are betting on what price it will take to correct the current production short fall thru demand destruction.  History shows it will take nearly a doubling in price to correct a 1% shortfall, and we have more than a 1% shortfall globally with no hurricane, and no new war, supply disruption or production decline. 

If everything goes well, oil will likely hit $95 by the 2008.  If things go badly, the sky is the limit. $200/bbl is only ~$9/gallon gas.  Ethanol will go crazy driving up the price of grains even further. 

Oil and agriculture products are the new housing bubble.  All the borrowed money that has been pullout of various fall markets is piling into commodity futures, at reduced interest rates too.  When Bernanke  slashed rates yesterday, he lit a fire under the energy market.  It was probably the biggest bone head move ever made by the Feds, making Greenspan look like a sage.  It makes we think that his only motive was to maintain tax revenue to sustain the debt load America carries.  Inflation will have that matter too, but it wont bring any more oil out of that ground.

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/pdf/wpsrall.pdf

[Chip Haynes]

I'm thinking next year's corn futures are looking like a mighty good buy right now.

[bkwillia]

Apparently, this years crops is going to be enormous.  Corn might be a little over valued right now, due to support from rising wheat and soy.  I kinda expect corn to dip below $3/bushel before it starts going back up.  Regardless, the ethanol industry is going to expand to meet capacity, so yeah corns looks like a bargain compared for most other commodities.  So does gasoline actually. We aren't even near the highs of this summer.

http://www.cattlenetwork.com/content.asp?contentid=161099

Thats a cool website thats all about commodities, mostly agriculture. From the article:

USDA increased its national yield projection by 3 bushels per acre to 155.8 bu/acre, which would be the second highest in history.  That, combined with the 19% increase in acreage this year, results in expected production of a record-setting 13.308 billion bushels.  Even with feed and export use projected higher, ending stocks are estimated to grow to 1.675 billion bushels for the 2007/08 marketing year.  As a result, the ending stocks to use ratio increased to 13.1%, three percentage points higher than last year.

Rising gasoline and falling corn means profits for ethanol makers, but oddly enough, their share prices are far below their IPOs, having been beaten down by rising corn and falling ethanol prices of the past year.

[Chip Haynes]

Oil above $82 this morning. Will we see it close above $82.50 today? It seems to be on a steady march up this week.

[45MPG]

...and still it barely makes the evening news. Is this website too 'doom & gloom' or is everyone else really that clueless?
Everyone I talk to is SO happy about the interest rate drop and yet nobody mentions the falling dollar.

[SaveThePlanet]

...and still it barely makes the evening news. Is this website too 'doom & gloom' or is everyone else really that clueless?
Everyone I talk to is SO happy about the interest rate drop and yet nobody mentions the falling dollar.

Until most people get kicked in the teeth...hard...they'll just go on their way until they ARE kicked in the teeth. Price increases won't bother as much as shortages, deflating dollar won't matter until the average Camry costs $60G's, a deflating dollar is required until savings rates go up and people actually WANT the dollar.

[unrepentantcowboy]

People don't care how much a barrel of oil sells for. But a gallon of gasoline...

Somehow we seem to have a disconnect between the two. I've read the explanations but still don't understand.

[Chip Haynes]

The short answer: Yes, people are clueless.

   If the price of gas goes up to reflect the rising price of oil, even that, by itself, won't get their attention. It will take NO gas, or at the very least strict rationing, to get the average American to turn his (or her) head away formthe TV long enough to say, "huh"?

[45MPG]

Thank you, everyone at LATOC. I have seen the light. I recently bought a Geo Metro (hence the name 45MPG), 3 cylinders, 5 soeed, 45 in town 50 on the highway. I'm not free of the gas pump yet but this IS a start.

[Chip Haynes]

Way to go, 45! I keep looking at that cool little Toyota Yaris, but our truck still runs fine. We'll bite the bullet for now.

[Chip Haynes]

Oil is at $83.28 on Bloomberg right now.

Will we see $84 tomorrow?

(And at what point will anyone else bother to look at all?)

[dscottjst]

New York Times Markets page has oil at $83.35 as of 2:15 PM EST.  It's movin' on up.