Andrew asked:What's your prediction on the fate of the "mini-bubble" in oil that's occurring right now, despite zero demand and excess supply?Smarter people than I are working on this. Some are pointing to the dollar. I pin it on speculators, same as last year's panic spike. As Andrew pointed out, the fundamentals don't support $65 oil. The tankers are still offshore fully loaded. Trucking is still declining. Airline passenger miles continue to decline. Exporting countries are still contracting. Two of America's three auto makers are bankrupt.
The current petro bubble is ridiculous. But what the hell do I know.
3 comments:
I'm stumped too. My job is to assess the economic viability of mega-projects for one of majors, and we aren't using prices anywhere near $65/bbl for our analysis. Nobody can figure out why traders are paying so much when the fundamentals are weak.
My favorite theory is that people are buying commodities for a)lack of a better investment opportunity at present and b) to hedge against a decline in the dollar and inflation, both of which are likely due to current monetary and fiscal policy.
But parking a tanker is expensive. I don't see how hey can recover their money.
the euro went from 1.25 to 1.42, that accounts for the move from $58 to $65, but traders are thinking that in the long term the price will be much higher.
we're in a race against time, if all the supply cuts start eating away at the excess stockpiles the price will continue to creep up. I think it's more likely we'll reach a tipping point where all the storage is full and traders have to take delivery of physical oil with no place to put it. the price will crash to $8 followed 6 months later by a zoom to $100.
traders are betting that crash never happens, if things keep drifting along for 6 more months and decline rates keep eating away at supplies, it could work out that way, flat demand will catch up to decreasing supply.
I agree with anon. I don't see how that tanker thing can work out good. if things stay slow, eventually the storage will fill up. if demand picks up, tanker rates will start to go up and then you're really paying money. it was an idea sold by tanker salesmen.
And don't forget an activist U.S. Congress hauling everyone they can get in front of the camera to be accused of "hoarding"
I get the feeling margin requirements are going to change drastically, ala the Hunt brothers' experience.
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