Crude still dropping

[67hat34c]

Find it odd that crude is still going down, raggers have cut production 2-3 million bbrls per day in last 4 months. World still using oil so why is it dropping so much?

My guess is that , as most of us stated before, it was the traders that ran it up and put a hurting on the world economies. Now the traders are seeing what happened and do not want to make a run on oil until economies stabalize. Guessing they dont want to kill the rest of the securities markets by running up the oil just yet. Also guessing that there is way less money in the market so they dont have it to play with.

 

[Genesis]

Speculative hot-money following demand beyond supply.

Serious global recessions kill demand. Oil is priced on the margin - you pay for all barrels at the price of the last one you wish to burn at a given point in time.

Had the dollar not collapsed by 15% in the last couple of weeks crude would be under $40. The real risk going forward for oil is to the upside, as we could easily get a currency crisis and treasury market collapse out of what Bernanke did yesterday. If that happens oil will be one of many things that suddenly get FAR more expensive (essentially anything imported will go ballistic)

 

[spartonboat1]

Speculative hot-money following demand beyond supply.

Serious global recessions kill demand. Oil is priced on the margin - you pay for all barrels at the price of the last one you wish to burn at a given point in time.

Had the dollar not collapsed by 15% in the last couple of weeks crude would be under $40. The real risk going forward for oil is to the upside, as we could easily get a currency crisis and treasury market collapse out of what Bernanke did yesterday. If that happens oil will be one of many things that suddenly get FAR more expensive (essentially anything imported will go ballistic)

Financial Times agrees with all above almost to the word. Re: < $40, that just happend at $37 today, Dec 18.

This is almost a complete repeat on a smaller scale of the late 70's early 80's...oil at $30, for sure going to $50, it did, then economy died (1981-82), and it fell back to $15 for quite awhile. That was 18, check that, 28 years ago, so follows the secular cycle somewhat, if you go for that theory.

 

[Boatsb]

Did anyone else notice the prices really dropped right after the elections?

Anyone wonder if there was some sort of foul play?

 

[Finalee]

Financial Times agrees with all above almost to the word. Re: < $40, that just happend at $37 today, Dec 18.

This is almost a complete repeat on a smaller scale of the late 70's early 80's...oil at $30, for sure going to $50, it did, then economy died (1981-82), and it fell back to $15 for quite awhile. That was 18 years ago, so follows the secular cycle somewhat, if you go for that theory.

That was 28 years ago. Adjusted for inflation only, wouldn't you think oil shouls be at least in the $90 per barrell range?

 

[Boatsb]

Fred you scare me with that $90/barrel number.

I spent a lot of time thinking about this and considering the newer technologies to get it out and the transportation costs dropped with the stupid tankers I feel $30-50 is what the world economy can hold.

When it spiked first we were straining but held on. After a while it became too much and the world economy was stressed to the point that we have had a partial collapse. I think at $90 /barrell there will be no recovery and the price will not matter if no one can afford it.

Cutting production to bring up the price will only make things worse. Cutting excess production will not effect the economy since no one is buying it anyway. The balance between them is the critical part.

 

[hyperfishing]

Iran, Mr. Chavez and other OPEC nations are in serious economic dodo, so they will cheat on production quotas and sell out the back door, continuing to push crude prices back towards $35 a barrel. Have fun boating with cheaper fuel. My .02.

 

[oldboat]

since the price of crude is still falling, why is the price of gas going up?
here in livermore, ca the price of gas has gone up from $1.65 to $1.89 in the last ten days. i have read that when commodity prices fall they sometimes overshoot and then stabilize a bit higher. is that it or is there a better reason?

 

[SKYCHENEY]

Gasoline generally follows crude and that spike will be short lived. You'll probably see gas come back down over the next couple of weeks. The wholesale price was down to about .95, but then it went up. Now it's back to about .97/gal.

 

[Trojan]

It was said that if crude drops another 10. bucks. The gas price will be under a buck.

BILL

 

[spartonboat1]

Iran, Mr. Chavez and other OPEC nations are in serious economic dodo, so they will cheat on production quotas and sell out the back door, continuing to push crude prices back towards $35 a barrel. Have fun boating with cheaper fuel. My .02.

Financial Times says that OPEC members are big-time cheaters and virtually no one reports "good" production numbers. So the cut probably isn't...

 

[bobk]

So why is diesel more than gas?? I've heard it is because our dumb politicians agreed to mandate 15ppm sulfur and the refineries can't make it cheaply. Even green Europe limited sulfur to 50 ppm. Anyone know for sure?

Bob

 

[SKYCHENEY]

Diesel is the fuel that does the work and it has not been affected by the slowdown as much as gasoline. We still all have to eat, which means fuel for agricultural equipment, trucking, ect.

 

[Boss Lady]

The see-saw prices for diesel and gas are caused by world wide supply and demand, not just what happens inside the USA. The third world runs on diesel, europe has switch to diesel and their demand is up, their gas use is down and they sell their surplus gas here. A few years ago diesel was cheaper than gas, but that is no longer the case today. When a barrel of crude is refined you get 21 gallons of distillates and 21 gallons of gas. They can't pick all gas or all diesel`so if the european countries don't have demand for the gas it gets sold to another user (which is us). The recent gas price spikes are probably related to less shipments of gas caused by the financial/banking disaster. World commerce relies on Letters of Credit, and banks no longer trust each other so cargo shipments have come to a screeching halt. I expect to see major shortages of imported stuff after the new year because of this. This country is in for some major surprises, just think about all the things we import which may not show up as people expect. This means everything, food, clothing, car parts, you name it. The Baltic Dry Index which measures demand for shipping is down 90% since May 2008.

http://www.nakedcapitalism.com/2008/10/baltic-dry-index-continues-to-fall-now.html

Here is a good reason for tracking BDI. http://www.investmentu.com/IUEL/2008/November/baltic-dry-index.html
The BDI cannot be manipulated like the Consumer Price Index, and there is no speculative influence, it is what is actually happening with global commerce.

Plan accordingly.

 

[eclipsarkanna]

The see-saw prices for diesel and gas are caused by world wide supply and demand, not just what happens inside the USA. The third world runs on diesel, europe has switch to diesel and their demand is up, their gas use is down and they sell their surplus gas here. A few years ago diesel was cheaper than gas, but that is no longer the case today. When a barrel of crude is refined you get 21 gallons of distillates and 21 gallons of gas. They can't pick all gas or all diesel`so if the european countries don't have demand for the gas it gets sold to another user (which is us). The recent gas price spikes are probably related to less shipments of gas caused by the financial/banking disaster. World commerce relies on Letters of Credit, and banks no longer trust each other so cargo shipments have come to a screeching halt. I expect to see major shortages of imported stuff after the new year because of this. This country is in for some major surprises, just think about all the things we import which may not show up as people expect. This means everything, food, clothing, car parts, you name it. The Baltic Dry Index which measures demand for shipping is down 90% since May 2008.

http://www.nakedcapitalism.com/2008/10/baltic-dry-index-continues-to-fall-now.html

Here is a good reason for tracking BDI. http://www.investmentu.com/IUEL/2008/November/baltic-dry-index.html
The BDI cannot be manipulated like the Consumer Price Index, and there is no speculative influence, it is what is actually happening with global commerce.

Plan accordingly.

Chris:

You are dead on about the BDI and one of the very few indicators that cannot be manipulated. YOu might find this recent article of interest - finally there has been a positive upward movement in the BDI in recent couple of weeks and we can cross our fingers this is maybe a sign that the global economy has maybe bottomed?? We can hope and pray maybe:

"The Baltic Dry Index (BDI) is up over 10% to 711 in the past few weeks. It doesn’t mean much, considering it’s down over 93% for the year. In fact, if you consider this move in terms of this summer’s price high of 11,793 - it’s moved barely half a percent.

But that doesn’t mean you shouldn’t be keeping an eye on the BDI.

The BDI is the price used to determine global shipping rates and prices. Like blood pressure does for humans, BDI measures the flow of goods for the economies of the world. And just like us, excessively low or high readings are bad.

Because it isn’t traded, the BDI cannot be moved artificially. It’s one of the best ways to judge the true health of global trade and our economy. It’s why Louis Basenese has been instructing readers to keep an eye on the Baltic Dry Index for weeks.

And looking at the major shippers of the water transportation sector, it appears that the market is paying attention as well. Frontline (NYSE: FRO), Kirby (NYSE: KEX) and Nordic American Tanker Shipping (NYSE: NAT) have all moved up over 15% in the past few weeks. Positive movement from the Baltic will continue to float these shippers.

And it’s not just domestic lines; Asian shippers have been on the move as well. Time will tell if these movements are the start of a new trend or just a bounce. But the water transportation sector could use some good news - it’s down over 37% since October 1st. By comparison, the S&P is only down 25%"