Future Price of Crude

[TWI]

Interesting Article
Be prepared for ever-rising oil prices
By ERIC REGULY
Saturday, April 17, 2004 - Page B2
The Globe and Mail - Canada
Mr. Hearn made an extraordinary observation last month, when Imperial's annual report was published. In the chairman's letter, he said "about half of the oil and gas that will be needed 10 years from now will have to come from fields not currently in production." He didn't mean in Canada; he meant globally.
http://www.theglobeandmail.com/serv...y/LAC/20040417/RREGUL17/TPBusiness/Columnists

 

[TheBramble]

I was talking with a chap the other day in that business and he echoed those sentiments, but emphasised that a large part of 'new' production will come from re-commissioned fields which were closed when production became uneconomical.

Many of them can, with new production techniques, be pressed back into service and provide worthwhile output (albeit at slightly higher cost). So, yes, higher prices whichever way you look at it, but not necessarily through lower supply.

 

[BBB]

Hope Mr Hearn has nothing to do with Shell's CEO then!

 

[DanielLambert]

The difference between the NYMEX Crude Jun and Jul contracts is 10 cents whereas the difference between the Brent Jun and Jul contract is currently 88 cents.

is this usually the case or is the NYMEX contract being overtly bullish.

There seems to be an anomaly , but is the NYMEX contract being too bullish or is the IPE contract being too bearish...... time to get that coin out!!!!

 

[TWI]

That sounds very odd. I do not recall that sort of spread in the past. Must be a good reason for it as the market is full of spreaders. Would be interesting to know how the spread propogates further down the curve. Could it be that Jun is already off the board in one market?
Think Jun Brent expires 14th May, today. June WTI terminates on May 20th. That would seem to offer an explaination I think but still wide....

 

[anley]

That article may be true but remember that most people get more bullish the higher prices go and bearish the lower they go, remember Dow 20K and 50K?

Hard to find a bear of crude right now but I think it will likely get smashed in the short term (paper over physical normally wins these days) but then go higher over the long run.

One interesting point to note about crude is General Chavez's (of Venz.) opinion of how 'cheap' a barrel of oil is against certain luxuries that we can all do without.

One barrel of oil is 159 litres and now sells for around $40. How much for a barrel of Evian, how much for a barrel of Coca-Cola? When you look at it like that it certainly makes you think (even if you get a big discount on the water/coke).

 

[oatman]

There's nothing new here.

1) The market will soon cr@p out, it's got itself too long.

2) What will OPEC members do with their petro$ if they screw up the western economies?

3) What were the US doing with their strategic stockpile when oil was $11 per barrel?

 

[BBB]

Are there any differences in the contract spec? The cost of carry will be the same (wont it?)

 

[TWI]

Oatman,
Totally agree with you there, quota abuse will be getting out of hand at these levels and no matter what the politics these guys are ultimately too greedy to let that get in the way of profits.
Wait for the economist to write an article saying it is going to 100 bucks then sell after all the week they wrote one when crude was $11 dollars saying it would go to $5 marked the end of that bear trend...

 

[Bluewave]

On a practical, traders point of view, when will be the best time to go short on oil? I would expect the price to be pushed down after the summer due to the forthcoming USA elections and the reduction in car use after the "driving season" ends there.

So is it worth shorting it now, or wait for more rises through the summer months?

 

[TWI]

May be worth selling some out the money calls as I suspect premiums are pretty good right now. That would be the way I would approach it. Sell at a number of price levels above here for something like Oct-Dec delivery.
I have not however looked at the structure of the forward curve and if there is a big backwardation then it is batter to leave it as that reduction will be already priced.

 

[Kilnside]

FWIW we're not talking about the future price of crude are we? We're talking about the current price of future paper. Since Nymex and IPE have no real delivery potential they might as well be quoting Evian or Coke as Anley said.

 

[TWI]

Interesting article on crude and the real winners from this spike.
http://www.forbes.com/energy/2004/05/12/cx_da_0512topnews.html

 

[josbarr]

Not the drop in Open Interest.

 

[oatman]

The price of crude in the 70s crisis was equivalent to $78 today.