Oil price moving upward

As discussed in Oil and the energy crisis is the ‘next crisis’, WTI crude on a monthly graph was showing a price incline from it’s previous lows (please go to link and click on graph). From $ 37 in January 2009, now sitting at $43 which is gain of $6 on a monthly based contract. Interesting to note that with the global economy de-accelerating at an incredibly sharp rate and the oil price plunging, the global economy will not return to speed anytime soon (minimal growth for a few years). Oil is now showing a price recovery. This could indicate that oil is being stockpiled (declining demand and also preparation for demand), which is what I think is occurring, especially from net importers of oil such as China. Also in the mix are OPECS cuts, closures of unprofitable oil companies and simmering geopolitical tension from North Korea, Pakistan, Iran and the West/Israel.

refer to graph (please click on image):

World Crisis scenarios for the 21st Century – Peak Oil (update 13): Looming Oil option price at $140.00 a barrel (Brent crude)

World Crisis scenarios for the 21st Century – Peak Oil (update 13): Looming Oil option price at $140.00 a barrel (Brent crude)

With oil reaching a new high of 139.92 (Brent crude close of trading 16th June 2008), it has slid back to 134 – 135. Yes, it looks over bought now under the resistance set at 135, trailing way above the the 50 day average at 123 and the 100 day average at 112. It is however trading with in the trading range of 125 and 140. The 22 CCI is showing steady at 67.27.

I believe we will see oil reach 140 by the 19th June 2008, then drop back into the trading range again. Refer to chart ( please click on graph for larger and clearer quality):

*please note morbius glass does not give investment advice. The following information is for reference only. Trade at your own risk.

World Crisis scenarios for the 21st Century – Peak Oil. (update 12)

World Crisis scenarios for the 21st Century – Peak Oil (update 12)

A lot of commentary in regards to the recent high oil price (on the 22nd of May in touched $135.00), the bulk of the commentary is the blame towards the futures market, for pushing the price upward. I am trying to understand the blame game here, is it a healthy dose of objectiveness in the market? Or, money worries (funds losing bets on the premise prices would decline). I would say fund money worries, hey?

Without being too alarmist and trying to be as objective as much as possible, it is hard not to be alarmed at the higher oil price. In which high oil prices and food prices have contributed as much as they could to current global inflation. Oil particularly is the fear factor here, breaking points are now evident in Europe, note recent riots (fishermen) in Belgium and France on high oil. The US has enjoyed cheap oil for a long time, apart from the sporadic oil shocks in the 1970s, an upward inclining oil price at some point is going to hurt real bad. It would be an economic spill on effect that has never really been endured in history. Oil in the sense has been the driver of such growth in the last decade, car industry, interconnected mail services (global courier networks), transport, freight transport (shipping, trucking etc) and emerging economies.

So, we have some bizarre commentary from the deniers of the implications of higher oil costs, mixed with pure arrogance. There is this crazy theory that the world will adjust, the American consumer will adapt to oil at $4.00 a gallon and somehow (fingers crossed) we will just sit it out until a massive oil field is discovered. I wouldn’t even analyze that ‘logic’, but some economists and commentators have come out and indicated at that hypotheses.

Of course a hypotheses of adaption (especially an oil dependent world with no back up energy source) is a delusion of reality, the blaming of the futures market is equally bizarre. Especially when a market that most certainty does not want to lose money, is not that leveraged and does not bet extraordinary amounts in volatile futures trading. Is hardly manipulating the oil price.

With that been said, the indicators that will drop the oil price, maybe substantially is the paranoia that the Federal Reserve has of oil countries dropping the USD peg. The Fed is essentially in a FUBR situation, low rates at 2.00% which is just far too low in an global inflation equation. It is making the situation far worst; Ben Bernanke has suggested that rates will pause and he is concerned about inflation. Oil dropped on this suggestion, that the Fed will not cut any further. Of course the credit crisis is about to swing back around again, so it is a scenario that market/social nightmares are made of. In the meantime oil has dropped to $121 a barrel (in Asian trading).

This is a slight sell off, I would have expected a substantial drop down to $110, or lower. Especially on reports that Brazil has one of the biggest oil fields in the southern hemisphere, but as a Bloomberg article reports the costs are phenomenal in extracting the oil,

“The Tupi deposit and nearby offshore prospects probably will cost $240 billion to exploit, said Peter Wells, director of U.K. research firm Neftex Petroleum Consultants Ltd. and a former Royal Dutch Shell Plc exploration manager. The total exceeds the $136 billion estimate for Kazakhstan’s Kashagan field, led by Eni SpA, and would be enough to fund the U.S. space program for 14 years.”

“Petrobras will probably face stiff challenges in this endeavor, as there are significant hurdles to overcome in terms of acquiring basic materials, people and rig equipment,” said Stephen Ellis, an analyst at Morningstar Inc. in Chicago.

Petrobras will revise its $22.5 billion-a-year capital budget because it was drafted before engineers realized the size of Tupi’s recoverable reserves, which may be equivalent to 8 billion barrels of oil, Gabrielli said. At $240 billion, the price tag would be more than the annual economic output of Thailand, Ireland and Malaysia.”

South America, particularly Brazil with high inflation and a commodity based economy running at full steam. It will be interesting over time to watch how they economy will shape up, especially if China starts to slow and Brazilian exports slow.

In my opinion, two things could bring oil down to a realistic level of $100 – $110. The US increases interest rates immediately and strengthens the US dollar. China cools quite dramatically (from the US recession) and demand falls off. These two events could stabilize the oil price. Overshadowing those two scenarios is of course a global recession, which could send oil lower.

But regardless, oil is becoming more and more scarce. The window of opportunity may present it’s self in a global slowdown, if that is the case society should try and develop an oil alternative as quickly as possible (preferably NOT biofuels from food crops). As there may be a future reprieve in the climbing oil price.

In the meantime, oil will climb onward to $127 – $129.

World Crisis scenarios for the 21st century – Peak Oil. (update 7)

On January 2nd and 3rd 2008 world oil prices reached $100.00 (per barrel) this is the first time in history. Whether or not this rise was on the back of a trader pushing the price to the $100.00 or the geopolitical tension in Iraq, Iran, Pakistan and Nigeria – the point is the demand for oil is increasing namely from China, India and of course Western countries such as the US and Australia (per capita).

The peak oil theory is holding more validity as we move into 2008

World Crisis scenarios for the 21st century – Peak Oil. (update7)

refer to graph, (note the Dates:01/02/2008 O=97.74 H=100.00 L=97.74 C=99.62 V=227099 OI:320900 and Date:01/03/2008 O=99.25 H=100.05 L=98.50 C=99.18 V=241269 OI:322787)

Also please refer to Marketwatch report on oil production, as overall productions losses estimated at at 4.5% each year. Video found here