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Posts Tagged ‘oil

Oil Up Over $10 In Trading Day

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Oil rose $10.67 (8.35%) today as the dollar dropped on news that surprised analysts regarding employment in the US. Here is two investors takes via Bloomberg:

Oil is “being used as a hedge by speculative buyers for the weakened dollar,” said Gary Adams, vice chairman of oil and gas consulting at Deloitte & Touche LLP in Houston. “We are seeing that the price will continue to go up as investors look for alternatives.”

and

“This is all just a plain old stampede,” Tim Evans, an energy analyst for Citi Futures Perspective in New York, said in an e-mail. “The sellers have basically pulled their orders so it doesn’t take much incremental buying to push prices higher.”

Oil first spiked last night after US markets closed. This morning I mentioned it was up over $6. For a time, it looked like it would stay there, but by the close of the US markets Friday evening, it was up over $10. In addition, the market felt oil-based pressure and jobs-number surprise, which both added to pessimism and talk of recession.

This current economics situation is really something. Things are extremely volatile, but at the same time it doesn’t appear to have really nasty consequences, as we’re still without a by-the-book recession. We’ll see where this goes over the summer.

Recall, last year things calmed down from mid-June through August between nasty stretches.

UPDATED @ 4:23p: Barry Ritholtz points out the irony a specific magazine calls from the Economist.

Megan McCardle was writing about $40 oil a few years ago, but will now trade her blood for it.

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Written by walonline

June 6, 2008 at 3:24 pm

Posted in Economics, Energy, Markets

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Oil Up At Market Open Over $6

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Crude oil today has moved over $130 and up up up. Currently, CNBC pegs it up just over $6. Most of this gain is thanks to comments by Jean-Claude Trichet, president of the European Central Bank, on the high probablilitty that the european central bank would increase interest rates. Predictably, this sent the dollar down against the Euro.

Also, Morgan Stanley has put their money where their mouth is, saying oil will be at $150 by the 4th of July.

As long as there is still pressure downward on the dollar, don’t look for any change in the price of oil.

Written by walonline

June 6, 2008 at 8:48 am

Posted in Energy, Markets

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Carbon-Neutral Oil? Its Renewable too!

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Google’s Autopia blog has an interesting post on a San Diego start-up that plans to use algae to make oil that can be refined into gasolines. In addition to that, it will be carbon neutral, renewable and they’ll roll out 10,000 barrels a day within five years. Even though 10,000 barrels isn’t much (the US consumes about 20 million every day), a movement towards technologies such as these sound very interesting. Here’s the meat of it, from the CEO:

Company CEO Jason Pyle says the algal oil is chemically identical to light sweet crude and compatible with America’s $1.5 trillion petroleum infrastructure, making it a direct replacement for oil. Although the algal fuels refined from it emit as much carbon dioxide as conventional fuels, the company says the emissions are offset by the photosynthetic process that uses sunlight, water and C02 to create algal crude.

Critics say they want to see what it can really do after the production and burn processes are perfected. “Even if it is carbon neutral, the algal fuels will emit pollutants that contribute to smog and ozone, says Don Anair of the Union of Concerned Scientists.”

It would be very interesting to see the government or big oil get behind some technological frontiers in the way the Kennedy Administration spearheaded the race to the moon through NASA. When the best and brightest are pulled together, this country has come up with some pretty spectacular stuff.

Written by walonline

May 30, 2008 at 7:10 am

Posted in Energy

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Oil’s Rise: Speculation or Fundamentals?

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Continuing with this blog’s ongoing energy and policy discussion, an article from John Mauldin, at Thoughts from the Frontline, has some interesting thoughts on the issue specifically dealing with oil. He looks at how index speculators have increased the amount of dollars chasing commodities in long term positions and whether this really effects the price by looking at oil fundamentals. Mauldin then looks at an interesting scenario, which he sees developing in the near-term:

Many developing countries subsidize the price of oil to their citizens, so they do not feel the pain of higher oil prices. But the headline of today’s Financial Times is that Asia is finally getting ready to cut their subsidies as oil rises to $135. The awareness that they need to allow market conditions to prevail is finally being acknowledged, as they cannot afford the subsidies. This is going to help drive down demand for oil over time.

As demand starts to fall, let’s remember that the storage facilities for oil waiting to be refined are a finite item. If all those tankers end up needing to find a home at the same time, even as demand for oil is going down, you could see the price of oil go down rather quickly in the short term.

If you are leasing tankers to deliver oil that is already hedged in price, you want to get it to port as soon as possible so that your lease payments stop as soon as possible. You only hold it on the high seas if you think the price is going up by more than your carrying costs (the cost of money and leasing the tanker). If you start to lose money, you sell your oil on the futures market and get it to port as fast as you can.

Now, here is where it could get interesting. Oil is the biggest component of the commodity index funds. If oil drops and looks likely to go lower, then the massive buying of these funds we have seen in the past few months could dry up. As Dennis Gartman says, it takes a lot of buying to make the price of something to go up, but it only takes a lack of buying to make it go down. And if there is net selling?

For the entire discussion, it is certainly worth looking at. In the end, he still sees oil at a higher price than the $130 range it reached last week.

Written by walonline

May 27, 2008 at 3:57 pm

For Energy Independence, Think Bakken

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The Examiner is reporting that new technology could open up an area, which in 1995 had 151 million barrels of recoverable oil (quite small). Thanks to new technology, now drillers could get at approximately 25 times that. The Bakken Formation, as its called, is located in eastern Montana and western North Dakota. Here’s the real meat of it:

That would make it by far the largest recoverable oil area in the 48 mainland states — and, if available all at once, it could replace every drop of American oil imports for about 10 months.

But here’s where the story gets even better: Estimates of total oil deposits in the Bakken Formation run between 170 billion and 400 billion barrels, or in other words, up to 100 times the size of even the new estimate of what is “technically recoverable.” That’s where the lesson really comes in: If, in 13 years, technology has improved enough to multiply the recoverable assets by 25 times, what’s to say that technological advancements won’t make available the rest of these vast reserves in an additional 10 or 20 years?

Note to our representatives in Congress: do not let what happened in Alaska’s ANWR happen here.

Written by walonline

April 17, 2008 at 11:44 am

Wednesday Link Roundup

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I’ve been running around like crazy today between meetings, class, etc. and haven’t had enough time to write a topical post, so here’s a link roundup for today.

  • Tax time approaches and Lifehacker has a timely Turbo Tax vs. Human Accountant feature. As someone with a little tax knowledge, I made use of Turbo Tax because of its ease. The article has some pretty good analysis, too.
  • The New York Sun‘s editorial board looks at whether the price of oil has changed, or whether its just the case of dollar deflation and a dollar-priced commodity.
  • The SportsBiz blog looks at the credit crunch with respect to the NFL how it might play out in player compensation issues this coming season.

Happy reading!

Written by walonline

April 2, 2008 at 1:15 pm

Posted in The Web

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