And here is a link to the actual report (thanks Nate):

http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfi...

The question is ... will you ... or anyone elee put your money where your predictions are? I don't mean a five dollar bet, either.

Only a fool who is well capitalized ... will attempt to predict prices of anything ... rice, interest rates, gold, uranium ... in a narrow time frame. Markets will fluctuate.

The trend in petroleum is up; higher highs and higher lows. Ditto gold. Is there a 'bubble' in commodities? Is it possible for there to be a bubble in commodities? (There is a negative feedback mechanism in commodity price rises that does not exist in internet stocks or real estate.)

As far as the CFTC report; what do you think they are going to say? Their interests are aligned with the big players who are making the NYMEX and other exchanges into bling machines. "Yah, it's all fundamentals of supply and demand and let's not look at the man behind the curtain!" Lenin was half right; the capitalists are in the rope business and they will sell enough to hang everyone in sight including close family membars.

Question? What other exchanges are arenas for maximum profit? How about ANY profit? Who is making money, today? There is the 'Hot Money' ... this is going to China, which is trying to corral it .... and into commodities. Commodities is a small market. Big, hot money can distort those markets just by showing up at the door.

Gold is going up too. Are we nearing peak gold? (Probably ... ditto peak water.) Real estate is taking a nose dive, stock markets around the world are tanking, bonds are looking crappy ... the central banks are creating money ... where does it all go? Not to me! Not to you, either. The Chinese and Japan are swimming in dollars; 'native' currencies can only be repatriated to their countries of origin. (You cannot buy a loaf of bread in Kansas with Britixh Pounds or Euros) If you have dollars and are overseas, what can you buy ... for trillions of dollars? Treasury securities? Yield on the 10 yr today is 4.10 pct. Oil has doubled ... since last week!

The trend is up, higher highs and higher lows.

Oil and gold. Copper and iron ore. Buying oil allows Saudi Arabia and China to launder the dollars. The Chinese buy Saudi oil with dollars and the Saudis repatriate them by buying Fannie Mae bonds. They're backed by the US government ... it sez so on the box!

The Chinese have a trillion US cash dollars in reserve! They can outbid us for oil or anything else. Yes, we can print ... we can repatriate all of our 'discount4d' money, too; our Treasury bonds and notes by printing all the money we need ... but ... if it ever gets to that point ... and we are getting there, fast ... the world that we know is coming to an end ... even if oil costs $50 a barrel. Nobody will have any money or it won't be worth anything.

Welcome to Zimbabwe! When we have to sell apples, I have my spot already picked out!

:)

In our last poll on 27 JUN, 61% of you predicted that CL would hit $154 in the front month before it hit $126, and only 9% of you predicted that CL would hit $126. Well, we've briefly broke that number today

I'm wondering which benchmarks we're using for the oil price, because Tapis closed at US$152.38 on 16Jul08, I didn't watch for it but it may have hit $154 the next day before this week's drop.

So rather than saying that the price of crude dropped to $126, I think it would be more accurate to say that since your last poll, the price of crude rose steadily from $126 to $154, but in the last week has traded in the $126-$154 range.

I think it might be worth making these polls on a regular schedule - every month, or every quarter. Any period chosen is arbitrary - 15Jun-15Jul is neither more nor less meaningful than 01Jun-01Jul - but having the polls at these random intervals turns it into a cherry-picking exericse. By bringing up a poll on a price high we overemphasise the rises, by brining it up on a low we overemphasise the drops.

For example, because you put the poll today at a low you're getting a poll result of around 40% saying it'll rise; had you put the poll a week ago when Tapis was near the $154 mark, I think you'd have got the old results of 60% or so saying it'd rise.

It'd be a bit like polling Americans on how they thought WWII was going after the battle of Monte Cassino, and then a week later after the landings at Normandy. By choosing when to do the poll you'd get different results.

It'd be better to have the polls at regular intervals.

This news about Oman production and exports came out a couple of days ago, however I have not seen much discussion about it in the relevant energy website, the information reported may seem trivial since Oman daily production is quite small (739k bpd), however the trends demonstrated in the numbers have big implications for future oil prices:

Oman oil production rose by 3.6% in the first 5 months of 2008; however oil exports declined by 5.1% compared to the first 5 months of 2007, due to high domestic consumption, fueled by 12.9% growth in GDP due to the high oil prices.

In the Export Land Model developed Jeffrey Brown, oil exports are expected to decline at a faster rate then production, once a nation experince post peak oil production combined with rising consumption, however the trend with Oman is quite different and even more alarming, as oil exports may decline even if the country oil production is rising, due to internal consumption growing faster then oil production.

There has been other countries with flat production that had a decline in exports (most notably Russia), but I have not seen a country with 3.6% production growth, experince a 5.1% export decline, if this same trende continue and expand to other Gulf countries, the implications for oil prices will be very signifcant.

Regards,
Nawar

Oman news:
http://www.tradearabia.com/news/OGN_146785.html

I can't imagine how declining oil prices to prop up the US economy will play on the Arab street, more importantly, how should it??

US politicians seem never willing or able to accept less revenue than last year, quarter, etc...

Going to get interesting.

Who is that guy who always says "have popcorn roll film"

FF

It was silly to think that the price would be a curve almost straight up without a break. And it was for quite a while, so its no surprise to me that a fall back occurred. Now we can play the game of predicting how deep the retrenchment will be. I have to admit that so far it is more than I expected.

OTOH, all the Saudis have to do is close the valve just a tad . . . . Will they do it?

Of course it isnt possible. Demand is on the march like never before seen in world history. 10.5m vehicles will be sold in China this year, double the amount from only 4 years ago! Annual vehicle sales in China is on the way of reaching a whooping 20m in 5 years, surpassing America by a wide margin. Vehicle sales in Brazil: up 30% from last year, sales in Russia: up 40%, on the way of becoming the biggest market in Europe this year. Demand destruction? I see massive demand boom.

I'm convinced there really is a $120 price floor.

There is NO (short-term) futures price floor, nor ceiling - for two major, reinforcing reasons:

1)oil is priced at the marginal above ground barrel. Markets care about how much is available this week/month. If the market is oversupplied, prices will drop until supply and demand equal out. If demand drops alot (due to some exogenous event), prices will freefall - there is no correct fundamental price for oil. If there was it would be a great deal higher than here. The markets do a very good job of pricing current supply and demand correctly. (And, contrarily, the markets do a terrible job of pricing in long term scarcity.)

2). The amount of dollars that have been printed over the years and the amount of credit that has been 'created' absolutely dwarfs the amount of open interest contracts available on various commodities, especially oil. As we saw with Amaranth (whose nat gas portfolio has STILL not been entirely liquidated but subsumed by JP Morgan and Citadel), prices will move in futures as a reaction to supply and demand of securities representing commodities as opposed to supply and demand for the commodity itself. I am hearing rumors that the natural gas selloff this past week is due to some large hedge funds selling large amounts of $10 puts and as we approach $10 they have had to sell futures to hedge. Remember - for $7,000 you can control 1,000 barrels of oil - which if we have 1 trillion barrels extractable left is about 7 times yours and your descendants all-time allotment.

Supply of money is greater than supply of futures. Prices can (and will) move way further in both directions (in the very short term) than anyone can imagine.

The market isn't perfectly information-efficient.

Agreed! And neither are we.

As prices drop I am guessing many suppliers might start having 'outages'. Once you and others in your supply chain have tasted that sweet and very profitable $140/bbl there will be a cutback to keep the price where it belongs.

On the demand side, the price drops a nickle and it resets the consumer brain (if it can be called that) all over again.

"I wasn't sure serious demand destruction was possible. I still don't think it's possible..."

Really. So you believe that petroleum is somehow exempt from the law of supply and demand? For the record:

US: U.S. oil demand in April was 863,000 barrels per day less than previously estimated and down 811,000 bpd from a year earlier, putting petroleum consumption at the lowest level for any April month in six years, the Energy Information Administration said on Monday.

U.S. oil demand in April was revised down 4.2 percent from the EIA's early estimate of 20.631 million bpd to the agency's final demand number of 19.768 million bpd, and was 3.9 percent less from 20.579 million bpd a year earlier.

By the way a drop of 863,000 bbls is quite large. Worldwide growth in oil consumption from 2006 to 2007 was 990,000bpd, according to the BP Statistical Review 2008). It is enough to wipe out two years worth of consumption growth from China.

Japan: Japanese oil consumption has been declining since 1996. Think of this as peak demand for oil, Okay?
Israel: Demand in Israel peaked in 2001, and it is now 16% less from it's peak level in 2001.
Italy: Italy’s demand peaked in 1995 and it is currently down 14%.
Sweden: Demand peaked in 1996.
Denmark: Demand for petroleum is down 20% from its peak in 1996.

I suggest that maybe oil is a commodity that still obeys the laws of supply & demand, no matter if we “feel” otherwise.

Please note I happen to believe that the overall trend is up, but I am not surprised that we are now seeing a 20% “correction” in prices.

Actually, Professor Goose is the mastermind of a global oil price conspiracy, and he decided that it was best to have a short term retreat in oil prices.

The unseen hand doesn't care who is in power, so long as they control the money supply. No matter who is in power, certain interests will be served. Obama seems to be the selected one this election cycle, so the only question is whether he will goof so badly that he will lose.

If exporters feel an election-related SPR release (like Bill Clinton's in Sep. 2000) is probable, they will sell future production at these prices. I think we may see a further, small dip in prices due to that fear.

Producers can be cornucopians too, and some may think that $147 is the "top". They may also believe that economies can't handle $200 oil. I think there was an article posted a couple of days ago about Pemex locking in these high prices for months (or more) into the future.

I'm not saying at some point demand won't exceed supply. But we're not there yet.

Although a reasonably well-educated person, I never quite know what a writer means by this. Absent crippled refineries or embargoes, and the introduction of rationing, it seems to me that, since demand is effectively infinite, consumption pressure is measured by price. So in that sense, demand always "exceeds" supply. There are no ads on TV saying "Buy more oil", just as there are none in poor countries saying "Eat more food".

It's not the same as Colorado River rafting, or seats to the Super Bowl, where the demand for them relative to availability is measurable. These are solved by first-in first-served, a ballot, or an allocation by some other means - and not by price as such.

I'm not saying at some point demand won't exceed supply. But we're not there yet.

I agree the concept is meaningless without the addition of the price factor. More logical to say "I'm not saying at some point demand of $140/bbl crude won't exceed supply of $140/bbl crude. But we're not there yet." Without the price, the statement is essentially void of meaning.

But,

in heaven there is no beer,
that's why we drink it here . . .

That is the key point that americans need to get through their skulls. If it costs $5 or $8 or $10 a gallon for gasoline, it is not worth it for an american to buy it if it only gets them 20 miles. But if someone in Europe or even China can get 50 miles out of that gallon of gas, then they are going to be able to outbid us even if their income is half. Or alternatively, they might use that gallon of gas to help power a factory to build bycycles. Or do any number of things with that gallon of gas that we cannot do because we are not that efficient with it.

Euan,

Nice weather aint it?

I voted 114 - 140. - But only after I double took the specific time frame.

It is summer, a correction is due (look at the dog-tooth corrections over the last couple of years).

But short of a massive global depression, the overall trend will be upwards.

The poster up top from Oman was very revealing: Production up, but not out-performing domestic consumption.

Enjoy the weather. ( we'll pay fer it y'ken!)

I agree, it's definitely the start of The Bumpy Plateau Syndrome, that consists of

• demand destruction at the fringes (some people in developed countries drive less, some people in developing countries stop driving)
• inventories rise, people start shorting oil, investors lose confidence and it all compounds
• wave of optimism in media, everyone talking about the "spike" in retrospect
• "sucker rally" occurs in stock markets (which will impoverish many people, if it happens repeatedly)

Welcome to the Oil Roller Coaster!

One of the major news talking points in the past few days is the 'Historic' drop in oil prices that was occurring. Well, sure, but it's all relative as they say. And when the price of oil was at an unprecedented high, it's not much of a leap to expect large, historic shifts in price.

I quite agree. I'm far too ignorant to speculate on where prices will go next, but I think that the current fall in price should be kept in context. A price drop like this a decade ago would have made oil practically free, but as things currently stand prices are still stratospherically high, from a long-term perspective. I'll believe this is all a 'bubble' when we have a sustained period of oil prices at historically 'normal' levels (20-30$/barrel).

AMR is up over 100% since oil peaked. It was up 37% today. Other airlines have seen similar gains. Obviously,the market is expecting a much bigger haircut for the oil speculators. And,the market usually turns out to be right.

It's been extensively discussed in the drumbeats each day, especially the day the TX legislature voted on wind. We are waiting on more of the details before we put it through the meat grinder, right now it's a smidge vague and does not explain where the infrastructural support needed is going to come from.

Yes, Boone's plan is better than nothing--nothing only being a little less than we have gotten thus far from Congress, especially after events like the recent non-renewal of incentives struggle therein, etc. Perhaps with the seating of the 111th Congress, things will change--but I am not holding my breath. I continue to fear that coordination at the federal level will be very difficult, even with a stimulus like >$120/bbl oil--though the demand destruction that is being caused by our recent economic turmoil may break oil prices down further, which will in turn prolong urgently-needed investment in alternatives due to the volatility and uncertainty as well. This one may still end being mostly up to the states, localities, and joint private-public efforts such as Boone's plan...so, I'll say it again: it's better than nothing.

There are still a lot of problems with Pickens' plan, mostly infrastructural (wind, LNG, support structures, grid problems, etc.), but also policy-oriented as well.

REMEMBER, and this is very important: we will not get a panacea out of anything we do...so, I'll say it again: it's better than nothing.

Perhaps, as many have said, combine it with Alan's plan and a massive tax increase to fund the infrastructural buildout necessary...and then you might have a solution--but it will only be a solution after we endure a good amount of going backwards economically.

(Though I must admit, when I heard Boone Pickens, one of the principal agents behind the "Swift Boat" ads in 2004 (e.g.,
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/111707...), say that Al Gore should be energy czar of Obama's administration, well that is when we know that traditional partisan politics are gone, thrown out the window due to the growing importance of issue of energy--as in people in hell are getting popsicles out of their freezers. (If you're on a campus, etc., you can view this interview with Pickens where he says the above: http://www.nationaljournal.com/njonline/no_20080718_4628.php))

Perhaps there is reason for hope of people working together to find solutions. Let's hope so.

He also testified in congress yesterday. Although he supports more drilling, he is careful to point out that it will not do much to change the fact that we will have oil shortages and high prices going forward. He also said something interesting. If we had drilled ANWR ten years ago, we would have already consumed half of it. He also said that if we had drilled ANWR years ago, it would have been sold for a pittance compared to what it could get now. Sure, he follows the party line on drilling but also provides some ammunition for those who want to not drill or delay drilling. He also said that once you consume oil, it's gone forever. We are exporting $700 billion per year to get imported oil and then we just burn it. Compare that to solar and wind which just keep giving and giving.

I think the main reason people push drilling now is that they have a short term perspective that just looks at those dollars that could be going to the oil companies.

Anyway, shouldn't we be glad we didn't drill ANWR ten or twenty years ago. If is still available when prices are much higher.

When do heating oil inventories in the U.S. need to seriously start building? Would that naturally lead to an increase in demand in North America even if we are driving a bit less?

I'd expect sometime before late Sept.

Yes, and all those solar panels will be scrapped as useless, wasteful and non-sustainable, once we go fusion or whatever comes next (according to the techno-fix ideological mantra).

What is your point?

Now I've been able to vote down twice in this poll. We'll see what that does to my average.

Chris

I voted trading range. I believe that demand "destruction" (an oxymoron, if I ever heard one, to call a 2-3% reduction in oil use "destruction" of demand)will moderate as oil goes down, and I would not be surprised to learn that Saudi Arabia has reversed part or all of its recent 500kbpd increase in production if oil approaches $100. They might announce this or they may do it on the sly, but I think they will reduce production if oil threatens to approach two digits.

I see a moderately likely bottom of around $110, but I think it is equally likely that we bounce back off $120 without visiting below.

Domestically, it seems Dolly won't be a factor, but we're now just getting into the busiest 60 days of the hurricane season (late July to late Sept), so the "E", "F" or "G" tempest may well Goose (pun intended, given his annointment as chief controller above)oil and gas prices and provide the "usual suspect" cause for reversing course on this correction.

On the upper end, however, I do believe that economic slowdown here and demand "moderation" (forget destruction)will keep oil south of $150 for the foreseeable future.

Jack Yetiv

The Middle East uses 3 times as much oil as India though, and the growth from that much higher base is faster as well (5% annual growth). Expect the Middle East to gobble up 12 mbpd by 2020 (it was 6 mb in 2006)...India is very important in a few years as the economy continues to grow, but currently it is largely a medieval society and those 1.15 billion Indians uses about the same amount of oil as South Korea.

Seeing Thailand in the summer, it's hard to believe that is true. Perhaps it's a combination of factors, including Beijing putting limits on Chinese emissions because of the Olympics? On July 20th, Beijing banned 300,000 "yellow grade" vehicles from the road until Sep 20. That artificial demand destruction is having a bigger effect than it normally would because of increased Saudi output. They are going further than that by limiting factory emissions. I'm not saying that this entirely accounts for the drop we've seen, just that certain things are favoring a somewhat lower price until late September.

Beijing Takes 300,000 High-Emission Cars Off Roadsj

Beijing claims to have already taken 50 percent of government cars off the roads, and will ban private cars on alternate days from July 20, depending on whether their number plates end in odd or even numbers. The authorities hope such a measure will take 45 percent of the city's 3.29 million cars off the roads and slash car emissions by 63 percent.

The capital has also announced a raft of factory closures and a ban on major construction to take effect for two months from July 20 to improve air quality.

Of course any number of factors is equally likely to make the price shoot back up. That's part of why I had to vote for the highest option available. Any price reduction is definitely temporary. The million dollar question is when will the upward momentum really kick in and erase the slight slump in prices we've seen lately. My best guess is sometime after September. I'm just wondering how gold will do in relation to oil... because it seems like we'll see a nice boost for gold too.

One wonders how long the Chinese will be able to continue their fuel subsidy though. As a conservative estimate, you can bet we won't see any change until after the olympics are over because the ensuing protests would be an embarrassment. They can't continue them forever though and when they do reduce them we might see a big change in demand in China.

A significant world wide contraction of economic output can and will cause a reduction in the demand growth.

History has shown that oil price spikes - rapid change - can do more than slow growth.

So far this is playing out as it has in the past. Price can run far when driven by fear or greed.

I bought an oil industry position today but unlike you I bought at the close, although I wasn't intending to until I recalled that one of my go-to stocks, ECA, reports tomorrow. Prior to remembering this I'd expected to go home flat and try to buy a gap down open. That may still be the result tomorrow.

A generally positive report for COP today didn't help it, but after another sector wide haircut today, its possible a second positive report in the sector, assuming ECA delivers, could do the trick. The EURUSD is lifting a little off today's lows and if that persists it will help oil (and gold) too.

However if this doesn't play out at the open I will cheerfully book the loss rather instantly, knowing I can always re-establish positions again in the future - 5 minutes or 5 days or 5 weeks hence. It may be that the entire industry rally from January to May/June gets unwound, perhaps even more, for all we know.

Prices of sector names are starting to hit April lows. If this area does not hold, say hello to January's lows. Does it make sense? Probably not. Can it happen? Absolutely.

Its ok to try once in a while to buy the falling knife provided there was some extreme price action involved; the mistake many make is to keep on holding the falling knife, bounce or no bounce.