Where's my "I'm feeling lucky" option?

So when will the massive increase in oil prices resume?

The "declining" dollar option needs to be changed to "changing" dollar.

You calling us a bunch of Yergins?

I've started buying DBO and UNG - ETFs based on oil and natural gas futures contracts. If prices fall, I'll just buy more in small tranches. Reasoning being that long term, the underlying commodities will be much more expensive. And if the dollar loses value, I'm also protected, there.

you know someone has their finger on the scales.

Exactly, and OPEC is reacting to it by putting their finger on the other side.

The releases from the SPR of late have been done with broad coverage in the media. Also, traders are all aware of the pre-election effect.

The hammering of the shorts was a manipulated event, took a lot off the table on the short side, and made many gun-shy.

TPTB can and do make their wishes known when it suits their purposes. They have been taking some serious losses as of late, and have sent a very strong back off signal. Like a wounded large animal surrounded by wolves.

Surreal isn't it. Can it go till Nov 26 ? No I just can't see this continuing that long however it probably really depends on hurricane damage over the short term. As long as US Refineries are not in full operation and the US is releasing from the SPR then oil demand will be low.

The bigger question is product supplies to the US over the next month or two. The US should be entering the winter with dangerously low fuel supplies of all types so life's going to get interesting.

Now as far as the supposed OPEC cut I think it really depends on the type of oil. Loosing 500 kbd of heavy sour production probably is not a big deal the heavy sour market is esp well supplied given that the complex refining in the US is crippled so we are swimming in heavy sour.

Now as far as overall supply everything I have shows that we had a significant drop in light sweet exports first half of the summer followed by a surge in light sweet during the second half. This is what knocked the oil prices down but now its in the past regardless of the state of the US refining industry.

To get the price down into the 80-90 range we need one more surge of light sweet with the US in the shape its in it probably does not have to be near as large as the last surge but to keep prices low through October and into early Nov we have to see one more significant increase in light sweet production.

If we get it then we can expect prices down around 80-90 if not lower through Oct at least.

On top of this we should be able to expect the dollar to continue to strengthen esp agianst the Euro so currency condition will favor a even lower oil price. I expect the dollar to continue to strengthen significantly over the next few months. Gold and silver should repeatedly set new lows. I think we will see some serious dumping of gold and silver onto the markets by the CB's or some other entities.

On a bigger scale we probably will see the Feds and FDIC take more aggressive action agianst insolvent institutions showing that they are on the ball cleaning up our financial problems. All the solution will mysteriously work out in the 2009-2010 time frame similar to the bailout of the GSE's. Each one of these house cleaning actions will cause a rally in the stock market as its hailed as the bottom. Given that we probably will be in worse shape at that point I'd suspect that these bailouts will unravel in 2009 but thats the far future right now. We are seeing this with Countrywide for example its starting to unravel now but it took a while.

However all of this seems to really depend on one more significant injection of light sweet crude without it I think the chances of being able to pull off this whole plan becomes very difficult.

I still don't see it continuing to work through Nov 26 but if we don't get one more slug of oil it won't even make it into Oct.

Now I think all of this is being done for a reason and I expect war with Iran since for a lot of reason I'll not add to this post everything thats happening right now is pretty much a one time deal.

And finally on the demand side if demand is being driven down by high prices then low prices will result in a rebound in demand. Given I drive drive once or twice a week from Irvine to San Diego I've got a pretty good personal VMT meter at least for the 405 California demand has rebounded significantly from what it was earlier this summer and seems to be back to normal. All thats missing right now is the construction traffic but that not coming back.

market is pricing in a 5-7mbpd drop in world demand - hurricanes, hoarding, production cuts be damned....wildcard is china...(and maybe Ike)

Indeed, a hurricane takes infrastructure offline and that means... the price falls? Conflict in Georgia... the price falls? OPEC cuts production... the price falls?

We did see a remarkable retreat before the last elections.

The manipulation of these markets is truly astounding. No matter what happens, they can create an 'explanation' for why oil has fallen again.

Here's my explanation for the talking heads:

"Sure, the hurricane was bad, but not that bad, so oil ought to be cheaper now that it will cost more to have it delivered and repair the infrastructure. Relax. We're going to drill everywhere, even where the oil is negligible. That added expense ought to bring the price of oil down further. But after the elections, no more promises."

According to a report released today, it's all the fault of speculators. The report, said from January to May index traders poured $60 billion into commodity markets, causing a big spike in oil prices. When Congress began holding hearings about speculation from May to July, traders pulled $39 billion from the market. The report was released as part of the effort by some members of Congress to crack down on what they believe is excessive speculation in oil markets.

So you can see the politicos really are helping to keep the price down and stop the poor consumers from being "gouged" as I think you call it.

Meanwhile, back in the United Socialist State Republic of America the comrades having nationalised Fannie and Freddie are on a much bigger bet, or leverage as the bankers call it, $200 billion against 6,000 billion. But don't worry gentle reader there are 6,000 billion of assets to balance the liabilities, never mind that nobody else would touch these "assets".

Oil prices are due for a crash (for now) simply because of rising supply and falling demand

Exactly. keep in mind that we did a poll last december when oil was $95 and many forecast a spike to 140 and then drop to 70-80 due to a recession. peak oil means we are going down but it also means MORE than ever before...(but I think marginal cost has increased faster than I anticipated so we won't likely see the $70-$80 that folks are talking about (of course, barring short term deleverage impacts which could be $10 in either direction at anytime)

How is "falling demand" being measured? Did China change its demand? We've seen the graph in previous posts of marginally less demand in Europe and the US being completely offset by China, and to a lesser extent, India. Has that changed in any substantial way? If so, time for a new graph.

Traffic is no different where I live. Demand destruction? Is that a just an abstract statistic or am I going to someday notice it on the freeway? Why would demand be less now that the price has dropped just before the elections? This is the time to drive! Drive everywhere--see the country. It's never going to be this cheap again!

And the same goes for flying! Don't miss your chance to see the world.

The dollar is in an uptrend which makes oil cheaper.

No, oil is priced in dollars, it is more expensive for all the people who have to convert to dollars from their currency, for example the UK $ rate in the last year has gone from 2.11 to 1.76, it makes oil >16% more expensive, so the UK would probably demand less now than this time last year.

Also on top of that Brent was ~75$ bbl a year ago relative to ~$100 today, for the UK (and many other OECD countries) oil is massively less affordable now than a year ago,way above wage inflation.

Even for the USA oil is massively less affordable now than a year ago, also way above wage inflation.

People demand oil based products based on how much they can afford not it's price per se.

Actual bbl supply = Actual bbl demand = (% of income available to buy oil)/(cost of bbl of oil)

If either the cost of a barrel goes up, or the amount of income available to buy oil falls (say because of a recession or currency)then less will be demanded.

The cost of a barrel of oil just balances supply and demand, nothing more - the price tells you nothing about the actual ammount being traded.

The dated brent spot price is usually lower than cushing and nymex. It's probably less attractive due to a different composition(e.g. heavier or more sulfur).

It ought to be clear that the answer to this poll is that NOBODY KNOWS! There is no rationality to the price of oil, nor much of anything else these days.

I would suggest that massive interventions and sub rosa manipulations, e.g. oil, gold, silver, mortgages, bonds, etc. the markets are fundamentally broken, reflecting primarily panic and confusion. Rationality has been lost, so market pricing in these times means very little. Last weeks big winners are this weeks big losers. The wise man takes his money off the table and stays home until the carnage has cleared.

Impossible to win your bets when the myriad Ministries of Truth are lobbing Molotov cocktails around the paper factories.

I don't see any other way we have a stock market rally in this environment, than the FED firing up the printing press and flooding the market with freshly printed paper.

But in the end, maybe that's what they'll eventually do.

I am just wondering about some of those guys who thought "buy and hold" was a no-brainer. That may be true in the long-term. In fact, I firmly believe the long-term trend is much higher. The short-term, however, can be brutal.

Looks like I'm getting extra opportunities to vote again, three times so far.

Chris

I won't say that I understand what the impact of the election will be on the price of oil. It could be that high crude prices might give a political party something to rally around. If history repeats itself, the price will stay in a perceived lower range. Unlike the last election, oil is a hot topic. I don’t understand the impact of the election on oil, but there are perceived facts that nag at me.

• Over the summer, Iran unloaded 28,000,000 barrels of stored (via VLCC or the like) oil on the market. (Bloomberg)
• Russia signaling $250 oil by next year.
• Russia influencing oil and gas flow in Georgia and elsewhere.
• OPEC reducing production.
• China and Asia's thirst for oil doesn't appear to have abated as it has in the USA.
• The relentless drop in the EIA USA reported crude oil and gasoline supply.
• The coming heating season with higher crude oil demand.

Pushing oil prices down is only, from what I perceive, demand destruction in the USA with perceived carryover to the rest of the world.

In the end, world GDP hasn’t be reduced by much. New higher efficient cars aren’t flooding the market to accelerate demand destruction.

Russia may want higher prices. From what I can see, they have nothing to lose from high oil prices and much to gain. Russia also has "the muscle" to demand higher prices.

I am not certain that the demand destruction in the USA was great enough to bring the USA demand in balance with supply.

I don’t think it is the dollar driving the price of oil. It is oil driving the value of the dollar.
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In the end, supply and demand will win out. As for the recent push downward in price, I like to give speculators their due, demand in the USA waned, the oil bubble burst. The bottom in price will be found and I believe we are close to it. To honor this thread, I think the price of crude will stay lower for the next three weeks, $98 to $105, beginning to push higher prior to the election, by Christmas, there is more anxiety in the market and in the early new year, prices begin to move up more sharply.

"HUGE".
But maybe the flab won't be cut until it is too late - that is, until oil is $300 to $400 per bbl, at which time, the little remaining oil will be very costly to extract and won't be adequate to the task of building alternatives. Ask yourself at what gasoline price point will Americans curtail most of their driving?

Ace as far as I know its impossible to get a good handle on the actual amount of light sweet oil available on the market however if you can think of ways to monitor this its important.
From what I can tell the price oil is driven at least for the foreseeable future by light sweet availability.
It could be years before overall oil availability much less total liquids begins to have as much of and impact.
After light sweet and tightly coupled is NG and heavy sour supply. As long as cheap NG is available then complex refining works fairly well.
But for at least the next year or two and maybe even three supply and demand for light sweet seems to be the dominant factor in the worlds oil markets. This of course sets on top or alongside export land and overall production.

Ace, I'm afraid you were wrong last time and will be wrong again this time! I'm also afraid I just don't believe your graph. If I've understood it correctly it indicates that as of from tomorrow oil production will start to fall fairly rapidly. I very much doubt that. Much more probable is that we bobble along on an undulating plateau between 85-95 mmbbls/day for another 5 years or so. Anyway, I'm still waiting with great expectations for you explanation of what's wrong with your forecast: After all you told us all after the last vote that:

"My guess is that oil price will "hit $126 before it hits $102". My forecast indicates that average monthly oil prices will never go back down to $102 :-) (Yes, I'm just rubbing it in :-))

Well never has just happened. So presumably your forecast is rubbish? :-)

"That coupled with $39 billion leaving commodities may explain why the oil price has dropped."

Where did it go (the 39 bullion bucks)? If you know, you could hitch your wagon to that horse and you could have a nice ride back up! :-)

RC