The Oil Drum

50 comments on Remembering Mr Micawber*

Comments can no longer be added to this story.

Halfin on October 2, 2006 - 1:05pm

2009 futures are at $63 - so $35 and $90 in 2009 are of roughly equal probability

Right, and actually if you look at option prices (I had to go to 2010 because it is more liquid, being a round number) the prices of $35 and $90 options imply about a 20% chance that the contract price will be outside that range - either less than $35 or more than $90.

I'm sure many people here don't find that too surprising; they're probably all sure that the price will be over $90. But the smart money says that below $35 is equally likely as over $90 - about 10% in each case.

Comments can no longer be added to this story.

Nate Hagens on October 2, 2006 - 2:50pm

what i think is more likely is that demand outstrips supply in the next 18 months, causes spike above $90, and the ensuing economic dominoes collapse world economy leading to supply (at that near peak point) far outstripping demand, and the marginal barrel heads below $35. volatility will be extreme and as Ive discussed previously, volatility itself can be worse of an enemy than expensive oil

Comments can no longer be added to this story.

Hothgor on October 2, 2006 - 9:05pm

So you think that since we may fall a tad short in the near term, the entire economic system worldwide will collapse? It takes a LOT longer then 18 months for something like that to happen. Just look at the 70's~

Comments can no longer be added to this story.

odograph on October 2, 2006 - 10:44pm

Halfin, I'm on track with you much of the time, but pedantic soul that I am, I must remind readers that it isn't "smart money" that says. It is the past statistical pattern, which if countinued, will produce prices with an 80% probability of beinf within $35 and $90.

Our best guess is that the pattern will continue, but we cannot predict the chance that the pattern will be broken.

Again, the 20% outside, is the chance given the past pattern.