The Oil Drum | POLL: CLU08 went through $127/bbl today..so, in the next 60 days, the front month price of CL will...

112 comments on POLL: CLU08 went through $127/bbl today..so, in the next 60 days, the front month price of CL will...

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Prof. Goose on July 22, 2008 - 3:52pm

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, though we closed back above it, so I'll use the same numbers I used two polls ago with $127 as the basis.

Our last three polls have predicted 10% rises within 60 days of each poll and were on target, and now we have had our first 10% decline. Past performance is not a predictor of future values, YMMV, and as it says in the disclaimer, nothing here should be construed as investment advice.

As I said last poll, this is the point about a plateauing oil supply to me: increasing uncertainty and volatility over time. As far as I am concerned, it's a guessing game right now...and will be for the foreseeable future. I mean, what if the psychology changes because of government intervention in commodities trading and money flows out of those markets, etc.? (which I don't think will matter, folks will just go to London to trade oil instead of here, idiots...talk about a symbolic gesture...) Who f-ing knows?

One other thing to note, in a press release issued by the CFTC today, the CFTC report that they found little evidence that the recent price rise in oil was attributable to speculation. Here is a link to the press release which says:

The ITF’s Interim Report on Crude Oil studied fundamental supply and demand factors and the roles of various market participants, and it found that fundamental supply and demand factors provide the best explanation for the recent crude oil price increases.

Speculation? Yeah right. It's called supply and demand. Look it up.

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Prof. Goose on July 22, 2008 - 4:00pm

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

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

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steve from Virginia on July 22, 2008 - 10:27pm

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!

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research24 on July 23, 2008 - 4:21pm

So . . . are non gambling addicts no longer permitted to make non monetary wagers? Go ahead and gamble your money. I'll keep mine.

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Kiashu on July 22, 2008 - 10:53pm

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.

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Prof. Goose on July 22, 2008 - 11:56pm

NYMEX CL, or the oil price that is in the yahoo box in the right. We have a new poll a) when 60 days have expired without hitting a boundary from the previous poll, or b) when we hit a 10% boundary. We did not hit 154 in NYMEX CLQ/U08 at any point, but we did go through 127 today briefly, therefore we hit a 10% boundary from the previous poll.

Regular intervals would be just as, if not more arbitrary; at least with these conditions, we have conditions for expiry. If oil goes through 114 tomorrow, then we will have another poll tomorrow night. If nothing happens in the next 60 days, then we have another poll then.

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dadco on July 23, 2008 - 3:09am

A Poll is a "sampling"exercise, and I agree with Kiashu that it would preferable to sample on a regular basis ..... and otherwise to sorta pay tribute to the sampling theorem in organizing the interval not only to be regular(ized), but also to be sufficiently fine to display the underlying process you want to elucidate ....
so as to avoid alias distortion.

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Prof. Goose on July 23, 2008 - 11:18am

I can assure you that there are few polling agencies out there who consistently use "time" as the basis of putting multiple polls into the field, even if they end up being non-random or event driven. If anything, the method I am employing here is more valid than what you propose because it attempts to capture the motivation/momentum after large moves in the market if they occur. Otherwise, it is exactly the design you propose with an interval, mine just happens to be 60 days instead of 30.

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Nawaralsaadi on July 23, 2008 - 6:26am

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

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westexas on July 23, 2008 - 8:10am

The US is the prime example of rising production and declining net oil exports. We went from a leading exporter, and the primary source of oil for the Allies in the Second World War, to net importer status in just a few years--in the late Forties, more than 20 years before our production peaked.

Of course, as you noted, when we see a combination of declining production and rising consumption, we tend to see an accelerating net export decline rate, which is of course what I believe is driving oil prices. I think that we are seeing brief periods of stability between supply & demand, and then net oil exports fall again.

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