My comments are regarding the economics of oil, not short term trading. I have opinions on oil that are separate from the dialogue of this thread.
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Crude is screwed, man.
- Thread starter Overnight
- Start date
My comments are regarding the economics of oil, not short term trading. I have opinions on oil that are separate from the dialogue of this thread.
Of course it is disputable, we are disputing it right now right here. First of all the view that we have to even dig deeper all too soon is highly questionable and highly contentious. Projects have been put on halt and hence less discoveries made because of low oil prices and NOT because the low hanging fruits have all been picked.
Secondly even if/when we eventually get there then technological advances will lower cost that are initially high, just as in every other sector. Setting up a Fracking well has been prohibitively expensive yet today any Joe can have it done on his backyard.
Secondly even if/when we eventually get there then technological advances will lower cost that are initially high, just as in every other sector. Setting up a Fracking well has been prohibitively expensive yet today any Joe can have it done on his backyard.
You are confusing things here. The marginal cost of extraction is going down for the oil we have at and near the surface, this is the economical oil. As we dig deeper over time, and I'm talking the next 50 years here, the oil will become more and uneconomical. As we get deeper into the surface the marginal cost to extract this oil will go parabolic and since price = marginal cost that means the price of will will go parabolic. This is not disputable.
So you agree then that neither absolute levels nor the shape necessarily indicate less supply of oil in the future. On average higher forward levels indicate that higher future oil prices are expected and ALREADY priced in, and that in turn on average will rather cause an increase in exploration and higher oil supplies as a result not less.
Yes, you are talking about forward hedging. I'm talking about the "shape" of the curve. The shape of the curve dictates if and when to store and when to produce.
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... Which has zero predictive value, contrary to what you claimed.
Forwards do NOT predict prices. The SHAPE of the curve DOES indicate the incentive to store now and sell later or sell now. Just as the shape of the yield curve indicates economic conditions, the shape of the energy curves indicates the supply and demand balance.
With all due respect to your otherwise useful comments in other threads but it seems you are highly confused here not me.
And it's a pretty cheap shot when you are proven incorrect on most sub topics and then come out and make a wild claim that someone confuses terms "x and y". It already appears now that you know very little about the subject matter. Why not talking about stuff that you are absolutely sure of?
And it's a pretty cheap shot when you are proven incorrect on most sub topics and then come out and make a wild claim that someone confuses terms "x and y". It already appears now that you know very little about the subject matter. Why not talking about stuff that you are absolutely sure of?
You are confusing "prediction" with value.
500 dollar oil prices are not disputed? You mean the outlandish claim relegated to being nothing but wishful thinking is not disputed. That i can agree on.
So now you say we will use very little of that oil (low demand) yet it will be up 500? What will we do with it if we don't use it? Hang it on our walls as decoration?
So now you say we will use very little of that oil (low demand) yet it will be up 500? What will we do with it if we don't use it? Hang it on our walls as decoration?
Over the next 50 years...yes. This is not really disputed in the economics community although some will say we will be using very little of that oil and that is likely the case but we will run out of "economical oil" and that is a fact.
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Incorrect, anyone can read the annual accounting statements of all the large producers and can verify that their prop trading divisions contributed a miniscule percentage to the bottom line. It's in the comments section.
The physical players are cleaning up. You have no idea what you are talking about.
Vitol is a trading house not a producer. And if you bothered to read even the first paragraph then you would have found the reason for their profits, and, hint, it's NOT the non existing insider information.
Here it is :
"Vitol Group BV earned $1.6 billion last year, the most since 2011, as the world’s largest independent oil trader profited from price swings in the energy market, according to a person familiar with the matter."
Here it is :
"Vitol Group BV earned $1.6 billion last year, the most since 2011, as the world’s largest independent oil trader profited from price swings in the energy market, according to a person familiar with the matter."
Yes the latter names are informed and yes they make a lot of money, but it comes from trading turnover and large price swings in oil. And you are sneakily shifting topics. First you made sweeping statements that the forward curve has predictive value for short term trading which is absolute nonsense. Then you claimed the prop groups of producers have insider information (also incorrect other than information about their own projects and production) and make a boatload of money which is also incorrect and can be easily gleaned from the annual audit reports and accounting documents.
Commercials are not getting it wrong. They are not in the business of "predicting" oil. They produce oil at cost and sell on the margins. BP is one slight exception as they have historically been aggressive in the paper markets as well as the physical. But firms like Trafigura, Vitol, Glencore, Gunvor are VERY informed, VERY aggressive and VERY profitable.
... Then why did you enter this thread and show how little you actually know about this subject matter? Pretty much anything you claimed is factually incorrect.
My comments are regarding the economics of oil, not short term trading. I have opinions on oil that are separate from the dialogue of this thread.