Oil Should Be Around $10 a Barrel: Analyst
- Thread starter misterno
- Start date
I agree with the guy who said this is useless commentary. what is the alternative? the markets exist, in part, to smooth out volatility in the retail market. There will be times that the futures are undervalued, and times they are overvalued. How do you prove which is true? A: you don't. Seriously, what is the point of this commentary? Just say you think Crude futures are over-valued. It's annoying
Nonsense.
Oil is settled physically at each expiration and all paper investors are forced to roll forward. When paper investors sell the current month to roll forward, all that's left are the physical buyers and sellers (i.e. no influence from the oil-as-an-asset-class crowd at this point). Notice oil doesn't crash at each expiration, there is ample demand for physical at the prevailing price.
The reasons we have $70+ oil instead of the recessionary norms of oil prices in the teens can be largely traced to demand from emerging markets (specifically India & China) that wasn't nearly as large in prior US recessions. Fiat currency devaluation is a significant factor as well. Gold wasn't $1240/oz when oil was $10.
Although the US is the largest oil consumer, looking at only US-metrics (inventory levels) to judge the price of a global commodity is rather folly (let alone not taking currency devaluation into account, higher oil extraction costs, etc).
Quote from toc:
Half of the world population i.e. China, India, Brazil on the 'steroids like' uptick on economic growth and oil at $10?..............does not make sense. Worst, if US picks up a notch or two, oil should be easily $100 and around.
I agree it probably would move higher with better equity markets along with better economic growth however something has to eventually give when the price of oil starts to move higher with the economy, there is no way our economy can handle $100+ oil. The consumer makes up 70% of the gdp and if oil were to move into the triple digit range you would see the price of goods rise along with everything else in between and that would eventually keep the consumer from spending once again.
Quote from tmarket:
I tell you, this guy just get no respect (Matthew Simmons; Peak Oil)...body is barely cold, dying in a hot tub just three weeks ago
http://www.bloomberg.com/news/2010-...nker-peak-oil-theory-advocate-dies-at-67.html
Simmons, July 16, 2008: "oil is more likely to hit $200 per barrel than drop to $50 over the next six months".
Yeah, and he was probably 20x or more likely to die in a car accident that drown in a hot tub, but yet and still....
That is the whole point. Assuming the market is made up of only producers and consumers, without the investors, he is proposing oil should be around $10-$20. In his scenario, there would be no investors having positions to roll over.
...
Sadly, Simmons' steely stare and nuclear resolve could not peak the price of oil..
+1 +1 +1
Lots of morons in this thread. When did Simmons predict $200 oil? July 2008? Oh yeah, S&P was still between 1200-1300 there was no sign of full blown recession. Simmons didn't know that 700 S&P was coming, neither did know the smart ass idiots in this thread.
Had the US economy stayed up, it is pretty likely that we would be above $120 per barrel.
Anything else you said is of course correct....
Also, it is a self-correcting connection/mechanism. The world economy is based on oil, when it gets cheap, economies can rally that drives the demand and price up. The same when the oilprice goes up, killing the demand and the price with it....
That doesn't counter my point, which is that oil investors exit before settlement, therefore delivery prices are not made artificially higher from investors. When all paper investors exit the front month, settlement price would collapse if there wasn't physical delivery demand.
What did I say that was logically incorrect?