View Full Version : Oil Prices Plummet! Man in New Zealand Confused!

08-06-2008, 05:46 AM
Amongst other things that happened today..........


NEW YORK - Oil traders sent crude prices tumbling as low as $US118 a barrel Tuesday on the growing belief that a US economic slowdown and high energy costs are curbing consumer demand for petrol and other petroleum products.
Crude oil finished the day just above $US119 a barrel - its lowest settlement price since early May.
A day after plunging as much as $US5 a barrel in a dramatic sell-off, crude continued its downward trend. Petrol and heating oil prices also fell, while natural gas ended unchanged after Monday's steep drop.
Light, sweet crude for September delivery fell $US2.24 to settle at $US119.17 a barrel on the New York Mercantile Exchange, the lowest close since May 2. During trading, the contract dipped to $US118 - nearly $US30 below the trading high of $US147.27 reached July 11.
In London, September Brent crude fell $US2.98 to settle at $US117.70 a barrel.
"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pennsylvania, adding that "$US4-a-gallon ($US1.05 a litre) petrol has clearly killed demand."

Some analysts say oil has the potential to jump back up.
There are many factors that could keep oil from descending further, said Mike Fitzpatrick, vice president of energy and risk management at MF Global LLC. Those include political tensions in Nigeria and the Middle East, the potential for a big hurricane along the Gulf Coast, and global demand that is still growing - just not at the same pace that it had been.
"Even if it seems as though China's economic demand run has slowed some, those changes at the margins still make them a huge consumer of crude products," Fitzpatrick said.
Still, the Federal Reserve, which issued an economic assessment statement along with its decision to keep interest rates stable, said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."
The dollar's six-week highs against the euro also contributed to oil's decline Tuesday. The euro fell to $US1.5464 from the $US1.5587 it bought late in New York trading Monday, making oil and other commodities less attractive to investors seeking a hedge against inflation and dollar weakness.

I thought this big spike in prices was to do with peak oil. You know, there was a logical fact based argument as to why oil prices were going through the roof but no, it seems to have been speculation and mindless profit-taking that was putting the pressure on.
Goodness me, Mercy sakes and Good gracious.....I appear to have been bitten in the wallet area by a vicious pig dog.

Though oil is still twice the price that some people said it should be.
What do I know?
Confused of New Zealand

The Bigfella
08-06-2008, 05:48 AM
I seem to recall saying the long term price was in the $80-115 range - when it had spiked well above current levels. I seem to recall Mark giving me a hard time about that. His number was "$160 within weeks" back in March - and he wasn't into seeing it come back down

08-06-2008, 06:05 AM
I think it's OPEC that's saying that oil should be $60.
While I was looking for that I saw a figure for oil almost exactly 2 years ago.
The price had soared to $80.
We won't be seeing that again, maybe it'll go under $115. Maybe.
I dunno.
I know less about commodities pricing than I know about counting gorillas.

08-06-2008, 06:42 AM
I don't understand markets well, but there does seem to have been a bit of a bubble. And things are slowing down. I don't see a huge crash on the way, but then what do I know? The housing downturn has taken a big bite out of the pockets of those who were over leveraged. That's going to take a number of years to sort out, though I get a sense it's starting to simmer down.

I wonder how much effect our current political debate over drilling more oil has had. I can't remember the exact schtick, but Monty Python. Michael Palin is cutting up for John Cleese. After he's done Cleese looks at him and remarks simply, "Silly human."

08-06-2008, 07:11 AM
I've been saying this right along..... Oil will be at $70.00 a barrel by March 2009 - if Obama wins.

Bob Adams
08-06-2008, 07:26 AM
I've been saying this right along..... Oil will be at $70.00 a barrel by March 2009 - if Obama wins.

Ah yes...the Savior:rolleyes:

It ain't the Prez, it's speculation. Been saying it all along.

Milo Christensen
08-06-2008, 07:31 AM
I've been saying this right along..... Oil will be at $70.00 a barrel by March 2009 - if Obama wins.

There's a couple of different ways this could come true, isn't there?

Be very careful what you hope for.

Wild Dingo
08-06-2008, 07:34 AM
Sean your confused about fuel prices?? MATE!! Let me help yer out here old cobber!!

You need fuel for your car/bike/truck/boat you NEED fuel right? RIGHT!! sooooo suck it up sunshine it aint gonna get cheeper! Have you noticed that other commodity that we all NEED called food has gone through the roof too?... called a captive market mate were the captive theyve got the corner on the market and because we NEED their market we are captive to their prices... nothing else matters but the bottom line for the companies their directors and share holders NOTHING... but the money its ALL about the money... having you me and every other dopey buggar in the world captive to those markets/commodity that we NEED to survive in this world means they can and WILL charge whatever the hell they want

Only way out of this is to
1) Start walking which is okay if you live within say 2ks of work
2) Start to grow your own EVERYTHING!
3) Find a way to produce your own biodeisel from the product that gives the biodeisel its fuel to actually work right through...
4) Become a totally self sufficient hermit reliant upon nothing that requires someone else to provide produce or manufacture whatever you need.

or 5) SUCK IT UP!! and accept that there is FLUCK ALL you I or the bloke up the track can do about it

or finally 6) become a very powerfull polititian (hard to do in NZ I admit since sheeps dont vote :p ) and get arced up about it get into every sodding Arabs earhole threaten to nuke the livin daylights out of every last one of them and their brothers unless they drop the damned prices to acceptable levels of say $2NZ a barrel then take out the damned governments stupid huge tax slice from the equasion and whalla cheeper fuel

As to tucker mate the ONLY answer is to produce your own.. there is no other answer your at the mercy of the big supermarket chains like everyone else... so get some seeds till the soil and plant away mate!;)

Simple easy and done... thank you glad I could help to take away your confusion young fella all in a days work... your shout by the way! :cool: :D

George Roberts
08-06-2008, 09:05 AM
"Man in New Zealand Confused!"

Seems to be a common state around the forum. Don't worry. All will work out.


The best theory is that SemGroup was caught in a hedging/speculation squeeze. This forced SemGroup to pay more than "market value" for oil. Which forced prices up for everyone.

When SemGroup went bankrupt, it no longer applied pressure to the oil market. And prices are falling.

08-06-2008, 10:49 AM
Only a few more days George...getting nervous?

George Roberts
08-06-2008, 11:24 AM
No need to be nervous. I don't invest in the futures market.

08-06-2008, 11:36 AM
Some observations from an oil futures speculator:

Nat Gas has given back its entire rally since January without so much as a minor bounce. This would equate to Crude moving to 90$/bbl without any meaningful bounce. Coal has also taken out the price equivalent of Anatoly's stop level on the downside.
The gasoline (RBOB) crack spread has been negative or near zero for some weeks now. This is unprecendented for the summer driving season and shows the extent of true end user demand destruction. Refineries will obviously reduce their runs rather than process crude at a negative crack spread. Crude is a completely useless commodity. It's the products that really matter!
The heating oil crack spread, in contrast, remains extraordinarily wide. Some attribute this to Chinese hoarding post snowstorm/earthquake and pre-Olympics. So the gasoline and heating oil crack spreads are giving us contradictory signals. While I'm open-minded on the outcome (although short right now), if I see the heating oil crack start declining, I'll know for sure that it's game, set and match for this phase of the crude bull market, and I'll aggressively press my shorts.
The Crude yield curve recently moved to contango from backwardation. Producers are now motivated to build even more inventories, and this is a self-reinforcing feedback loop. When the crude curve goes into contango, it is predictive of declining prices in the spot contract for the following three to six months.
The price volatility of crude is around 40% now. So, as a pure probability statement, one can easily envision a 40% decline from the "high" and we'd still be in a "secular" bull market! More importantly, given 40% volatility, one would expect daily swings of around $7 per barrel just as random noise.



John B
08-06-2008, 04:25 PM
it seems to have been speculation and mindless profit-taking that was putting the pressure on.


On the positive side , these greedy dorks have alerted the world to the fact that there's no future in oil, and have generated or regenerated a whole new interest in alternatives.
In other words, they've defecated in their own market/ nest.

08-06-2008, 05:07 PM
"USO (representing crude prices) is down almost 6% in the last three days"

Down again yesterday, but the Oil Co's lag well behind on pump prices, as usual. As Dingo said, a captive market!

John of Phoenix
08-06-2008, 05:20 PM
If you're confused now, try this - this fellow thinks ExxonMobil may not exist in 10 years. And it makes sense. Kinda.


08-06-2008, 06:50 PM
OK, so a drop in reserves that goes down to the inevitable no reserves and the company disappears? Makes sense.
Their production is down but their profits are up.
We (NZ) really have to move away (as far as possible) from oil.

At the same time as we are having an price crisis with oil, we are having a capacity crisis with electricity.
The power companies haven't built any large plants for a while and why should they?
Less supply means higher prices........

08-06-2008, 07:13 PM
What really gets me is that Shell (for example) presumably hold rights to pump x amount of oil from some OPEC country. That oil gets refined at a facility they own, and at some point winds up at a gas station they also own. If they own the entire supply chain, where do the speculators get a look in? Abdul the Arab sells crude at a price that works for him, Mr Shell adds some value and sells petrol to me, and Barry the Speculator is shut right out of the loop.
Obviously it doesn't work this way, maybe it should??