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Oil to $160 !!, Gold to ... where?


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This might put the knackers on Zaps $160 oil theory

 

http://www.guardian.co.uk/business/2008/apr/16/oil.brazil

 

Carioca oil discovery

 

Excitement about the potential of Brazil as a massive new source of oil and gas intensified yesterday after a senior energy ministry official declared that the newly found Carioca field could have 33bn barrels in place.

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Then agan it will take some time to put it into production and that 33bn is not yet substantiated......

Yes, this thought crossed my mind also. However, even though I am no expert on this subject I also did a little thinking around the numbers. The world uses about 85m barrels a day I think; about as much as it produces... Jim Puplava has run a couple of energy roundtables this year, ()http://www.financialsense.com/transcriptions/2008/0202.html and in Feb they discussed Wall Street Journal / CERA research on depletion rates. Jim and the team think these depletion rates are totally understated but the figure quoted is still a staggering 4.5% per annum, or 3.8m barrels per day. Quite obviously JP thinks we are at a critical, critical juncture regarding depletion.

 

If you then factor in global growth demands in BRIC, they reckon you'd need to 59m barrels per day new finds to meet global demand. Very scary. The point being that even at 33bn barrels in total, as an illustration the amount of oil in that field (although it couldn't be serviced in such a way) would be enough to last about 559 days at the required volume of global consumption. I've summarized this below:

 

 

 

 

 

 

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Supply pressures abound. With reports like these from Nigeria and the recent Russia warning you can start to piece together where the 4.5% depletion per year figures come from.

 

 

Nigeria’s oil output ‘could fall by a third’

http://www.ft.com/cms/s/0/048f2014-0bdf-11...00779fd2ac.html

 

"The report says funding shortfalls “portend a grave danger not just to the reform process, but to the continued well-being of the industry as a whole”, adding that even if funding levels are maintained “total oil and gas production will decline by 30 per cent from its current level by 2015”.

 

The government’s failure to pay its share of costs of the joint ventures with companies such as Shell, ExxonMobil and Chevron, is one of the biggest obstacles to raising production. "

 

A great example of how politics get in the way of otherwise straight forward business no brainers.

 

 

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Can anyone you seasoned investraders see a likely pull back in the price in the near future?

 

I became interested a few weeks ago when it was around the $104 level put postponed buying in anticipation of a pull back because of the likely impact of a global slow down/recession. IIRC some commentators were saying it would probably pull back to around the $80 mark. This seems to have been dispelled by the notion that the BRIC countries will take up the slack and supply constraints are still a dominant factor.

 

My investment is meant for the medium to long term but it would be nice to use the volitility to spice up the return. Seems to be only one direction for the price and the "fear" factor of missing the boat is consuming me ATM.

 

How have peeps got exposure here, it looks like an ETF (USO or CRUD.L) for an unsophisticated player like me? Although I do have my concerns about ETF's http://www.greenenergyinvestors.com/index.php?showtopic=3018

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My investment is meant for the medium to long term but it would be nice to use the volitility to spice up the return. Seems to be only one direction for the price and the "fear" factor of missing the boat is consuming me ATM.

 

How have peeps got exposure here, it looks like an ETF (USO or CRUD.L) for an unsophisticated player like me? Although I do have my concerns about ETF's http://www.greenenergyinvestors.com/index.php?showtopic=3018

 

:rolleyes: I'm with you on the missing the boat feeling in a few areas at the moment ! Not just in oil either. I appreciate your concerns about ETF's. In actual fact I am trying to get my head around what the ultimate conclusion is to the global financial crisis at the moment. I agree with No6 from your linked thread that your view on this plays probably the most important factor in deciding how to go about your investment activities.

 

I have so far gained exposure 2 different ways and have a third in mind. I have had some success spread betting, managing to get a couple of positions in the last time WTI was at $99. I only entered these trades though once I had convinced myself that we weren't going to see $80 due to a global recession as you have mentioned many commentators have targeted. (Even Moneyweek put this proposition forward a couple of months back). I recently opened a SIPP and purchased mainly the ETF All commodities Forward, but also about 10% ETF Forward Energy. Clearly the SIPP is just a wrapper but it enables you to switch your investments regularly. That is up 10% in a couple of weeks. I've got a link somewhere as to why it may be better investing in the forward ETFS rather than the vanilla ones. It is basically because of the backwardation in the market at them moment, but I may switch to the vanilla when contango returns. here it is

http://hardassetsinvestor.com/index.php?op...45&Itemid=6

 

The third way I am now considering is jumping straight into the Futures market. This for me provides the opportunity to get leverage and take a longer/medium term view. The longest dated contract on the likes of ETrade right now is Dec 2009 unlike spreadbetting which I think currently goes out to June. Until about a week ago I was ready to jump in but I have read some stuff in the last week whcih is making me a little nervous about some sharper pull backs. The one thing I would say is that I decided a few weeks ago that I will now never short oil; there are just too many geopolitical variables and potential black swans out there which could come at any time and push oil higher. In order to trade futures directly you need to ensure you 100% understand how to trade them and are confortable with the risks, and convince the broker of this before they wil lopen your account. Usefully though you can take smaller contracts now as there are "mini" contracts in most commodities, so you don't have to risk quite as much and can deposit larger margin to lower the risks further

 

If you want leverage but a little less risk and have convinced yourself of ETF suitability you could use a leveraged ETF which introduces leverage x2 I think.

 

In terms of when to get in. I believe that the price will pull back fairly sharply to at least the 50day moving average in the next couple of weeks; somewhere around $104-$107, but I could be wrong ;)

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:rolleyes: I'm with you on the missing the boat feeling in a few areas at the moment ! Not just in oil either. I appreciate your concerns about ETF's. In actual fact I am trying to get my head around what the ultimate conclusion is to the global financial crisis at the moment. I agree with No6 from your linked thread that your view on this plays probably the most important factor in deciding how to go about your investment activities.

 

I have so far gained exposure 2 different ways and have a third in mind. I have had some success spread betting, managing to get a couple of positions in the last time WTI was at $99. I only entered these trades though once I had convinced myself that we weren't going to see $80 due to a global recession as you have mentioned many commentators have targeted. (Even Moneyweek put this proposition forward a couple of months back). I recently opened a SIPP and purchased mainly the ETF All commodities Forward, but also about 10% ETF Forward Energy. Clearly the SIPP is just a wrapper but it enables you to switch your investments regularly. That is up 10% in a couple of weeks. I've got a link somewhere as to why it may be better investing in the forward ETFS rather than the vanilla ones. It is basically because of the backwardation in the market at them moment, but I may switch to the vanilla when contango returns. here it is

http://hardassetsinvestor.com/index.php?op...45&Itemid=6

 

The third way I am now considering is jumping straight into the Futures market. This for me provides the opportunity to get leverage and take a longer/medium term view. The longest dated contract on the likes of ETrade right now is Dec 2009 unlike spreadbetting which I think currently goes out to June. Until about a week ago I was ready to jump in but I have read some stuff in the last week whcih is making me a little nervous about some sharper pull backs. The one thing I would say is that I decided a few weeks ago that I will now never short oil; there are just too many geopolitical variables and potential black swans out there which could come at any time and push oil higher. In order to trade futures directly you need to ensure you 100% understand how to trade them and are confortable with the risks, and convince the broker of this before they wil lopen your account. Usefully though you can take smaller contracts now as there are "mini" contracts in most commodities, so you don't have to risk quite as much and can deposit larger margin to lower the risks further

 

If you want leverage but a little less risk and have convinced yourself of ETF suitability you could use a leveraged ETF which introduces leverage x2 I think.

 

In terms of when to get in. I believe that the price will pull back fairly sharply to at least the 50day moving average in the next couple of weeks; somewhere around $104-$107, but I could be wrong ;)

Gatesy, thanks for your reply, some nice insights into the way oil can be played, I'm sure I'll refer to your post a number of time in the future.

 

I agree with you about not shorting, you're much more likely to be caught out than by going long. What I appreciate about oil (and I hope my perceptions are correct) is it's volatility creates frequent opportunities to profit e.g. it's susceptable to all manner of things which regularly occur in our world. I'm thinking of geopolitical events, acts of terrorism, acts of god, wars, insurections and I'm sure there are others beyond my understanding. Of course the key to all this is to know when to buy and when to sell. No one likes to get a trade wrong but at least a secular bull market provides a degree of insurance.

 

ATB

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OPEC chief: Oil prices would go higher

Updated: 2008-04-21 07:53

http://www.chinadaily.com.cn/world/2008-04...ent_6630888.htm

 

 

ROME - OPEC Secretary-General Abdullah el al-Badri said Sunday oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply -- something he doubted

 

"Oil prices, there is a common understanding that has nothing to do with supply and demand," al-Badri said on the sidelines of an energy conference in Rome.

 

Oil prices reached a new high Friday at $117 a barrel.

 

A host of supply and demand concerns in the US and abroad, along with the dollar's weakness, have served to support prices, even as record retail gasoline prices in the US appear to be dampening demand. Crude prices have risen as much as 4 percent last week.

 

The OPEC chief said the Organization for Petroleum Exporting Countries "will not hesitate" to increase production if the group thought the higher prices were due to shortages. But he said more oil will not solve the high prices.

 

OPEC's production levels were just one of many factors, he said.

 

"But how much higher it will go, of course it depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries. So there are many other factors other than OPEC production," al-Badri said.

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"Nobuo Tanaka, the IEA's head, did not repeat his call to oil producing countries to increase production to try bring prices down from their record levels.

 

"If oil-producing countries were to maintain their current level of production, inventories would be replenished, " he said.

 

"That will lead to better-balanced fundamentals, assuming there are no unforeseen geopolitical events, leakages, accidents, hazardous weather or port strikes."

 

Not an "in an ideal world" type statement at all then....

 

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Japanese tanker attacked off Yemen

http://english.aljazeera.net/NR/exeres/A19...3DE67C135D9.htm

 

A major Japanese oil tanker has been damaged in a chase by heavily armed pirates off the coasts of Somalia and Yemen, leaking hundreds of litres of fuel.

 

But officials and crew members said no one was injured in the incident that occured on Monday.

 

The 150,000-tonne tanker Takayama, with a crew of 23, sustained damage but was able to sail on its own power after the attack at about 4:40am (0140 GMT), its owner and operator Nippon Yusen Kaisha (NYK Line) said.

 

The attack came a day after a Spanish tuna fishing boat carrying a crew of 26 was seized by pirates in waters off Somalia, which has not had an effective central government for more than 17 years.

 

The area is plagued by insecurity and considered to be among the most dangerous waterways for shipping in the world.

 

Avast, me hearties! I hear our sworn enemy those land lubbers the Ninjas are guarding treasure on those there galleons and this treasure I speak of is not gold but oil at $120 a barrel, Arrr!

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The problems that Zapata George (ZP) has found relates to the reports that the oil companies are issuing. ZP reads the annual reports of the oil companies and is able to 'read between the lines'. He has noticed that these Large cap north American Oil Companies' are reporting 'potential barrels' of oil on the company reports instead of 'actual barrels'. This makes him think that they may be teetering on the edge of a situation in which they will not be able to supply the oil to their customers.

 

Has anyone had their car converted for LPG yet?

nope...but I've built a diesel motorbike that runs on diesel, oil, or a mix of 90% oil and 10% petrol. It does 160mpg.

 

Sorted!

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The problems that Zapata George (ZP) has found relates to the reports that the oil companies are issuing. ZP reads the annual reports of the oil companies and is able to 'read between the lines'. He has noticed that these Large cap north American Oil Companies' are reporting 'potential barrels' of oil on the company reports instead of 'actual barrels'. This makes him think that they may be teetering on the edge of a situation in which they will not be able to supply the oil to their customers.

 

Makes you wonder doesn't it. Quite convenient for Shell to call Force Majeure on the Nigeria Delta situation..... ie. Cite events outside of their control for not being able to deliver on contracts and thus not face the risk of litigation. Mercs for hire anybody?(I'm not a conspiracy theorist really:-))

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Genius! Have got a piccie of your frugal bike?

Sure have mate

 

Its just going through its final mods at the mo. I am using a CVT gearing system (hence the big pully behind the engine and the centrifugal clutch on the drive shaft.

 

Please see the attached photo of the bike in more or less finished condition.

 

Steve

post-1615-1208970429_thumb.jpg

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nope...but I've built a diesel motorbike that runs on diesel, oil, or a mix of 90% oil and 10% petrol. It does 160mpg.

 

Sorted!

Have you approached anyone with this as a business proposition? You just might save the western world way of life, for a few years anyway.

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Sure have mate

 

Its just going through its final mods at the mo. I am using a CVT gearing system (hence the big pully behind the engine and the centrifugal clutch on the drive shaft.

 

Please see the attached photo of the bike in more or less finished condition.

 

Steve

 

Looks great Steve. Thanks. :)

 

Is the engine from something like a diesel generator? 5kW?

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ZG is "re-iterating his $160 oil forecast" on Financial Sense.

 

He cites more anecdotal evidence for why oil is in shortage

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ZG is "re-iterating his $160 oil forecast" on Financial Sense.

 

He cites more anecdotal evidence for why oil is in shortage

Talking of the US economy he used the phrase "death spiral".

 

I've been following the peak oil phenomenon closely since 2001. The last few months the bad news has been coming so thick and fast it's getting scary. A lot of the other hard-boiled peak oil people are surprised at the speed and for many earlier than expected deterioration.

 

The Forties North Sea pipeline is being closed tonight. That's 700,000 barrels a day or 30% of UK crude oil production being switched off. With the tight supply situation the effect may well go beyond the UK. It isn't clear when it will be reopened, in a month is possible maybe longer.

 

30 days ago when he made the prediction I said that I though he was sticking his neck out on the price and timing - I guess he really meant $160 within 90 days. We're certainly closer and who knows he may be right. Still 60 of those 90 days to go.

 

The ZP interview starts about one third into the show if you want to jump straight to it.

 

 

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Talking of the US economy he used the phrase "death spiral".

 

I've been following the peak oil phenomenon closely since 2001. The last few months the bad news has been coming so thick and fast it's getting scary. A lot of the other hard-boiled peak oil people are surprised at the speed and for many earlier than expected deterioration.

 

The Forties North Sea pipeline is being closed tonight. That's 700,000 barrels a day or 30% of UK crude oil production being switched off. With the tight supply situation the effect may well go beyond the UK. It isn't clear when it will be reopened, in a month is possible maybe longer.

 

30 days ago when he made the prediction I said that I though he was sticking his neck out on the price and timing - I guess he really meant $160 within 90 days. We're certainly closer and who knows he may be right. Still 60 of those 90 days to go.

 

The ZP interview starts about one third into the show if you want to jump straight to it.

 

He did seem to (try and) forget that he made the prediction last time...

 

But going long oil at $120 seems desperate, is natural gas the junior gold miners of oil?

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