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Posted by John Galt on May 29, 2009, 8:10 am
Igor The Terrible wrote:
> Where are these clowns getting all this optimism?
The optimism, what little there is, is mostly being driven by
politicians. There are a few members of the analyst class who have
ostensibly become optimistic, but when you drill down on their optimism,
you generally find out that they are either optimistic about a certain
sector only (and have a good reason for doing so) or are optimistic
about being able to profit from further market distress.
The economy is
> poised to get worse in the meantime people are lining up to buy
> worthless equities which will lose more of their value in the coming
> years.
Hyperbole. All equities are not worthless, and all equities will not
lose "more of their value". There will be spot opportunities to make
money, but you better know what you're doing, or you're better off in CD's.
So, tell me, what happens when all this bailout money finally
> runs its course and there is absolutely NO more good news about
> companies claiming all these jumps in profits?
Precisely what you think will happen. :-)
> Apparently, oil
> traders seem to think the economy is going to come roaring back later
> this year which in effect leads them to believe oil prices are in line
> with the economy.
I don't know what "oil prices are in line with the economy" means. The
oil traders know that oil is now an currency play.
>
> Sorry. That is not going to happen. By them increasing oil prices,
> it will not only weaken demand for other goods and services but for
> oil as well. No real wage increases for middle and working classes
> for the past 30+ years.
That's a very important point. The real question is "why have real
hourly wages been dropping since 1974"?
..no money to buy all the supply-side centric
> goods and services...and the same goes for oil. I see oil dropping to
> the $20 range--if not lower.
You're the only one who sees that. $20 oil will require slacking demand
and a strong currency. One of the two will not do it.
JG
But I must admit, it will be
> entertaining to watch the next crash. :D
>
>
> Igor
>
>
>
>
>
> Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up?
>
> Storage tankers across the globe may be brimming with oil that no one
> is buying because of the global economic downturn, but the traditional
> laws of supply and demand don't always apply to oil prices. Drivers
> have faced rising prices at the gas pump in recent months, as
> investors and oil-producing countries hoard supplies in anticipation
> of a global economic recovery later this year.
>
>
> The 12 member countries of the OPEC cartel voted in Vienna on Thursday
> to maintain output at current levels rather than increase supplies in
> order to bring some relief to consumers, particularly in the gas-
> guzzling West. The OPEC oil ministers, whose countries account for
> about 40% of the world's entire crude-oil supply, also renewed their
> commitment to stick to their agreed quotas, rather than ship extra
> oil, as they began doing last April when several members ignored their
> agreed output limits. OPEC leaders, many of whose economies are
> heavily dependent on oil exports, have struggled to stabilize prices
> at a level that suits their own economic needs amid falling demand and
> rising supplies. Prices had rocketed to a record level of $147 a
> barrel last July before plummeting to $30 just five months later and
> beginning a new climb. (See pictures of South Africa's oil-from-coal
> refinery.)
>
>
> Oil analysts believe OPEC's decisions on Thursday could help push oil
> prices even higher; oil futures on the New York Mercantile Exchange
> have risen 36% in just two months, to about $63.46 a barrel on
> Thursday. And that appears to be on track to achieve targets set by
> OPEC leaders. Saudi Oil Minister Ali al-Naimi - OPEC's key power
> player - said Wednesday that oil prices ought to rise to between $75
> and $80 a barrel by the end of the year. "Demand is picking up,
> especially in Asia," he told reporters puffing alongside him as he
> jogged through the streets of Vienna. "The price rise is a function of
> optimism that better things are coming in the future."
>
>
> The economic recovery Naimi so optimistically predicts would certainly
> be vital to oil-producing countries, whose own economies would be
> imperiled by a drawn-out recession. Oil demand in rich countries has
> crashed since the onset of the economic crisis last year, and is now
> at its lowest level since about 1981, according to the Paris-based
> International Energy Agency. U.S. oil inventories - the stored surplus
> - this month reached their highest level since the 1980s. And about
> 2.6 billion barrels are currently stored in commercial tankers around
> the world. "There is some risk we will run out of storage space in the
> next four to six weeks," says Simon Wardell, director of global oil at
> IHS Global Insight, an energy-forecasting company in London. To oil-
> rich countries that possibility evokes grim memories of 1998, when the
> Asian economic crisis sent demand plummeting, driving world oil prices
> down to $10 a barrel. "If we run out of storage it could prompt a
> collapse in the price," says Wardell. Oil producers might then choose
> to dramatically cut output in order to run down the surplus. (See
> pictures from Azerbaijan's oil boom.)
>
>
> Despite such dangers, investors and oil producers are betting that
> global demand will roar back, apparently hoping that the recession has
> already hit bottom. Over the past two months, investors have plowed
> billions of dollars into oil futures. If the U.S. and other major
> industrial economies rebound, oil supplies could be depleted because
> the recession has prompted producer nations to freeze hundreds of
> projects to open new oil wells or upgrade existing ones. In the oil-
> rich Niger Delta, a major Nigerian government offensive against rebels
> has seriously disrupted production for several weeks. Venezuela's Oil
> Minister Rafael Ramirez said in Vienna that his country could not
> afford to invest in major new oil exploration unless prices rise
> further. "We need a level of at least $70 [a barrel] to recuperate
> investment," he said on Thursday. Muhammad-Ali Zainy, senior energy
> analyst at the Center for Global Energy Studies in London, says oil
> demand could increase quickly once the recession ends, especially as
> China has begun to build up its strategic oil reserves. "We think the
> price is going to go up gradually," says Zainy.
>
>
> For those feeling the pain at the gas pumps, however, there is one
> piece of good news. Oil is unlikely to hit $147 a barrel again - at
> least not during the coming decades. The U.S. Energy Information
> Administration said on Wednesday that oil prices would likely rise to
> $110 a barrel by 2015 and $130 a barrel by 2030. By that time the
> world oil markets might once again follow the normal rules of
> economics.
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