Crude Oil to Hit 100/barrel before 2008?

A post originally placed in our forum and moved here. I thought it would be interesting to relive what we were discussing mid-way through 2007. Oh how times have changed!

Bloomberg seems to think that $100 oil (not only BLoomberg BTW, a lot of people think…) will land come December this year. Is this probable? What are your thoughts, let’s open this can of worms.

Mike Moffat over at About.com doesn’t think so citing evidence in the futures and options market.

The only way oil hits $100 is if a hurricane destroys 10 refineries, US attacks Iran, or terrorists attack US. That’s the only way. Natural market pressures won’t send it to $100, but confidence issues may. We’ll see come December!

Re: [econmod] Crude Oil to Hit 100/barrel before 2008? [In reply to]

Actually, it depends on whether OPEC can increase their production for the high demand 4th quarter. Many people are now saying that it seems Saudi Arabia might have peaked, since their production was declining well before OPEC put in their quota at the end of last year and they’re down over 800,000 barrels/day, or almost 10%. The IEA has practically been begging OPEC to open the spigots, since they expect an increase in demand of 2.8mb/d by December, but OPEC has remained strangely steadfast, and won’t even think about an increase until September.


Meanwhile, crude closed Friday one cent shy of the record close, with no Nigerian hostages, no Iranian tensions and no terrorist attacks or hurricanes. It’s simply increasing demand against stagnant to declining supply.World oil production has declined slightly since May, 2005 according to EIA data. Here’s a chart:

http://www.updebate.org/phpBB2/album_page.php?pic_id=91

Oh, $100/barrel going forward is a certainty. At some point in the near future we’ll all be saying “Remember the good old days when oil was just $100/barrel and gas was under $4/gallon?”/

(This post was edited by joewp on Aug 1, 2007, 10:38 PM)

joewp
Teller

Jul 28, 2007, 10:15 PM

Post #2 of 7 (2907 views)

Re: [joewp] Crude Oil to Hit 100/barrel before 2008? [In reply to] Can’t Post
Blah blah blah, peak this peak that. Fact is we’ll see 100 oil, sure, that’s just scarcity. Will we see it before 2008? I highly doubt that. Plus, OPEC HAS the oil, they just don’t want to lift it. Plain and simple, the cartel refuses to increases supply. Not that we have the production capacity to support it.

econmod
Broker / Moderator

Jul 31, 2007, 9:53 AM

Post #3 of 7 (2863 views)

Re: [econmod] Crude Oil to Hit 100/barrel before 2008? [In reply to] Can’t Post
In Reply To
Blah blah blah, peak this peak that. Fact is we’ll see 100 oil, sure, that’s just scarcity. Will we see it before 2008? I highly doubt that. Plus, OPEC HAS the oil, they just don’t want to lift it. Plain and simple, the cartel refuses to increases supply. Not that we have the production capacity to support it.

Ah yes, the reasoned, rational response to uncomfortable facts. I guess my chart touched a nerve, huh?

Saudi Arabia, the 800 lb. gorilla of OPEC, started seeing a production decline in April, 2006, a good 6 months before OPEC’s official cuts in November. Many people think those cuts were cover for KSA’a natural depletion. Many people think Gwahar’s production is crashing as is Cantarell in Mexico and Burgan in Kuwait. The North Sea is down 15% and Alaska is down 12.5% over last year. This ain’t no party, this ain’t no disco, this ain’t no fooling around. This is when nature meets economics, and it’s not going to be pretty.

Oh, this song and dance they’re doing about “refinery capacity” is more BS. In reality, the problems with refineries breaking down is that they’re trying to process heavier crude oil, which needs higher temperatures and more pressure in the vessels. Of course, this causes leaks, fires and blowouts and “unscheduled maintenance”.

And I hear there’s a tropical wave off South America known as Invest 99L, which could spin up into a hurricane in a few days. That should be interesting…

2 comments

  1. Or how about this from a few month ahead:

    The end of cheap oil this summer is nigh, according to the National Energy Board’s (NEB) summer outlook for Canada’s energy markets. The price of crude is expected increase during the summer – averaging in the area of US$130 per barrel. The oil market continues to be tight with supply and demand closely matched. Some of the main reasons the NEB predicts the price of oil will remain high include seasonal demand increases, geopolitical risks to supply, low spare producing capacity, and the weakness of the U.S. dollar, which is resulting in more investment money flowing into commodities, including oil.

    Gasoline prices, which are strongly influenced by crude oil prices, will also remain high and continue to reflect changes in the price of crude oil. But not just oil, natural gas prices are rising as well, and have more than doubled since last fall. Prices are expected to remain between $US 11-13 per million British thermal units (MMBtu) this summer. This is due in part to record crude oil prices, lower liquefied natural gas (LNG) imports into North America, declines in Canadian production, a greater volume of gas needed to refill storage and the usual uncertainty of potentially hot summer weather.

    Stronger production in the U.S. helps offset current production decreases in Canada. This means that there will be a more than adequate supply of natural gas to meet summer demand and to store for the winter heating season.Storage inventories are expected to refill to around 95 per cent of last year’s peak of 4.1 trillion cubic feet (Tcf).

    Provinces and territories should have an adequate supply of electricity to meet summer loads but this is subject to uncontrolled circumstances,including extreme weather events or unplanned transmission outages. In the realm of pricing, if natural gas prices continue to increase substantially, we could see upward pressures on electricity prices this coming summer, particularly in regions that have natural gas fired electricity generation, including Ontario and Alberta.

    There are several electric power line expansions being planned across the country as well to enhance reliability and access to nearby markets and to address increased demand and aging infrastructure concerns.

    Ah yes, the good old days.

  2. Or how about this from a few month ahead:<br /><br />

    The end of cheap oil this summer is nigh, according to the National Energy Board’s (NEB) summer outlook for Canada’s energy markets. The price of crude is expected increase during the summer – averaging in the area of US$130 per barrel. The oil market continues to be tight with supply and demand closely matched. Some of the main reasons the NEB predicts the price of oil will remain high include seasonal demand increases, geopolitical risks to supply, low spare producing capacity, and the weakness of the U.S. dollar, which is resulting in more investment money flowing into commodities, including oil.<br /><br />

    Gasoline prices, which are strongly influenced by crude oil prices, will also remain high and continue to reflect changes in the price of crude oil. But not just oil, natural gas prices are rising as well, and have more than doubled since last fall. Prices are expected to remain between $US 11-13 per million British thermal units (MMBtu) this summer. This is due in part to record crude oil prices, lower liquefied natural gas (LNG) imports into North America, declines in Canadian production, a greater volume of gas needed to refill storage and the usual uncertainty of potentially hot summer weather.

    Stronger production in the U.S. helps offset current production decreases in Canada. This means that there will be a more than adequate supply of natural gas to meet summer demand and to store for the winter heating season.Storage inventories are expected to refill to around 95 per cent of last year’s peak of 4.1 trillion cubic feet (Tcf).

    Provinces and territories should have an adequate supply of electricity to meet summer loads but this is subject to uncontrolled circumstances,including extreme weather events or unplanned transmission outages. In the realm of pricing, if natural gas prices continue to increase substantially, we could see upward pressures on electricity prices this coming summer, particularly in regions that have natural gas fired electricity generation, including Ontario and Alberta.

    There are several electric power line expansions being planned across the country as well to enhance reliability and access to nearby markets and to address increased demand and aging infrastructure concerns.

    Ah yes, the good old days.

Leave a Reply