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Has the demand for oil really declined dramatically?
Old 12-19-2008, 07:38 AM   #1
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Has the demand for oil really declined dramatically?

Here is an interview with a US oil 'expert' who says the press about a collapse in oil demand isn't backed up by facts. He predicts the OPEC cut in production will actually take place (history has show little follow through with past announced reductions) which could create big problems as the US inventory of oil is "on the low end" from a historical standpoint.

Could we see a quick run-up in oil prices mirroring the recent rapid decline?

Video - "No way" oil demand has plunged - Fortune

Numbers is hard.

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Old 12-19-2008, 07:58 AM   #2
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Just as in the way up, oil is priced at the margins AND by speculative action. It doesn't take much of an increase/decrease in demand to make a large difference in pricing at the margins. And that's before all these people coming in and speculating on momentum, whether up or down.

Frankly, with the advent of so many financial instruments and regular/concentrated long and short ETFs on the market, I think we've made it way too easy to speculate on the short-term up/down movement of stocks, bonds and commodities, and I don't think that's a good thing for the certainty or stability of the markets and ultimately the economy at large. Some of that is inevitable from the pros, but do we need to make it so easy?

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 12-19-2008, 08:08 AM   #3
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When the recession ends oil will begin to rise but it will not be quick.
Oil is being stored in ground and tankers - that needs to be worked off
People are learning to use less oil
OPEC will ramp up production when they can

The key area to watch in the USA is refining capacity and taxes.
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Old 12-19-2008, 08:17 AM   #4
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To me it is pretty clear that any market that can go from $140+ to $40- is not really predictible.

That said, buying oil related investments now is buying somewhere near the groung floor. If they are debt free or low debt, they can't go below zero.

One bump in the road ahead will come at year-end when E&P firms as well as majors will be required to estimate reserves, and the SEC 10% discounted value of those reserves. Current quotes have to be used in valuing, no matter how unrealistic they seem. When these revised values become public the stocks could suffer. Hard to guess, as this is such an odd situation.

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