Lot of craziness in energy trading

[haha]

https://finance.yahoo.com/video/t-boone-pickens-where-oil-014100777.html

I always like to hear what Boone has to say, on any topic. Neal Cavuto is in too big a hurry to ever shut up and let Pickens come to the fullness of his point. Pickens is smart enough to realize that these Persian Gulf monarchs are sitting on a barrel of dynamite. Some "spokesman" for one of the smaller rich oil producers today predicted that even if oil price went to $40, OPEX would not cut.

Isn't this like saying that OPEC does not exist? Isn't the sole purpose of a cartel to keep prices higher than they otherwise would ordinarily be? That's one issue. The other is that while the Saudi royal family and Kuwait and Qatar and UAE produce a lot of oil relative to their populations, they essentially keep ISIS and Iran and other much larger and militarily powerful regimes of their turf thanks to paying off many client states like Egypt, and also having the US air power in their pocket. This gets complicated fast. I would be way over my pay grade to try to guess how all these pressures are balanced, but for sure this whole thing has lot more in common with poker than anything else I can think of. No way are any of them saying what they believe to be likely, they are saying what they believe advances their negotiating position. Like the German minister said a couple years ago, when things get serious you have to lie.

Pickens thinks that oil returns to $90 or more within 12-18 months. I surely don't know, but I put more trust in what he says than the Economist, which recently prophesied $50 Brent.

The other thing which for the most part we do have the information to interpret is that companies that are almost 100% in the natural gas business are also falling fast. How much sense does this make? IMO, none. If I look at a chart of Nymex gas futures, prices are overall higher in 2014 than in 2013. And we are currently ~100% above the NG Nymex low below $2 in 2012.

Part of what is going on is that people are crazy.

Ha

 

[Running_Man]

Pickens on earlier interviews on CNBC scoffed at reports that oil would drop below 70 dollars, at the time oil had just broken 80 and he was quite confident on this coming on twice to state that, he has not been on CNBC since. I thought he looked shell shocked myself and incapable of believing what is going on , here is one of those CNBC interviews wherDon't panic over oil: T. Boone Pickens

 

[Looking4Ward]

Yesterday I exchanged one third of my Vanguard Retirement 2025 fund to Vanguard Energy Fund Admiral in my IRA account.

I'd put more into Vanguard Energy in my taxable account but I'd have to sell other funds to do so and don't want to incur any additional CG.

Point is I'm in it for the long haul and believe that Santa gave us a present this year, it hasn't been a rally but in fact a great buying opportunity.

 

[Senator]

There is more going on than just over supply. Unless OPEC, Russia and other countries have been pumping a lot more oil. Other economies are slowing. There is more conservation going on in the US, but I doubt that there is in China, India and other countries.

Russia just bumped up interest rates to 17%, because their Ruble is getting weak. In the USA, the Fed wants to make our dollar even stronger even though inflation is tame. It will kill exports and probably jobs. It will make oil even cheaper.

We need a weaker dollar to compete with countries that use forced labor and destroy the environment. We cannot compete with all of the regulations and high labor costs here in the US

Increased demand will raise oil prices, or a lower supply will do the same. It's that simple.

BTW, Dennis Gartman says $30 a barrel is coming.

 

[Mulligan]

Ha, your point about Cavuto cutting him off in the interview really resonated with me. It is even worse on CNBC. I want to hear the "experts" opinion, not the Teleprompter readers opinion. At times it resembles going to a basketball game and the officials assuming they are the stars of the game.


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[audreyh1]

Even if we get a very low price on oil, I don't believe it will stay there. A lot of folks making predictions act as if it goes to the bottom and stays there. Well it never works out that way.

And a lot of the crazy trading right now is speculators dumping their investments indiscriminately, so you get side effects that "don't make sense" like natural gas being hurt. I think this is exacerbated by it being the end of the year. It will be interesting to see how much of this reverses in January.

Eventually the "pros" get done selling, and things settle down and rebound somewhat.

Don't mention Gartman. Whether he is correct on this, he reversed himself on so many predictions I'm embarrassed for him. But does he shut up? No!

 

[GrayHare]

IMO the current drop is a sub-rosa agreement designed to put pressure on Russia.

 

[Chuckanut]

At times it resembles going to a basketball game and the officials assuming they are the stars of the game.


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Or worse yet, the announcers assuming they are the stars of the game.

 

[audreyh1]

Or worse yet, the announcers assuming they are the stars of the game.

I think this is really true! No humility, no attempt to really learn from guests as they already know it all, very little investigative reporting. More interested in spouting off the spin du jour.

A major reason I quit watching the financial press entirely.

 

[NW-Bound]

About buying more energy stocks, I would say it's not yet time. Looking back in recent history, we have seen prices running to the truly absurd, and we are not there yet. I still remember shaking my head in 2009, filling up with gas at less than $2/gal. How could gasoline be cheaper than some bottled water?

I am not saying that gas will get that cheap again, but then a lot of ridiculous things have happened. We have seen that in house prices too, and the crazy thing is that it keeps repeating. People seem to have shorter and shorter memory. So, I think I will wait until the impossible happens to deploy what I have left in cash.

 

[LOL!]

If folks are buying, then capitulation hasn't happened yet.

 

[Chuckanut]

I am not saying that gas will get that cheap again, but then a lot of ridiculous things have happened. We have seen that in house prices too, and the crazy thing is that it keeps repeating. People seem to have shorter and shorter memory. So, I think I will wait until the impossible happens to deploy what I have left in cash.

+1

I believe you are correct. While we may not see $5 a gallon gasoline in the next few years, I can't help but think that this is temporary and gasoline will be back in the $3+ range within 12 months.

Side note: Remember when people were crying the the oil companies could charge whatever they wanted because 'we have to have it'? I wonder where they are now.

 

[haha]

If folks are buying, then capitulation hasn't happened yet.

Not quite. It takes equal number of shares sold as bought, otherwise there would not be transactions. What varies is the eagerness on each side.

Ha

 

[audreyh1]

Yes, why not wait until early next year to see how things settle out?

The last big oil price drop (2008) lasted 20 weeks. This one has been 24 so far. It might be close to the end, but what's the hurry?

I do think that part of the very recent higher volatility is end of year repositioning.

 

[NW-Bound]

Oh, and I forgot to add that I have plenty of energy stocks already. And I have learned to be careful about keeping buying while something is dropping.

 

[kgtest]

Oh, and I forgot to add that I have plenty of energy stocks already. And I have learned to be careful about keeping buying while something is dropping.

I was staring at a limit order for VDE last night and this same thought came into my head. I've done this before, better not this time. I already have enough energy and do not want to be overweight. Besides, I already got unlucky at the top, why try to get unlucky in the middle ??

When I started driving at 16, back in 1996 gas was about $1.80 - $2/gallon, I do find it hard to believe we are dialing back that far but I am not the one to ask advice from heh.

Oil and junk bonds seem to be the only thing people want to talk about these days.

 

[unclemick]

Hmm - two of the last five DRIP stocks left are Chevron and National Fuel Gas so let them keep compounding - in 25 yrs I can have gold handles on my casket.

A few good stocks(5% of portfolio) and football keep the hormones happy.

Saint's beat the Bears last night.

heh heh heh - and all this means? I haven't a clue let alone a theory.

? Is this the same Mr Pickens who has expressed some interesting thoughts on water rights and wind energy via long distance transmission lines over the years?

 

[Travelwanted]

IMO the current drop is a sub-rosa agreement designed to put pressure on Russia.

And perhaps ISIS? Their revenue is from oil. They have threatened Saudi Arabia. I don't think it is lost on them that ISIS will be hurt by low oil prices.

I am also buying. Not too worried about exact timing. Fact is there is a sale and I'm buying.

 

[NW-Bound]

I just came back from a run to Home Depot. On the way, saw that Sam's Club had gas at $2.17/gal. Then, just now check gasbuddy-dot-com, and see that Costco's price is $2.15. Is the end near?

Darn, I want to take my motorhome for a spin, which I have to do every so often anyway to exercise it, and fill up its 55-gal tank. But even with that big tank, it's still $20 gain at most to hold it for a while, then the gas goes stale. And it is not easy to get gas out of it to put in my cars. And it will be another 6 months at least, before I can go on another RV trek.

Bad, bad timing...

 

[samclem]

Side note: Remember when people were crying the the oil companies could charge whatever they wanted because 'we have to have it'? I wonder where they are now.

They are the same people upset when gas stations raise their prices immediately when there's a local gas shortage and price increase. "They still have the fuel in their tanks that they bought at the low price, they are gouging us!" But today, with oil down, I'm sure they expect to get the lower gasoline price immediately, and will shop at the station that has it. Funny.

 

[REWahoo]

Is the end near?

Nah. Just another close call...

Potentially hazardous asteroid surprises astronomers

 

[haha]

One confusing thing is that earth products, like oil and gas and copper and nickel are called commodities. Also called commodities, or commodity products, are things like bricks, floor tiles and the like. In each case when things start getting challenging, it is immediately said that this is just supply and demand, so of course the oil price is falling, supply is rising. This is true enough, but IMO very misleading. Todays trading price for oil measures only what is available now or very shortly, compared to what is needed or wanted now or very shortly.

But bricks are very easy to replace, you can dig up some clay in your back yard and make some. Not true with commodities like oil which are hard to find in high concentrations. The story of energy and copper and nickel and other earth products of this nature is that they are not ubiquitous. High concentrations are rare. Calling America the new Saudi Arabia is very misleading. Horizontal drilling and fracking are very clever responses to high demand and high prices, but in no way can these resources be compared to Saudi Arabia. I can't specify numerically the difference, but put it this way, could the US set out to shut down Saudi production by producing at top rates? Of course not.

So in a way it is a market failure, When there is a current surplus of supply in oil, it trades like women's skirts being marked down at the end of a season. But that low cost oil still has the same very special long term value that it had before the sale started. It's just that trading is today and near term, not 20 years into the future.

Ha

 

[Senator]

So in a way it is a market failure, When there is a current surplus of supply in oil, it trades like women's skirts being marked down at the end of a season. But that low cost oil still has the same very special long term value that it had before the sale started. It's just that trading is today and near term, not 20 years into the future.
Ha

There is tremendous volume in traders, and speculators, that have no interest in actually getting any oil delivered. Many people buy and sell thousands of contracts of oil and gas without the means to hold more than a 5-gallon can.

Getting rid of the speculators would smooth out the markets. If you cannot take delivery, you have no reason to buy. If you do not own any gas/oil, you should not be able to sell it.

 

[Fermion]

I want to find a way to lock in $55 oil for five years or so such that we have $3 diesel for our truck/camper during our travel of the USA. At 10mpg and traveling up to 20,000 miles a year, it is not a insignificant price difference ($6000 of fuel at $3/gal vs $8000 of fuel at $4/gal)

Perhaps if I could find an investment that would go up 33% if diesel goes back up 33% but is guaranteed not to drop more than the equivalent drop in diesel.

In other words, I want to pre-buy $30,000 of diesel for use in the next 5 years.

 

[jim584672]

There is tremendous volume in traders, and speculators, that have no interest in actually getting any oil delivered. Many people buy and sell thousands of contracts of oil and gas without the means to hold more than a 5-gallon can.

Getting rid of the speculators would smooth out the markets. If you cannot take delivery, you have no reason to buy. If you do not own any gas/oil, you should not be able to sell it.

Why should someone have to own a commodity in a futures contract? The contract is a promise of future delivery backed by a deposit to cover price swings. The speculators offset their positions before the delivery date.

Speculators are needed in futures markets to assume risk and provide liquidity to the market. Commercial hedgers can forward sell their production and lock in their prices. You can't have a market without the speculators.