Ah, the wonders of supply and demand. On the supply side:
Saudi Arabia Oil Minister Ali al-Naimi said on Sunday the world oil market was oversupplied and that the kingdom had reduced production in March due to weak crude demand.
Oil consumers have urged OPEC to quickly add supply to the market to quell the rally in crude prices that has taken oil to its highest level in two and a half years amid unrest in North Africa and the Middle East.
Other OPEC ministers have insisted the market is well supplied and there is nothing the group can do to stop prices from going higher while there is not unmet demand for crude.
“The market is overbalanced… Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don’t know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied,” Naimi told reporters.
And now for the demand side:
Oil prices are roiling financial markets, hitting the economy and forcing investors to re-examine their portfolios.
Oil prices closed at $109.66 a barrel on Friday, up more than 31% in the last year. They’re up from a low of about $84 in February and are near levels not seen since September 2008, before the economic downturn.
Behind the spike in oil: Unrest in the Middle East, including continued fighting in Libya. At the same time, improving economic prospects in the U.S., including a slowly improving job market, suggest that energy demand will grow.
To our resident/visiting Stock Market Experts:
Have a simple explanation, or better yet a link to something that makes sense, about how the Options market works?
Half the time I read the put/calls even out so speculation has zero effect on the price of oil. Half the time I read that speculation adds an average 15% to the cost of oil. Then another half of the time I read speculation drives the market up and down. You can tell my math skills aren’t up too snuff, but I’d still like a real simple explanation as “balance out” makes sense but I doubt there would be a “market” for it if it wasn’t “fixed.”
Meanwhile, what we need is a strong leader for this country, the type that only the Pukes would nominate and vote for. Like Trump. You know: “the cure for our oil problem is to tell OPEC they need to supply more and supply it at a lower cost. If you tell them in the right way, they will listen.” Same with China. Seems we don’t know how powerful our debtor status is.
The ignorant fail to see that oil prices is driven by more than supply and demand. The teabagger loons think the silver bullet is to drill for more oil here as if that capacity magically gets allocated to US consumption. Wrong, bozos. It goes to the world markets where its price us regulated by speculation and the next war in the Arab cesspool.
This is why we need to ween you from the oil tit. Instead green, renewable, alternative and variety of energy sources will allow choices to supress energy costs. I’m pro choice and u should be too. Next time it cost $10 bucks to haul your fat ass to Walmart, you might think about why sucking on the oil tit is not a good idea in the long term.
Here is what I think is some further evidence of the oil markets being out of kilter. WTI crude is much lower currently than Brent crude ($12-$14), where historically it is even or slightly ahead of Brent. Here is link to spot prices:
http://wtrg.com/daily/oilandgasspot.html#Brent
Oversupply of is the not correct solution do down the oil prices and also it is only a temporary solution not for a long time so we need to develop other resources to bring the oil prices down for a long time and also if we use less oil that means if we used to go to our offices by using bikes not using cars and especially if we use electric bikes and electric cars then we down oil prices for a long time and also we can control pollution will also bring good effect on nature.
What are the arguments against advancing renewable energy tech? Renewable energy reduces our dependence on foreign providers, and decreases the likelihood of vast market fluctuations that cripple our economy. Additionally, there’s limited environmental impact. Forget global warming for a moment. Think about something tangible. Oil spills kill eco systems that are invaluable to other industries and radiation from nuclear leaks lead to death and birth defects. If you don’t believe that? I suggest you walk around with a cellphone strapped to your head at all times and drink some motor oil. Renewable is the future. Lets leave crude oil in the crude ages.
# 25 Tech Deporter said, “Renewable is the future.”
Yes it is. IF you want to live in grass hut and access the internet with an abacus. What we need now is a visionary in charge of the country. Someone who can see that nukes are the near term solution. And I don’t mean those dangerous uranium waste manufactories. (Do you know, we settled on the most dangerous type of reactor not because it was good for the people but because it produced all the plutonium the military needed for bombs?) We need to establish new reactor types like the thorium reactor that produces no waste, shuts down when the power is interrupted and can even dispose of the waste from old reactors. Thorium is dirt cheap (it’s generally considered mining waste and discarded!) They are safe, far less expensive to build and run than the current models and don’t even require the huge containment domes.
Then drill baby drill. Our Fearless Leader would drive legislation that declared our oil reserves a national resource so that it would be reserved for us. The Arabs could do the same thing but they won’t. They need the money.
Once we had cheap, plentiful energy, then there would be time to fully investigate and establish green, renewable tech. Solar, wind, what ever. In truth, we cannot sustain our lifestyle and get green at the same time.
I think it was Bobbo who suggested we could replace the interstate highway surfaces with solar panels and run the country. I feel certain the cost of doing that would be far higher than building a bunch of safe nukes. I know the knee jerks among you will immediately jump on the no nukes bandwagon. “Look at what happened in Japan!!!” To you, I suggest a quick google search for thorium reactors.
Energy independence is the only way to put America back on track. You want electric cars? Great, burn some filthy coal or oil to generate it. Or nice safe clean nukes?
Prices have NO RELATION TO SUPPLY – ONLY TO THE MONOPOLISTS ***GREED*** !!! And since they have BOUGHT THE GOVERNMENT, ***NOTHING WILL BE DONE ABOUT IT*** !!!
Up Yours, Consumers !!!
PAY OR WALK !!!
#21, bobbo, while there are certainly ways to imagine how speculative buying of oil futures could lead to some increase in prices, but that certainly isn’t the whole story. Refineries undergoing periodic maintenance in a region can have significant effects on the prices and demand for certain types of crude due to the vastly different refining requirements between different densities and sulfur content.
bobbo, it’s not stocks or securities we’re talking about here. It mainly commodity futures with some options. Completely different kettle of fish.
Wall St types tend to lose their shirts on commodities.
Thorium Reactors huh? Thats why I come here, to be educated.
No link or simple explanation on how the effect of the options market on the price of commodities huh? Well, sometimes you have to educate yourself. I’ve looked, just have to look some more. Gee. Perhaps a college textbook?
Well, this will be the limit of my study on the issue of Thorium Reactors. animby–it seems the benefits you listed all need a little bit more work. Not exactly lying, just accelerating the truth?
http://debatepedia.idebate.org/en/index.php/Debate:_Thorium_based_nuclear_energy
at # 20 ArianeB RE: PEAK OIL
My thoughts are that peak oil is a scam in order to create an artificial scarcity and hence be able to restrict, sanction and Increase the cost per barrel. more than they do already.
“They” control what we know, via status quo academia and controlled institutions and education, the only way to escape is to think for yourself.
Alternative energy by the likes of Tesla and john searle is where it’s at, but until the cartels stop giving these heros “two to the head”, we are not going to see cheap fuel anytime soon.
Peak oil hmmm, doubt it. but we still need to find clean and cheap energy that cant be throttled by the powers that be.
(apart from abiogenic/abiotic oil)an unsubstantiated explanation is:
We make more blood- so does the earth. maybe?
we are both carbon based and at times full of hot air. both support parasites and constantly under the control of others. no too many differences.
bobbo, you crack me up. Like most people who’ve worked in commodities trading, I wouldn’t go near securities. Technically a commodity future is an option, but it’s used and traded very differently than a security option. Options are mainly used in the energy industry to avoid foreign exchange risk.
For example, if you have a June contract to deliver gas you’ll put on a forex hedge if the commodity will cross the border. I don’t know many security traders holding canola futures just like I don’t know a lot farmers holding mortgage options.
Thanks foobar–I’ve stated clearly: “I don’t know” and I’m looking for a simple “accurate” text. I did google (“effect of speculation on commodity prices”) and about 20 hits indicated “about nil” on effects of prices. The few hits I tried to read didn’t come from academically neutral sounding sources, AND I probably phrased the question wrong, but I did get pulled more towards the Net-zero position, which as stated, does make sense.
Your post communicates only the fact that you know what you are talking about, but it doesn’t explain a thing.
Perhaps just the way all traders want? I do agree a security and a commodity are different products. Doesn’t help explain the initial question. I dont’ see why Investment Houses would go all in on commodity betting when the restrictions were listed if they could not rig the game to come out ahead over the long haul. Whatever that “ahead” is, is a rip off to the system/consumers of those commodities. the SMALL percentage of actual users of the commodities that need protection are dwarfed by the volume of betting that is going on==just like debt/swap securities having a volume several times larger than the entire security market they are supposedly based on.
Your opinion: near nil net effect or a constant skimming of profits? Why do I crack you up? Ignorance is not funny.
Bobbo, good to see you are trying to educate yourself, and not just declaring it true that speculation is raising oil prices. Let me know what you find, as I’ve been always asking people on here and elsewhere to explain how speculation is raising the price.
Best I’ve seen is that you have more money being invested in buying oil, so the price is going up. However, eventually that oil contract comes due, and the speculator has to sell it back, unless he’s planning to hold 100000 barrels in his house. He can then use that money to buy some more oil contracts in the future, and repeat the process. This still balances out. The only way I see the price rising is if the money comes in is accelerating, and even that has limits.
Compare to a gas station that will lets you buy more gasoline at some point in the future. I might have bought 1000 gallons when the prices were at $3. Now maybe the gas station charges a premium for future price, so I pay $3.20 for my summer driving.
However, if the price stays at $3, I just buy it new and don’t cash in my rain checks. This would be an option. I would guess that options would be priced very high by the seller. On the other hand if I’m out the money guaranteed at a certain date, then I will either take the gas or find someone else to take it, maybe losing money in the process.
If I have enough money to move the market, then it is worth it for me to buy lots of contracts to drive the price up past $3.20. However, that would require buying lots of other contracts on which I lose money.
Mike, we’ve had this near conversation before: I don’t understand macro economics well enough to know if the stimulus should have been 2-3 times as large, or what the effect would have been without the TARP. I can find links to any answer I wish, but thats not what I’m looking for.
LIEberTARDS say: let the banks fail thereby letting the market work. Dogma. I’m willing to say let the banks fail but only after I know what the probable effect would be. Its a net game, a long term game, not the application of dogma for some existential religious experience.
The truth, pragmatism. Thats why I say:
Wake Up Fools. The Republicans want to Kill America but they can’t do it without your vote.
The Fed needs to stop devaluing our money.
Jack it to three and make you happy when it drops to “only” two.
Jack it to four and make you happy when it drops to “only” three.
Jack it to five and make you happy when it drops to “only” four.
Dance, happy monkey, dance!
I wasn’t talking about the stimulus bobbo. Stop acting like Mr Confusion, and let me know if you find out anything about speculation and futures markets.
#2 Nope. Obama isn’t transformative enough to be a factor in this.
#6 I think you can get a better 5k used car than 25k new car. Cars are starting to suck. The Hyundais John mentioned in the last DH unplugged are maybe the last good value car left. And those are 35k or so.