Link

Traffic jams in Beijing and humming air conditioners in Dubai are replacing U.S. highways and suburbs as the driver of global oil prices.

China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year, an increase of 4.4 percent, according to the International Energy Agency in Paris. U.S. demand will contract 2 percent to 20.38 million barrels daily, the IEA says.

Economic growth of more than 8 percent in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 billion people, will more than compensate for falling U.S. demand. Oil use worldwide will increase 2 percent this year because of growth in emerging markets, the Paris-based IEA says.

``Does the U.S. matter anymore?'' said Mike Wittner, head of oil research at Societe Generale SA in London. ``Has the U.S. mattered for the last few years? It is debatable. As far as the oil market is concerned, demand growth is going to be continued to be driven by China and the Middle East.''

Matt Simmons surprised me a bit last week by saying that global oil production has already peaked.  Although some may quibble, it seems clear that the debate has shifted from decades to years.

Yesterday I was perusing "Profit From the Peak", by Brian Hicks and Chris Nelder.  In it was an interesting graph which showed that oil EXPORTS have already peaked as of 2005.  Apparently, additional oil production (if any) has been absorbed by domestic consumption increases.

Interesting stuff.  It remains to be seen whether these incredibly high oil prices will trigger an increase in global supply.  But we could well be witnessing de facto peak oil.

 

 

 

0Brian0:

Interesting stuff.  It remains to be seen whether these incredibly high oil prices will trigger an increase in global supply.  But we could well be witnessing de facto peak oil.

Good point Brian. I was reading an article about this point. And the bottom line of that article was that high oil prices will not bring increase in oil explorations. The article pointed out a detail discussion as to the reasoning. Too detailed to even try to summarize it here. And of course I don't have the link anymore and am too lazy to look for it and post it here..

Last year I said $150 in 2007 was a possibility, although it was a long shot target. I'm beginning to think $150 oil in 2008 is a REAL possibility .We'll find out

The bottom line is that folks like Koala who believe in $50 oil price are just dreaming. Impossible to see Oil below $70, in my opinion, plain and simple

By the way, Oil could do some correction here. The XOM and Oil chart look toppy with a triple top. But then again, the market can do anything and everything and move higher short term

re "where is everybody?"  hmm how about Cushing, OK?  openhurdle you probably know what I'm talking about ;)

I have a question though... WHY is oil trading in such significant backwardation?  The front month vs Dec 2009 spread is something like $9 per barrel?  Do people really think supply will increase (highly unlikely), or do they think demand will decrease in that time frame? (decrease also unlikely, flat demand in OECD is possible but not in developing countries)  This makes NO sense.

rayden:

re "where is everybody?"  hmm how about Cushing, OK?  openhurdle you probably know what I'm talking about ;)

I have a question though... WHY is oil trading in such significant backwardation?  The front month vs Dec 2009 spread is something like $9 per barrel?  Do people really think supply will increase (highly unlikely), or do they think demand will decrease in that time frame? (decrease also unlikely, flat demand in OECD is possible but not in developing countries)  This makes NO sense.

Rayden,

The long view, the farther out months for oil trading is in "backwardation" regarding pricing, so it shows pressure on the spot price contract. However the contango relationship, when it returns, should be evidence of a possible turn in the trend. Pair it with the COT data and to me there are no clear signs of a top in oil yet. This does not mean there won't be corrections, but there will be just that, CORRECTIONS, and nothing more.

(Thank God for the edit feature...greatly amended version) 

For the most part, I don't spend much time on this board any longer.  The primary reason is that so few actually read what I write, so I often get irrational and irrelevant responses.  While I might take a lot of time to post, there are just too many people that don't know seem to know how to read with understanding, yet who insist on responding anyway.  That inevitably results in a general waste of my time, and extreme irritation.  So I have mostly given up.

When it comes to my thoughts that oil would go down for awhile, I have clearly been wrong.  I think its because I greatly underestimated how investors would look for alternatives that would shelter them from the dollar.  My gold and silver have done well however, so got a piece of this trend anyway. 

How much higher can oil go?  I am beginning to wonder if there are any reasonable limits?!

Alex,

My mentioning your name was not a criticism of you personally, but rather to point out that back last Jan there were many (and you were one of those) that for the short (and perhaps the intermediate term) believe that a top was in for Oil mainly because of a slowing Us economy. I was really the only one (at least to speak out anyway) that I was not worry at all, and that was calling for Oil to just go higher. Of course your concerns last Jan were justifiable. However, like you, I don't talk much in this forum as well. I don't get much responses, people don't seem to care or perhaps they don’t' want to read my bullish oil outlook because they drive V6 and V8 and high oil prices ultimately hurts their wallet.

As for the fundamentals for commodities; they are all there. A bull market will not last 8 and plus years just by speculation. Just check the Naz for past examples. It was only a 5 years speculative mania and nothing more. This commodity bull has a long way to go, and the fundamentals are all there. For Oil, it's all in the supply/demand, and to some extent in the declining dollar.

But don’t’ sweat it, as I think you’re one of the few around here who’s a smart investor

You folks have a good grasp of the oil markets.     However I am curious why the oil cartel (OPEC) does not seize this opportunity of record prices for crude and make a ton of money by opening the spigot a little.  

Sorry, OH, I am jet-lagged and in a crank(ier) mood.  You are a good guy, and to some extent I have been wrong.  So if that irritates me, well too bad for me.  lol..

Still... it is a frustration in this board, that many seem excited about posting opinions without reading the comments of other people.  You are not a problem that way, so please accept my heartfelt apologies.