UBS Investment Research expects more projects to return to life, arguing that the investment climate has changed dramatically since September 2008. It predicted then that most projects required oil priced at $80 to $100 a barrel to achieve a 10 per cent rate of return.
"It now appears that most projects would be able to achieve this return threshold in a $60 a barrel environment," the firm's analysts wrote yesterday in a research brief, noting a fall in development costs.
There remains concern, however, that the current run-up in oil prices is merely a return to the same kind of speculative trading that drove the price past $147 a barrel last July. The price of crude, while still half that high, is up about 50 per cent this year. It's a pricey level, given the International Energy Agency has lowered its global oil-demand forecast for nine months in a row.
Also Americans are driving less than last year, industrial activity is still down, and the China reports indicate the increase in oil imports flows from stockpiling in anticipation of a manufacturing recovery.
A leading shipbroker recently noted crude oil surpassing more than 100 million barrels is being stored in tankers at sea so traders can take advantage of higher futures prices. The U.S. Commodity Futures Trading Commission has reported that speculative positions on the Nymex jumped 14 per cent last week.
As a result, some U.S. politicians are calling again for a crackdown on speculators.
"There is mounting evidence that excessive speculation, not supply and demand, is the cause for the recent run-up in oil prices," Senator Bernie Sanders, the independent from Vermont, wrote in a letter last week to the commodity commission chairman Gary Gensler.
http://www.thestar.com/business/article/643831
Originally posted by uzlessI've heard this many times, but maybe you can enlighten me on one little thing: Exactly why would transparency discourage oil investors? Is there something morally or legally wrong with oil speculation that would discourage people from speculating on oil if there were greater transparency.
Open up the exchanges to transparency for starters...
http://www.stopoilspeculators.com/
If the "dark markets" were closed, wouldn't the same traders simply buy oil on the "light markets"?
I'm not trying to be contentious; I just want to know.
Originally posted by sh76http://www.cbsnews.com/video/watch/?id=4713382n
I've heard this many times, but maybe you can enlighten me on one little thing: Exactly why would transparency discourage oil investors? Is there something morally or legally wrong with oil speculation that would discourage people from speculating on oil if there were greater transparency.
If the "dark markets" were closed, wouldn't the same traders simply buy oil on the "light markets"?
I'm not trying to be contentious; I just want to know.
You can't understand the oil market if you don't understand what is in this video by cbs
Originally posted by sh76This is a good question, and as well I would add to it, if oil speculators are unjustified the market has methods to punish their speculations.
I've heard this many times, but maybe you can enlighten me on one little thing: Exactly why would transparency discourage oil investors? Is there something morally or legally wrong with oil speculation that would discourage people from speculating on oil if there were greater transparency.
If the "dark markets" were closed, wouldn't the same traders simply buy oil on the "light markets"?
I'm not trying to be contentious; I just want to know.
Most people are clueless about the futures markets. This stuff is seasonal, supply and demand, and at any given moment there are tankers at sea.
One factor making seasonal supply and demand effect retail price more is the critical shortage of refining capacity, combined with the foolish regulating of gasoline even within some states with boutique blends,
Last year, we all heard prices were rising because the President was an oilman helping his friends. That was superficially stupid, as higher prices don't generate higher profits. It would make more sense that Obama is conspiring for higher prices, as an enemy of big oil.
Originally posted by KazetNagorraThe presence of speculators in any free market doesn't drive prices in a single direction. If speculators are wrong, they lose.
Summary of the video: there are lots of speculators on the oil futures market, and there is little government oversight.
Like any investor, they tend to be making an educated guess on market direction, supply and demand, and other factors. If they guess right they make money, and if they guess wrong they lose.
Like government oversight is the holy grail of fair and honest markets? It didn't seem to matter in the banking business especially with quasi governmental agencies like Fanny and Freddie.
Originally posted by normbenignIt doesn't sound like you watched the video. Listen to the stats. These aren't crazy people they inteviewed.
The presence of speculators in any free market doesn't drive prices in a single direction. If speculators are wrong, they lose.
Like any investor, they tend to be making an educated guess on market direction, supply and demand, and other factors. If they guess right they make money, and if they guess wrong they lose.
Like government oversight is ...[text shortened]... er in the banking business especially with quasi governmental agencies like Fanny and Freddie.
It's pretty obvious how we got to $147/barrel last year.
Government oversight isn't the holy grail but it is better than what we have now. The stuff about the commodity market deregulation in 2000 is pure gold.
Originally posted by uzlessI watched the video, and as usual, there isn't much explanation, but speculation that some shadowy group is pulling strings.
poor summary. "Lots" doesn't do it justice.
Watch the video SH for a good perspective.
News flash. If a speculator buys futures contracts, and the market doesn't support his price speculation, he loses. Speculators can make money in rising as well as falling markets, so long as they anticipate the price movements correctly.
They have no magical power to drive prices in the direction they want them to go.