Posted on 10/28/2008 6:58:55 AM PDT by thackney
Crude oil prices could possibly fall to as low as $40/barrel, and as crude continues to lose value it may soon be oversold, Deutsche Bank chief energy analyst Adam Sieminski told an audience at a Washington think-tank Monday.
"Just as we overshot with $140/b oil, we could undershoot with oil at $40/b," Sieminski told attendees at the Johns Hopkins SAIS Global Energy and Environment Initiative.
Crude oil prices are down more than 50% since reaching an intraday record high of $147.27/b on July 11. NYMEX December oil futures Monday fell as low as $61.30/b earlier in the day, before rebounding to settle $63.22/b. Brent crude futures on ICE fell as low as $59.02/b.
Sieminski said that as crude oil prices fall, it may be time for the US government to start buying oil to build up the Strategic Petroleum Reserve, which currently stands at about 700 million barrels, but has a capacity of 727 million barrels and is scheduled to be expanded to 1 billion barrels.
"We should have been selling oil at $100 [per barrel], now we should be buying it at $50 (per barrel)," Sieminski said in a later interview. The SPR has also sold or loaned about 5.4 million barrels of crude oil as a result of supply disruptions resulting from hurricanes Gustav and Ike, both making landfall last month.
Congress in June forced President Bush to stop filling the SPR at a rate of about 70,000 b/d, suggesting that the royalty-in-kind program which took crude oil in lieu of royalty payments for drilling on federal land, was contributing to soaring crude prices.
Falling oil prices may also create a dilemma for Democratic presidential nominee Barack Obama, Sieminski said, as Obama has called for a 70 million-barrel "swap" of light sweet crude oil from the reserve as a way to lower oil prices. A sale could boost net revenue for the federal government by about $750 million, according to a similar measure proposed earlier this year by Representative Nick Lampson, a Democrat from Texas.
"We need to grow the reserve, not shrink it," Sieminski said.
Already falling oil prices have forced the Obama campaign to relent on a plan to implement a windfall profits tax on oil company profits when crude oil prices are over $80/b. A senior Obama campaign aide said in an interview on October 23 that the tax would only be implemented when oil prices are above $80/barrel. With oil currently trading in the mid-$60-$70/b range, the tax would not kick in. The tax plan was expected to raise $65 billion over five years, the campaign said.
Mr. Putin is NOT going to like that.
I won’t be happy with oil prices until I see Arabs starving in the streets, and oil futures traders jumping from skyscrapers!!!
I guess I will be buying that Hemi Challenger after all!
I wonder if Nancy Pelosi and etc. have a plan now to bail out the speculators who are now loosing money..
It should stabalize between 50-60 and gasoline should stabalize around 2.25-2.35
Or, it may not. It may be at $20. Or $10. Or $60.
No one knows.
If the price of oil was certainly going to be “x” tomorrow, it would be “x” today.
Seriously, after the Wall Street meltdown, who in the world would believe ANY analyst?
$2.42 in southern Indiana
It was $1.95 in Baytown, TX yesterday. Might be lower today.
The silver lining in every dark cloud. Better hurry before it becomes part of Chevrolet.
Yeah.......and the greedy bastards will still make money at $40 a barrel.
While I agree with your numbers (based on my own guesses) what do you base that on? How long do you see it stabilizing at those leves?
Great time to replenish the reserve or better: Double it.
The consensus among those who understand the actual markets have said all along Oil should be in the $40+ range and with a worldwide recession I agree but ad 10-20 because it’s always priced above fair value.
Gas could stabalize at around $2/gal and 2.25 for other higher octanes.
I know my Dodge Ram with a Hemi is lovin’ it......C
Still makes coal to liquids refineries profitable. They claim to be able to produce oil related products from coal at the $40 a barrel oil equivalent or lower. That’s what had held them off the market before, well that and the environmental nut jobs.
What about the knucklehead at Goldman who said it would hit $200 (and how rich did he get off saying that). Does anybody on Wall Street actually look at fundamentals?
Thanks.
A minimal uptick in the economy here and in Asia will bring the price spiral back to crude oil and associated products. Coal to liquids, syncrude and shale development should proceed, even though I noticed Suncor and one other Canadian outfit had delayed another tar sands upgrader for a year.
“and oil futures traders jumping from skyscrapers!!!”
Who do you think is driving the price down ?
The same traders that kept buying long positions on the way up are probably selling short on the way down.
That means they will drive it lower than it should probably go based on supply/demand. This is what the article is suggesting. Speculators are driving the price DOWN.
The U.S. dollar was at or near historic lows against most world currencies as recently as last spring. It has strengthened considerably in the last few months, which has resulted in a near-freefall in oil prices.
It would be nice if instead of the waste of money ethanol boondoggle, ie paying off farmers, the government would actually OK syncrude refineries and start production. Be a whole lot cheaper than the stupidity of storing oil in the national oil storage whatever.
I predict that if the current trends continue, it will soon be cold enough that even the dumbest amongst us will realize Al Gore is a little funny in the head.
The whole idea is energy independence isn’t it —
Are these the same analysts who were predicting $200+ barrels of oil before August? And the same ones who were saying that gasoline would be $5+?
Sweetness!!!!!!
3.15 in Campbell, CA. We are still getting the hose!
Until President/Premier Obama takes office.
venezuela is already blowing up, and its going to get very bad there for Senor Chavez next year. Repression will intensify, then he’ll be overthrown in a coup.... and everyone will blame the USA.
That should be the new California state motto! It is true on SO many levels!!!
Contribute to FR: $10 $20 $50 $100
I purchased my Mustang GT Convertible for 28K.
The value of the dollar certainly had had an impact on recent pricing.
They won't at $40/bbl. Neither will new domestic drilling. That's the cloud surrounding the silver lining.
That is one sharp vehicle!
We just broke under 2 bucks in Indianapolis today.
Filled up my Saturn for a twenty.
:- )
Agreed seeing how we already have reserves: ANWAR, OSC ect.
Capitalist markets are so overrated. I’m sure the Barack Hussein Obama will step in and as part of his first Five Year Plan set the market price of oil at $2 a barrel. This will ensure cheap gasoline for the masses and allow his implementation of a $2gal Federal Gas Tax without anyone complaining.
Problem solved.
$40/barrel yet gas in los angeles is still at $3.09 wonder if were getting shafted naaaaa.
Oil is not $40.
Read the article, that was a prediction of a possible bottom.
Oil trades below $65 despite OPEC output cut
AP via Houston Chronicle | Oct. 24, 2008, 6:19AM | George Jahn and Alex Kennedy
Posted on 10/24/2008 5:31:15 AM PDT by thackney
http://www.freerepublic.com/focus/news/2113955/posts
Plunging Crude Oil is a geopolitical time bomb
[a.k.a., sure would be a good time for a huge federal tax on crude]
Commodity Online | 10/22/2008 | Justice Litle
Posted on 10/22/2008 8:44:12 AM PDT by markomalley
http://www.freerepublic.com/focus/f-news/2112224/posts
Crude prices could fall to $50 a barrel: Goldman Sachs (now shorting oil market?)
Times of India | 10/13/08
Posted on 10/13/2008 1:10:06 AM PDT by TigerLikesRooster
http://freerepublic.com/focus/f-news/2104322/posts
OPEC reportedly considers meeting to stop crude’s fall
Houston Chronicle | Oct. 9, 2008 | Houston Chronicle
Posted on 10/09/2008 5:56:27 AM PDT by thackney
http://www.freerepublic.com/focus/news/2101276/posts
Oil speculators are getting killed: Jim Rogers
[4 months later, change that to “gas station owners”]
Commodity Online | 2008-07-14 | George Iype
Posted on 07/14/2008 5:29:38 AM PDT by thackney
http://www.freerepublic.com/focus/f-news/2045122/posts
Anti-Drilling Crowd Should Worry About the Saudis
humanevents.com | 06/20/2008 | Deroy Murdock
Posted on 06/20/2008 3:32:41 PM PDT by kellynla
http://www.freerepublic.com/focus/f-news/2034106/posts
Saudi Oil Exec: Crude Reserves Figures Bunk
[Saudis try to prop up the price of crude set by OPEC]
MoneyNews.com | May 29, 2008 | MoneyNews
Posted on 06/05/2008 11:11:38 AM PDT by Tolerance Sucks Rocks
http://www.freerepublic.com/focus/f-news/2026581/posts
Why Is Gasoline So Expensive? Price of Crude Oil Is Biggest Cost
ABC News | April 15, 2006
Posted on 04/16/2006 5:20:03 AM PDT by snowsislander
http://www.freerepublic.com/focus/f-news/1615924/posts
That is going to hurt silicon valley ,...they are banking on Obama and Green tech,...like Solar...
The International Monetary Fund warned in a report in August that Iran's swelling current account surplus could swing into deficit in the medium-term if oil went to $75.
http://www.dailytimes.com.pk/default.asp?page=2008\10\12\story_12-10-2008_pg5_15
But the limit might be $90:
Press TV - The International Monetary Fund has predicted that Iran will face a fiscal deficit should crude oil prices fall below $90 per barrel.
“Iran's break-even price is $90 a barrel, and that is a big issue in Iran right now,” Mohsin Khan, Middle East and central Asia director at the IMF, told Dow Jones Newswires.
“If prices dip below $90 a barrel, and we have seen it touch $89 earlier this week, then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there - the public would not be content,” he added.
The weakening of the global economy and a fall in oil demand has already brought prices down from a record high of over $147 a barrel on July 11. The recent turmoil in Wall Street markets accelerated the fall in oil prices.
Khan forecast a break-even price of $56 per barrel for Algeria while the figure stood at $49 for Saudi Arabia, $33 for Qatar and $23 for the UAE.
Iraq is the only country in the region which is faced with a fiscal deficit with the current oil price standing, according to IMF figures, to be published in the Fund's next regional outlook for the Middle East and Central Asia.
http://www.payvand.com/news/08/sep/1257.html
OPEC Has Already Turned to the Euro...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.
GoldMoney Alert
February 18, 2004
|
US Imports of Crude oil
|
|||||
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|
Year
|
Quantity (thousands of barrels)
|
Value (thousands of US dollars)
|
Unit price (US dollars)
|
Average daily US$ per € exchange rate
|
Unit price (euros)
|
|
2001 |
3,471,066
|
74,292,894
|
21.40
|
0.8952
|
23.91
|
|
2002
|
3,418,021
|
77,283,329
|
22.61
|
0.9454
|
23.92
|
|
2003
|
3,673,596
|
99,094,675
|
26.97
|
1.1321
|
23.82
|
We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
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