Cheers!
Bloomberg has the prices right, of course. Your interpretation of them is, uh, dubious. No serious oil trader trades on a snapshot; serious trading is done on ''the strip'', that is, the series of spot plus futures contracts going out 6, 12, even 18 months.
You post: In January 2002, crude oil prices were running about $17 or $18 per barrel
Hard facts: here are the daily prices, straight from NYMEX, for both Feb and March WTI crude during Jan 2002
(pls note -- the Feb contract always expires before the end of Jan)
Detail history of Feb Crude Oil for the contract year 2002, from 01-02 to 02-01...and the March contract...
date open high low close date open high low close 2001-12-31 20.30 20.43 19.66 19.84 2002-01-11 20.35 20.38 19.60 19.68 2002-01-02 20.00 21.07 19.86 21.01 2002-01-14 19.35 19.45 18.65 18.89 2002-01-03 20.78 21.10 20.32 20.37 2002-01-15 18.90 19.43 18.85 18.90 2002-01-04 20.85 21.70 20.72 21.62 2002-01-16 18.39 18.99 18.30 18.86 2002-01-07 21.50 22.00 21.20 21.48 2002-01-17 19.10 19.15 17.85 17.97 2002-01-08 21.20 21.50 21.03 21.25 2002-01-18 18.20 18.50 17.90 18.00 2002-01-09 20.70 20.95 20.11 20.18 2002-01-22 18.35 18.65 18.00 18.34 2002-01-10 20.20 20.48 19.85 20.38
Detail history of Mar Crude Oil for the contract year 2002, from 01-02 to 02-01
date open high low close date open high low close
2001-12-31 20.70 20.70 19.95 20.11 2002-01-17 19.75 19.80 18.50 18.63
2002-01-02 20.25 21.30 20.15 21.23 2002-01-18 18.90 19.14 18.52 18.66
2002-01-03 21.05 21.30 20.60 20.64 2002-01-22 19.00 19.18 18.70 18.98
2002-01-04 21.20 21.99 21.08 21.91 2002-01-23 19.25 19.70 19.22 19.50
2002-01-07 21.82 22.30 21.50 21.78 2002-01-24 19.25 19.88 19.17 19.70
2002-01-08 21.53 21.80 21.35 21.57 2002-01-25 19.80 20.10 19.28 19.99
2002-01-09 20.95 21.30 20.55 20.65 2002-01-28 20.15 20.37 19.81 20.05
2002-01-10 20.65 20.98 20.35 20.90 2002-01-29 19.75 19.80 19.48 19.58
2002-01-11 20.90 20.90 20.20 20.32 2002-01-30 18.95 19.15 18.56 19.08
2002-01-14 20.00 20.05 19.30 19.41 2002-01-31 19.20 19.50 18.95 19.48
2002-01-15 19.48 19.85 19.38 19.44 2002-02-01 19.30 20.55 19.15 20.38
2002-01-16 18.96 19.60 18.94 19.48
$17-18? Don't think so. Effective price of crude (i.e. the front-month future) was over $19 for the bulk of the month.
Next: price in any market is not the be-all and end-all. Prices do not move for no reason, or because of ''Peak Oil'' or similar nonsense. They move because of the expectation of the mkt participants regarding future developments in the specified mkt.
The single most significant reason, 80-90% of the cause, for the price movement in crude from 2002 through April-May 2006 is this, and this only: from July 2002, the worldwide excess daily production capacity declined from 6.7 MM bbl-equivalents/day in July 2002 to -- are you ready? -- 0.6 MM bbl-equivalents/day in Jan 2006.
These figures are easily verified. I suggest you consult WTRG Economics, run by one of the finest energy mkt analysts in America (the world, for that matter -- the Russian Oil Ministry is a subscriber of his), Jim Williams, for complete details and analysis. Excess capacity has been the name of the game in crude pricing for years on end. The July 2002-Jan 2003 period is particularly interesting in this regard, btw: excess capacity dropped almost 2 MM bbl-equivalents/day in just 6 months. Why?
Demand increases? Sure, some. US ''recovery'' from a ''recession'' (hence anticipated reduced energy demand) that never happened? You bet. Supply uncertainty? No doubt. Idiots blowing up Iraqi pipe? Not at that point, but later on certainly. A new Muslim/infidel problem in Nigeria? Oh, yes. PDVSA's continuing degradation of their facilities? Absolutely. Indonesia becoming a net importer of crude and product during this period? Bet your life.
You post: The odd thing is, the price actually *dropped* during the immediate run-up to the Iraq invasion.
Odd? What's odd about it? I'll tell you what's odd: your use of the ''immediate'' period before the Iraqi campaign began on 2003-03-20. Here's the price history, day-by-day...but beginning just a little earlier than you prefer.
—— Detail history of May Crude Oil for the contract year 2003, from 01-02 to 04-01
date open high low close date open high low close 2002-12-31 27.80 28.55 27.70 28.50 2003-02-18 33.70 34.12 33.60 34.12 2003-01-02 28.95 29.08 28.75 28.84 2003-02-19 33.95 34.36 33.82 34.21 2003-01-03 29.05 29.62 28.95 29.62 2003-02-20 34.10 34.30 33.35 33.46 2003-01-06 29.50 29.50 28.85 28.99 2003-02-21 33.95 34.60 33.90 34.33 2003-01-07 28.70 28.85 28.50 28.73 2003-02-24 34.75 35.10 34.55 35.04 2003-01-08 28.20 28.52 28.00 28.52 2003-02-25 35.70 35.70 34.30 34.42 2003-01-09 28.90 29.38 28.75 29.38 2003-02-26 34.62 35.60 34.50 35.34 2003-01-10 29.30 29.40 28.85 29.04 2003-02-27 35.50 36.25 34.95 35.19 2003-01-13 28.85 29.70 28.85 29.64 2003-02-28 35.55 35.60 34.70 34.83 2003-01-14 30.00 30.05 29.73 29.97 2003-03-03 34.30 34.55 33.80 34.24 2003-01-15 30.30 30.55 30.07 30.48 2003-03-04 34.72 35.20 34.65 34.91 2003-01-16 30.80 31.05 30.65 30.82 2003-03-05 35.10 35.35 34.40 34.96 2003-01-17 30.70 31.15 30.40 30.95 2003-03-06 35.30 35.75 35.20 35.54 2003-01-21 30.70 31.10 30.48 30.96 2003-03-07 35.50 36.45 35.50 36.35 2003-01-22 31.00 31.01 30.60 30.77 2003-03-10 36.40 36.65 36.15 36.28 2003-01-23 30.80 30.95 30.25 30.46 2003-03-11 36.30 36.35 35.40 35.74 2003-01-24 30.47 31.20 30.37 31.12 2003-03-12 35.50 36.40 35.35 36.35 2003-01-27 31.00 31.05 30.45 30.49 2003-03-13 36.15 36.15 34.20 34.67 2003-01-28 30.90 31.00 30.70 30.94 2003-03-14 33.50 33.55 32.50 33.36 2003-01-29 30.90 31.90 30.85 31.72 2003-03-17 33.75 34.00 31.90 32.54 2003-01-30 31.70 32.05 31.70 31.95 2003-03-18 30.00 31.25 29.75 30.05 2003-01-31 31.65 32.05 31.55 31.80 2003-03-19 29.90 30.45 29.20 29.36 2003-02-03 31.50 31.70 31.25 31.34 2003-03-20 28.81 30.12 27.75 28.12 2003-02-04 31.55 32.10 31.50 32.04 2003-03-21 27.45 27.70 26.30 26.91 2003-02-05 32.15 32.65 31.75 32.37 2003-03-24 28.00 28.90 27.60 28.66 2003-02-06 32.75 32.75 32.35 32.40 2003-03-25 29.10 29.70 27.80 27.97 2003-02-07 32.70 33.20 32.60 33.13 2003-03-26 28.50 28.95 28.30 28.63 2003-02-10 33.10 33.10 32.45 32.60 2003-03-27 29.70 30.45 29.35 30.37 2003-02-11 32.68 33.35 32.65 33.27 2003-03-28 30.30 30.85 29.85 30.16 2003-02-12 33.42 33.55 32.85 33.35 2003-03-31 30.75 31.30 30.35 31.04 2003-02-13 33.70 33.95 33.55 33.92 2003-04-01 30.45 30.60 29.58 29.78 2003-02-14 33.95 34.10 33.50 34.04As is readily apparent from the table, crude ran up a tasty little 25% from the first of the year until it topped on March 10th, fully 10 days in front of the beginning of the Iraqi campaign. Conspiracy? Nothing of the sort.
Markets learn. The mkt participants were well aware of what happened to crude prices the last time a war kicked off in the Muddle East (no typo). The very day of Schwartzkopf's invasion, crude prices fell like a rock (and US bonds and 10-years, and Eurodollars, went crazy to the upside). Clearly, this was going to happen again to some extent when this war kicked off...but markets learn, ok? Markets are an anticipatory discounting mechanism of price...and the participants, knowing the past, were -- guess what? -- anticipating future developments by starting to sell crude ''early''.
And they were dead bang right, too.
There's not enough time to go through the rest of your post in detail, except to note that you are exactly right on one point: natural gas isn't crude. Natch prices have been drug by the heels by crude prices for about 2 years (hint: it's called the ''BTU spread''). This effect was disguised to a great extent by the one-off hurricane season in 2005, and the natgas bulls have in their turn been strung up by the heels by insisting on being long -- VERY long in Amaranth's case -- in what was and still is a dead bear mkt.
Your limericks are very good, and thank you for them. Your analysis of crude pricing, and energy pricing isn't nearly so good. Stick with the limericks.
FReegards!
Bloomberg has the prices right, of course. Your interpretation of them is, uh, dubious. No serious oil trader trades on a snapshot; serious trading is done on ''the strip'', that is, the series of spot plus futures contracts going out 6, 12, even 18 months.
You post: In January 2002, crude oil prices were running about $17 or $18 per barrel
Hard facts: here are the daily prices, straight from NYMEX, for both Feb and March WTI crude during Jan 2002
(pls note -- the Feb contract always expires before the end of Jan)
Detail history of Feb Crude Oil for the contract year 2002, from 01-02 to 02-01...and the March contract...
date open high low close date open high low close 2001-12-31 20.30 20.43 19.66 19.84 2002-01-11 20.35 20.38 19.60 19.68 2002-01-02 20.00 21.07 19.86 21.01 2002-01-14 19.35 19.45 18.65 18.89 2002-01-03 20.78 21.10 20.32 20.37 2002-01-15 18.90 19.43 18.85 18.90 2002-01-04 20.85 21.70 20.72 21.62 2002-01-16 18.39 18.99 18.30 18.86 2002-01-07 21.50 22.00 21.20 21.48 2002-01-17 19.10 19.15 17.85 17.97 2002-01-08 21.20 21.50 21.03 21.25 2002-01-18 18.20 18.50 17.90 18.00 2002-01-09 20.70 20.95 20.11 20.18 2002-01-22 18.35 18.65 18.00 18.34 2002-01-10 20.20 20.48 19.85 20.38
Detail history of Mar Crude Oil for the contract year 2002, from 01-02 to 02-01
date open high low close date open high low close
2001-12-31 20.70 20.70 19.95 20.11 2002-01-17 19.75 19.80 18.50 18.63
2002-01-02 20.25 21.30 20.15 21.23 2002-01-18 18.90 19.14 18.52 18.66
2002-01-03 21.05 21.30 20.60 20.64 2002-01-22 19.00 19.18 18.70 18.98
2002-01-04 21.20 21.99 21.08 21.91 2002-01-23 19.25 19.70 19.22 19.50
2002-01-07 21.82 22.30 21.50 21.78 2002-01-24 19.25 19.88 19.17 19.70
2002-01-08 21.53 21.80 21.35 21.57 2002-01-25 19.80 20.10 19.28 19.99
2002-01-09 20.95 21.30 20.55 20.65 2002-01-28 20.15 20.37 19.81 20.05
2002-01-10 20.65 20.98 20.35 20.90 2002-01-29 19.75 19.80 19.48 19.58
2002-01-11 20.90 20.90 20.20 20.32 2002-01-30 18.95 19.15 18.56 19.08
2002-01-14 20.00 20.05 19.30 19.41 2002-01-31 19.20 19.50 18.95 19.48
2002-01-15 19.48 19.85 19.38 19.44 2002-02-01 19.30 20.55 19.15 20.38
2002-01-16 18.96 19.60 18.94 19.48
$17-18? Don't think so. Effective price of crude (i.e. the front-month future) was over $19 for the bulk of the month.
Next: price in any market is not the be-all and end-all. Prices do not move for no reason, or because of ''Peak Oil'' or similar nonsense. They move because of the expectation of the mkt participants regarding future developments in the specified mkt.
The single most significant reason, 80-90% of the cause, for the price movement in crude from 2002 through April-May 2006 is this, and this only: from July 2002, the worldwide excess daily production capacity declined from 6.7 MM bbl-equivalents/day in July 2002 to -- are you ready? -- 0.6 MM bbl-equivalents/day in Jan 2006.
These figures are easily verified. I suggest you consult WTRG Economics, run by one of the finest energy mkt analysts in America (the world, for that matter -- the Russian Oil Ministry is a subscriber of his), Jim Williams, for complete details and analysis. Excess capacity has been the name of the game in crude pricing for years on end. The July 2002-Jan 2003 period is particularly interesting in this regard, btw: excess capacity dropped almost 2 MM bbl-equivalents/day in just 6 months. Why?
Demand increases? Sure, some. US ''recovery'' from a ''recession'' (hence anticipated reduced energy demand) that never happened? You bet. Supply uncertainty? No doubt. Idiots blowing up Iraqi pipe? Not at that point, but later on certainly. A new Muslim/infidel problem in Nigeria? Oh, yes. PDVSA's continuing degradation of their facilities? Absolutely. Indonesia becoming a net importer of crude and product during this period? Bet your life.
You post: The odd thing is, the price actually *dropped* during the immediate run-up to the Iraq invasion.
Odd? What's odd about it? I'll tell you what's odd: your use of the ''immediate'' period before the Iraqi campaign began on 2003-03-20. Here's the price history, day-by-day...but beginning just a little earlier than you prefer.
—— Detail history of May Crude Oil for the contract year 2003, from 01-02 to 04-01
date open high low close date open high low close 2002-12-31 27.80 28.55 27.70 28.50 2003-02-18 33.70 34.12 33.60 34.12 2003-01-02 28.95 29.08 28.75 28.84 2003-02-19 33.95 34.36 33.82 34.21 2003-01-03 29.05 29.62 28.95 29.62 2003-02-20 34.10 34.30 33.35 33.46 2003-01-06 29.50 29.50 28.85 28.99 2003-02-21 33.95 34.60 33.90 34.33 2003-01-07 28.70 28.85 28.50 28.73 2003-02-24 34.75 35.10 34.55 35.04 2003-01-08 28.20 28.52 28.00 28.52 2003-02-25 35.70 35.70 34.30 34.42 2003-01-09 28.90 29.38 28.75 29.38 2003-02-26 34.62 35.60 34.50 35.34 2003-01-10 29.30 29.40 28.85 29.04 2003-02-27 35.50 36.25 34.95 35.19 2003-01-13 28.85 29.70 28.85 29.64 2003-02-28 35.55 35.60 34.70 34.83 2003-01-14 30.00 30.05 29.73 29.97 2003-03-03 34.30 34.55 33.80 34.24 2003-01-15 30.30 30.55 30.07 30.48 2003-03-04 34.72 35.20 34.65 34.91 2003-01-16 30.80 31.05 30.65 30.82 2003-03-05 35.10 35.35 34.40 34.96 2003-01-17 30.70 31.15 30.40 30.95 2003-03-06 35.30 35.75 35.20 35.54 2003-01-21 30.70 31.10 30.48 30.96 2003-03-07 35.50 36.45 35.50 36.35 2003-01-22 31.00 31.01 30.60 30.77 2003-03-10 36.40 36.65 36.15 36.28 2003-01-23 30.80 30.95 30.25 30.46 2003-03-11 36.30 36.35 35.40 35.74 2003-01-24 30.47 31.20 30.37 31.12 2003-03-12 35.50 36.40 35.35 36.35 2003-01-27 31.00 31.05 30.45 30.49 2003-03-13 36.15 36.15 34.20 34.67 2003-01-28 30.90 31.00 30.70 30.94 2003-03-14 33.50 33.55 32.50 33.36 2003-01-29 30.90 31.90 30.85 31.72 2003-03-17 33.75 34.00 31.90 32.54 2003-01-30 31.70 32.05 31.70 31.95 2003-03-18 30.00 31.25 29.75 30.05 2003-01-31 31.65 32.05 31.55 31.80 2003-03-19 29.90 30.45 29.20 29.36 2003-02-03 31.50 31.70 31.25 31.34 2003-03-20 28.81 30.12 27.75 28.12 2003-02-04 31.55 32.10 31.50 32.04 2003-03-21 27.45 27.70 26.30 26.91 2003-02-05 32.15 32.65 31.75 32.37 2003-03-24 28.00 28.90 27.60 28.66 2003-02-06 32.75 32.75 32.35 32.40 2003-03-25 29.10 29.70 27.80 27.97 2003-02-07 32.70 33.20 32.60 33.13 2003-03-26 28.50 28.95 28.30 28.63 2003-02-10 33.10 33.10 32.45 32.60 2003-03-27 29.70 30.45 29.35 30.37 2003-02-11 32.68 33.35 32.65 33.27 2003-03-28 30.30 30.85 29.85 30.16 2003-02-12 33.42 33.55 32.85 33.35 2003-03-31 30.75 31.30 30.35 31.04 2003-02-13 33.70 33.95 33.55 33.92 2003-04-01 30.45 30.60 29.58 29.78 2003-02-14 33.95 34.10 33.50 34.04
As is readily apparent from the table, crude ran up a tasty little 25% from the first of the year until it topped on March 10th, fully 10 days in front of the beginning of the Iraqi campaign. Conspiracy? Nothing of the sort.
Markets learn. The mkt participants were well aware of what happened to crude prices the last time a war kicked off in the Muddle East (no typo). The very day of Schwartzkopf's invasion, crude prices fell like a rock (and US bonds and 10-years, and Eurodollars, went crazy to the upside). Clearly, this was going to happen again to some extent when this war kicked off...but markets learn, ok? Markets are an anticipatory discounting mechanism of price...and the participants, knowing the past, were -- guess what? -- anticipating future developments by starting to sell crude ''early''.
And they were dead bang right, too.
There's not enough time to go through the rest of your post in detail, except to note that you are exactly right on one point: natural gas isn't crude. Natch prices have been drug by the heels by crude prices for about 2 years (hint: it's called the ''BTU spread''). This effect was disguised to a great extent by the one-off hurricane season in 2005, and the natgas bulls have in their turn been strung up by the heels by insisting on being long -- VERY long in Amaranth's case -- in what was and still is a dead bear mkt.
Your limericks are very good, and thank you for them. Your analysis of crude pricing, and energy pricing isn't nearly so good. Stick with the limericks.
FReegards!
Thank you, and my apologies for being clumsy.