Back in March, I posted some info on Crude passing $105 and hitting $107 for the first time: Crude Oil = $107.
Its a round trip: We broke below $105, trading as low as $104.23.
CRUDE OIL October 2008 (NYMEX)
Oil < $105
September 9, 2008 9:00am by Barry Ritholtz
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Pending Home Sales Index Fall 6.8%
from CSFB this morn..
Monthly Survey of Real Estate
Agents
CHANNEL CHECK
Traffic Slips Further in August; Buyers
Focused on Foreclosures and Bargains
■
August brings another month of weak traffic; losing some traction in
hard-hit markets. Our Monthly Survey of Real Estate Agents showed a
modest decline in August, with agents continuing to cite buyer hesitation
about falling home prices and difficulty obtaining a mortgage as the key
challenges. We did see changes among markets, though, as several
markets that had seen better traffic in recent months (based on the better
affordability from lower home prices) experienced significantly weaker traffic
in August. Pricing continued its slide, with our price index falling to 20, from
21 (readings below 50 point to sequentially lower prices).
■
Traffic off slightly overall; earlier bright spots dimming. Our traffic index
fell to 25.9, down from 27.4 in July with any reading below 50 pointing to
traffic below expectations. Unfortunately, markets such as Ft Myers, Las
Vegas, Sacramento, and Washington, D.C. (all of which had seen better
traffic in recent months) all saw traffic drop by over 10 points in August. Only
the Inland Empire (Riverside-San Bernardino, CA) showed continued
improvement. We did see better trends in both Miami and San Diego with
slightly better traffic in Houston and Phoenix.
■
On positive side, inventory levels closer to stabilizing. Our traffic index
increased to 38 in August, up from 35 in July (with a level of 50 indicating flat
inventories sequentially with levels above 50 pointing to falling inventory
levels). Denver, Las Vegas, Minneapolis, Orlando, Phoenix, San Francisco,
Sarasota, and Tucson were among the markets showing flat or falling
inventory levels in August. We continue to believe that declining inventory
levels are necessary for home price stabilization.
As it now seems clear that the run to $140 was a speculative blowup like so many assets we have seen [at least for the near term], what do people think is a reasonable price range where crude will stabilize?
No chartists or tea leaves, just decent fundamental guesses…
i was wondering how high people thought the price of oil would go after the elections?
Corrolate the fall off in Crude Oil with the environmental policies that Chinese enacted ahead of the Olympic Games. They stopped consuming a tremndous amount of energy and inventories of raw materials began piling up until they has a large surplus of metals and what not.
In the past 2 weeks China has chartered over 65 VLCC crude oil tankers at very low rates and very low POO. They have locked in quite a bit of future production at these rates ahead of refineries in the US ramping up for Heating Oil season.
My guess is that oil will find a bottom at 100-105 and will run up this fall/winter
I think lower, there just isn’t any juice in our or many other world economies right now…home sales down again more than 3 per cent today, lower than the MSM forecast. Nobody wants to sound as cantankerous as Jim Rogers, we all want stocks and the economy to rally, but this was a tipping point and the easy credit days, it seems to me, haven’t nearly been purged from our economic system.
Pass the castor oil…and let’s get it over with.
Bruce in Tennessee
Barry, I made my small contribution today by firing an email to David@SeekingAlpha.com.
Keep up the good work!
Back in the 1980s when we had a similar commodity blow up in the petroleum markets, the prices soon collapsed to ridiculously low levels. The prices for a barrel of crude in today’s dollars are shown here http://zfacts.com/p/196.html. That low point in 1986-1987 in then current dollars was something like $9 per barrel, far below any replacement cost anywhere but in the most easily tapped oil province. We also didn’t have the BRICs charging forward and increasing their consumption of petroleum. It would appear that the price for crude should fall to somewhere in the $80-$90 per barrel range at this time, which I suspect would suit the Saudis just fine. It’s high enough to make a good living and low enough to discourage any major alternative fuel programs. Whether Riyadh can convince Moscow, Tehran, or Caracas to accept that is anybody’s guess.
And friends, taxes must go up next year. Must. No matter who is in.
Last year’s budget deficit: 161 billion
This year’s budget deficit: 407 billion
http://money.cnn.com/2008/09/09/news/economy/cbo_budget_update/index.htm?postversion=2008090910
With the next fiscal year’s deficit even greater..I mean we just absorbed the GSE’s and this doesn’t include Washington Mutual, National City, Ford, GM, etc. etc.
If we don’t have massively higher taxes…the emperor will never get clothes.
Bruce in Tennessee
I say $85/bbl is the floor.
Fascinating…
Meanwhile, here in northern New Mexico, you’d never know that the price of oil has fallen by over 40 percent, as gasoline prices are down only maybe a nickel from their recent highs.
The efficient markets at play… this yo-yo move is an indication of just how fundamentally broken/corrupt the ‘free markets’ are.
Parallel to this the USD has entered a massive recovery. Henn and egg of who is pushing who, however I find it interesting as this seems to be some kind of black swan to just about anyone who has thought himself on the “right side” fundamentally for the last, oh, 7+ years.
Barry, I was wondering: Would you consider making a post at some point with a bit more of your personal view about the USD in general? (USDX, EUR vs USD perhaps)
Would love to hear your version. There’s already enough rabid USD haters out there, so I’m curious.
(If you’re in a boat, and everyone moves to one side, what happens? Exactly, it tips over.)
Think oil is going back to maybe 80.
Have a question for the community, including BR: I have some pretty substantial profits in a %age sense in DUG and SMN even though I’m small potatoes. I’ve been trying to figure out how to lock in the profits w/o selling since I think they haven’t run their courses. I have never tried this before.
I spent a few hundred buying calls on the corresponding long ETF for DUG, IYE, but this seems a somewhat inefficient way to do it and the options markets on these ETF’s are pretty thin and there doesn’t seem much opportunity to roll them along with the upward movement of my ETF’s.
If I’m right, the options go to zero, but I suppose that is the nature of insurance. Does anyone have any better strategies?
Links to sites are welcome if Barry doesn’t mind.
Thanks.
BTW, I sent my email to SA, also.
Mike,
http://www.888options.com/
http://www.888options.com/advanced/default.jsp
I’d start with those links above.
though, I don’t this: “figure out how to lock in the profits w/o selling” can be done. If you’re open to the upside, you’re open to, at least, some downside.
you should be looking for options to amplify trends, or reduce risks.
Bruce,
“This year’s budget deficit: 407 billion”
Add in several hundred billion masked by the trust fund surpluses, several hundred billion in off-budget spending for Iraq & Afghanistan, and it’s a trillion dollar deficit.
.
Mark:
Thanks. Will check them out. I understand there is always some downside if you have an open position, just trying to reduce the risk of a big loss from a black swan like the IDF:)
Hello,
I saw that you posted crude oil prices and thought you might be interested to take a look at Brent Spot, West Texas Intermediate prices as well. (http://fxtradeinfocenter.oanda.com/fxeconostats/index.shtml?country=Global&category=Commodities)
You can find more commodities by visiting fxeconostats.com.
This chart smells of demand destruction.
“As it now seems clear that the run to $140 was a speculative blowup like so many assets we have seen [at least for the near term], what do people think is a reasonable price range where crude will stabilize?”
I disagree.
It took Oil going to 140 to get people to stop driving SUVs to the corner grocery, factories/power plants to go coal/nat gas, to stop shipping next day air and open some factories closer to assembly/customer.
Oil will continue to fall until it becomes cost effective enough to flip the switch back the other way or OPEC cuts production. I think they like Oil at 100 plus and will work to keep it there.
Isn’t symmetry a beautiful thing? Clearly this was a bubble, and some of us called it at the time. As Barry said, high prices are invariably the cure for high prices.
Bubbles have a way of retrenching about 50%. It’s uncanny. So that would be in the $70s for oil.
Of course there will be rallies along the way and we are surely due for one soon, now that the $ rally is getting a little bit tired here and we are sitting close to $100/barrel.
Mike in NOLa, welcome back and hope the storms passed by without much damage.
CFTC needs its head drilled IMO.
leftback:
Actually, New Orleans had very little damage. My house only lost power for a few hours. I haven’t gotten back yet, but my daughter tells me it just a lot of leaves and branches to clean up.
The carnage was actually in central La. Haven’t checked today, but there were still several hundred thousand without power yesterday. It was pretty bad in Lafayette and Baton Rouge. Lots of trees on houses.
So my SRS was up a lot today, but still remains under water :)
I need to lighten up some on these short etf’s. 6% up on my whole account in one day is a little scary. Think I have too much leverage.