Oil..........gone.

[Packersoldkidney]

Putting on my contrarian hat - I think the current oil price is made up of too much of a speculative side, and the northern countries are coming out of their high energy needs time, namely their winter. Further, the market is becoming innured to the constant stream of terrorist attacks on oil instillations in the Mid east, and I think there is now relative stability in these areas. Further, inventory and infrastructure are starting to be raised to a level that will feather any of the possible short-term shocks to oil and its price. Thus I think the oil price is due for a correction downwards. I don't think this correction will be long term, obviously, but I think that once oil goes down it will be down for a fair time.

Now that I have pronounced this to fellow share-traders, I fully expect the price of oil to rise 10 dollars US on Monday, and thus I will end up with egg all over my mug.

Any opinions to the contrary welcomed. Also, if anyone agrees with me they can put up what sectors will be boosted by this outcome, as the ones who will be effected most is pretty obvious.

[Winston001]

I'm having a think about your thesis - but my brain hurts.

Anyway, having recently taken a notional bath on 5000 AWE at 1.96, went down to 1.54, now at 1.75, I'm rethinking this whole oil thing. Isn't the best place to invest in the companies which actually sell the stuff? Rather than the drillers?

But I know virtually nothing about the oil industry. I imagine Shell, Mobil etc must trade almost as precisely as foreign currency. There must be other smaller oil businesses - like NZR, which are worth looking at. Any thoughts?

[R2]

In my view Saudi crude supply will diminish, South American supply will threaten to do so in the US, China will continue to demand more, so $80/BBL is possible backed not by 70's supply curtailment but by demand to pay more.

Therefore profits of marketing arms will be poor as they can never increase commercial/retail prices fast enough to maintain profitability in a rapidly increasing $/bbl market even if the public moan like hell about pump-price increases; it is when the price is falling that marketing makes profits. In the current phase the role of Marketing is to act as an outlet for Refineries which are high margin businesses currently.

So, Refinery & Current Reserves will be the no-brainer places to stay and Exploration will be very tradable. One point worth noting is that the market treats intergated oils' better than pure play e.g. exploration only. I guess because there is less risk wherever the cycle is at there is always a profitable part of the mix.

Building on the question of investment opportunities, can a refinery expert shed light on product mix capacity, i.e. if China needs disporportionatley more of the heavy end to build roads and run trucks - what will be the effect on global avgas prices - I am sensing a reversal in airline profitability particularly in the cost-price segment - right ? or wrong ? - My indirect pick for NZX is Infratil

[morpork]

Disc; conspiracy theorist
Surely, despite the "disruption" in Iraq , the capabilities to distribute this pool are still available , or is it invite only ?

[winner69]

quote:Originally posted by Packersoldkidney

Putting on my contrarian hat - I think the current oil price is made up of too much of a speculative side, and the northern countries are coming out of their high energy needs time, namely their winter.

Saw this chart on chartofthe day.com a few weeks ago that showed the price of oil generally goes up from April-September .... reason given more demand as more cars go further distances in the US summer (obviously more oil used than keeping warm during the winter)

[Packersoldkidney]

Heard this bloke on the teev, some oil expert, who said if you cut out all the gas guzzling models of cars in the world you'd cut the world's oil usage by.......less than half a percent!

In summer the oil is mainly used up and down the Yangtze for factories to get their power when they have power failures.


This oil expert said if you seriously wanted to cut oil usage, just shut down the internet! He said the power that was using was astronomical - reckons you'd cut oil usage by 25-30% right of the bat!

Don't tell George Bush. I think it might be an idea he might like! Don't cut of the internet, George! Please, anything but that!