Oil prices

The "io-io" business is very well. After the Iran hostage's crisis had been solved, the tide will move down.

But, some clues for the next months:

• In its weekly inventory report, the Energy Information Administration said oil and gas refineries ran at 90.4 percent capacity, up from 88.4 percent a week ago.
• Refineries had suffered a string of accidents and other unexpected shut downs in recent weeks, which along with strong gasoline demand and a draining of winter blends had pummeled gasoline stockpiles and helped push retail prices to nearly $3 a barrel.
• EIA said gasoline demand averaged 9.4 million barrels per day over the last four weeks, up 2.5 percent from the same period last year. The average rate of demand increase is about 1.5 percent.

Let's bet that we will have a hot summer!

Note: yellow colour is the oil company's index; blue colour is the Nymex daily.

The io-io business

In a week, it is a question of US inventories: oil is up.

Next week, it is a question of a riot in Nigeria: oil is up.

In another week, it is a hurricane in Caribbean: oil is up.

Last week, Iranians put Brits back home: oil is down!

What a huge business, for traders. And for owners!

What about the consumers!

Today, we see this: Crude oil plunged $2.77 a barrel in New York, the biggest decline in three months, on speculation that an Energy Department report will show U.S. inventories jumped last week as refiners unexpectedly shut units.

Bear

"Financial stocks are not performing well and this is usually a bad indicator for the market". Marc Faber has said that. And when we have this kind of figures: A measure of financial shares has retreated 5.9 percent since Feb. 20. We are in a bear market.

Rising oil prices, real estate burst and "war on terror" never ending story, we will se S&P in a bad shape.

Oil & Gold

Have you ever read “The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century” from James Howard Kunstler?

Maybe the book is too negative about the future.

What do you think about it?

And, how about "Beyond Oil: The View from Hubbert's Peak" , from Kenneth S. Deffeyes?

His main concern is not our long-term adaptation to a world beyond oil but our immediate future: “Through our inattention, we have wasted the years that we might have used to prepare for lessened oil supplies. The next ten years are critical.”

Think about it!

Now you may understand this:

What’s coming next?

I'm pessimistic about future and optimistic about Gold.

Oil: let's go again!

Oil gained the most in 16 weeks yesterday and gasoline jumped 5.6 percent after a report showed U.S. consumer confidence neared a five-month high.

Are we in the up-side of the cycle, again? After touching 80 dollars a barrel, the down-side came until 50 dollars. Today we have witnessed to a significant up! Is the “ethanol Bush Plan” a clue to a new skyrocket oil price?

Trends

President Bush is not in good shape. Even tough, Dems will give him enough space to survive, until Ms. Clinton or Mr. Mccain will arrive!

For us, investors, the speech of yesterday gave us some clues to follow:

• Ethanol producers and health care service providers are among the potential corporate beneficiaries of policies proposed by President Bush, while domestic automakers and oil companies could get slightly stung.

Our main conclusions are:

1. If the bet is to produce ethanol, it is because oil will be a rare energy.....
2. If oil barrels will be fewer, oil barrel will be expensive.
3. Ethanol is not viable, in economic terms, at a level of 60 dollars a barrel of oil, which means....

Oil political moves

After the high level from mid 2006, right now we are witnessing the fall:

• U.S. light crude for February delivery tumbled $2.24 to $50.75 a barrel after touching $50.93, the lowest since May 2005, in earlier New York Mercantile Exchange trading. In London, Brent futures shed 82 cents to $52.30.

We are close to a level of oil price, to support an economy rebound. Or is it this oil price level a prediction of an economic downturn?

Oil: after the boom

In last 5 days, the oil and gas industry index loosed 5%. Think about 5% of Chevron, Exxon or Shell. It is too much.

We think oil will continue to be the major energy in next decades, no matter the global warm will attack ourselves. Some of the mentioned behemoth will benefit from other new energies, even if they need to buy new energy companies.

Learn to wait

We will foresee a fine 2007 for stocks. But, things are grey, for the moment. Look:

• copper, which has tumbled 36 percent since reaching a high in May.
• Copper futures for March delivery were at $2.60 a pound on the Comex division of the New York Mercantile Exchange. A close at that price would mark a weekly loss of 9.4 percent, the most since July 21.
• Crude oil was also poised for its steepest weekly decline in New York since April 2005, as warm U.S. weather reduced heating demand. Crude oil for February delivery last traded at $55.22 a barrel on the New York Mercantile Exchange. Oil has fallen 9.6 percent this week.
• Commodity stocks are the most exposed to signs of an economic slowdown.

We are experiencing a typical slowdown. Wait a little bit, and the markets will comeback. Unless, The Congress and The White House will come to a battle....

And the winner is....

The oil still is in command. We ear about new energies, from air, from sea, from lithium batteries, but oil still is the most affordable and reliable commodity, in energy field.

We are, among a crowded legion of people, believers in a kind of quest for oil, in a typical Hollywood contest, all over the world. We only see news from certain countries, because of oil or natural gas, like Angola, Nigeria, Turkmenistan, Dubai or Brunei.

We read this: "I like energy and materials because emerging economies like China and India just have such demand to grow, and they need materials and energy to do it,".

Even, if US will stay in sidelines, in 2007, believe that this kind of news, will only help energy sector stocks:

• At least 200 people died today in a large fire after a burst fuel pipeline exploded in Nigeria's largest city, Lagos.

Of course, if you buy Total, Exxon-Mobil or BP, probably you will not have a huge return, but you have probably a safe and nice return.

Energy: a bounce back

Yesterday, the "major oil and gas index" have increased 1,52%. OPEC is trying to reduce production. New energies are not yet available. Exxon-Mobil says that oil will continue to be the major energy, even 20 years from now.

Look to: Conoco-Phillips, Petrochina (where Buffett has a stake), Total and ENI.

Like it or not, we will continue to need oil!

A new light for oil

Big oil company ExxonMobil is betting on oil, again:

• ExxonMobil delivered its annual long term energy forecast Tuesday, saying that it expects the world will use 60% more energy in 2030 than in did in 2000.
• But despite this spike in demand, the oil giant does not expect to see any increase in the use of renewable energy sources from 2006 levels.

Is it a big trap, the investments in renewable energy? Or is it, like a fashion?

We believe in a much more non-oil dependent economy. We will see it.

Dollar hits 20-month low...

The US dollar is exceeding even what we might think of this phase of the Iraq War, the crude oil price (above US$63/barrel) and twin deficits: 1 Euro = 1.337 USD... Similar, but not quite, as the crisis of the Vietnam War and oil price spikes, the dollar depreciation continues: a known strategy of softening the economic and financial effects of war and oil price increase.

Crude oil prices - 1947-2006

Euro - US Dollar exchange rates prices - 1999-2006

There can be no hope of short-term inversion of this scenario until the pull out of american troops from Iraq occur and competitive forms of automotive energy becomes viable. Even that doesn't seem to solve the problem. With US army out, Iraq War, then with its neighbours (Syria and Iran and Saudi Arabia) involved, will claim huge sums of money and this very III World War with the islamic fundamentalism, that we suffer, will continue. The world is dangerous and so the markets will maintain its present turbulence and risk.