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Analogs are a very reasonable way of looking at this.
The cycle being observed is a bit of a classic oscillation system -- where the Peaks and Valleys feed back into themselves to run to a Max and Min cut-off point.
By the true math of the curve(s), there is no Max and Min and the Peaks and Valleys keep building Higher and Lower, until the system breaks apart. Since we have limits -- (e.g. Everyone has to stop pumping at some low point above zero, and no one can afford some $XX a gallon fuel) -- our real-world self limits before it gets there.
Generally systems that exhibit this create cycles that run closer and closer together.
Iran delivered 7.1 mln barrels of crude at the bottom last week and is poised to do the same around the end of this month. It'll probably be a much smaller shipment as they've had the tankers waiting for the lifting of the embargo for some time.
Besides the MLP's which have been rallying on the KMI news, the biggest advancers in energy have by far been the shallow water drillers: HP, NBR, and PTEN. All are 30-40 percent higher.
- Saudi freezing production to keep the price high.
- Warren Buffet heavily investing on oil.
Looks like oil is coming back to $40!
Warren Buffett is NOT heavily investing in oil. KMI is a storage/infrastructure/pipeline play. phillips 66 is a refiner. If anything, I think he's betting that oil storage will soon get very expensive as the oil glut worsens and we run out of places to put it. Buffett actually does not like betting directly on commodities. He most likely did not even make this recent KMI purchase. Someone underneath him did.
Second thing, Saudi Arabia is near max production levels. Iran is not planning on freezing their output.
Last thing for the oil ETF players, WTI is already near $33 in the April contract which will be trading next week. The contango situation is the worst I've ever seen which could rip those ETFs to shreds next week...
If Cushing is at 75 percent capacity, they probably won't fill up this year. It also depends on how much Cushing capacity expands and where they cut off storage before reaching 100%.
There are also reports of S. American and African oil being turned away from storage facilities in the Caribbean and being dumped on the market below cost.
In all likelihood, oil and oil stocks will rally well before OPEC production cuts as in 2012 because the supply-demand imbalance will have been largely corrected by then. The Saudi production cuts didn't come till six months after the low.
Oil price predictions are a crapshot. Nobody knows if the last low holds for a better rally or if it goes down even further. Seasonals are becoming bullish.
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