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Speculators, leverage and dollar technicals are the only things supporting oil. Demand fundamentals are awful.
http://online.wsj.com/article/BT-CO-20090603-709371.html
06/03 13:58 CDT Energy prices slump on surplus of oil in storage
Energy prices slump on surplus of oil in storage
By DIRK LAMMERS
AP Energy Writer
SIOUX FALLS, S.D. (AP) -- Oil prices took a dive Wednesday after a government
report on unused crude in storage suggested the monthlong rally in energy
prices may have been premature.
After rising for seven straight days and threatening to break the $70 barrier,
benchmark crude for July delivery tumbled 3.5 percent, or $2.43, to $66.12 a
barrel on the New York Mercantile Exchange.
The catalyst was a report from the Energy Department's Energy Information
Administration, which said crude in storage rose by nearly 3 million barrels,
which is about 20 percent above year-ago levels.
Even though most analysts say crude is still overpriced, the market has created
its own momentum with an enormous amount of money fleeing equity and currency
markets.
The crude storage report Wednesday was simply the third part of a "triple
whammy" said Jim Ritterbusch, president of energy consultancy Ritterbusch and
Associates.
Crude and gasoline prices tumbled through most of the year as storage
facilities filled up. Heavy industry and individual consumers had pulled back
sharply on energy spending. A rebound for energy prices began in early May as
the dollar began to weaken. Oil is essentially cheaper when the dollar falls
because crude is priced in the U.S. currency.
Wednesday's report sent a jolt through the market.
Yet with so much money flowing into the market, prices are likely to hold close
to where they are, until market fundamentals can take hold. That could happen
as early as this summer, said oil analyst and trader Stephen Schork.
There are few signs that energy demand has rebounded strongly, despite some
glimmers of optimism from the manufacturing sectors in Europe, China and the
United States. Heavy industry is a big energy consumer, particularly of natural
gas.
Natural gas futures plunged nearly 9 percent Wednesday. Earlier this week,
there was a rush of money into natural gas, which looked like a bargain next to
oil.
That optimism, at least on Wednesday, appeared misplaced.
"It seems like the prices have gotten a little ahead of themselves," said Chip
Hodge, managing director of MFC Global Investment Management in Boston.
The run-up has been felt at the pump, where prices rose by more than 2 cents
overnight to hit $2.548, according to auto club AAA, Wright Express and Oil
Price Information Service. That's more than 11 cents higher than last week and
well above the $2.07 that gas cost just a month ago.
There is a danger that high energy prices could slow any economic recovery,
beginning on the level of the individual consumer who must fill up the gas tank.
Hodge said he doesn't think oil prices will rise above $70 per barrel until
there's some kind of uptick in demand.
In other Nymex trading, gasoline for June delivery slipped 5.1 cents to $1.8743
a gallon and heating oil fell by 7.7 cents to $1.7208 a gallon. Natural gas for
June delivery tumbled 38.6 cents to $3.734 per 1,000 cubic feet.
In London, Brent prices lost $2.84 to $65.33 a barrel on the ICE Futures
exchange.
___
Associated Press Writers Alex Kennedy in Singapore and George Jahn in Vienna
contributed to this report.
[Related Stories]
Gasoline sales were quite low and fell like a brick for Memorial day weekend. Much lower than market expectations and bad vs any prior year period. Basically the consumer has no intention of paying for market prices that are artificial. We may get a big inventory build in gas next week (because of the ramp up in refinery utilization last week) and that would also mean refineriess will be buying less oil. I'd get out of RBOB in a hurry if I were a speculator. I think the only time you'd see gas spike high this summer is if a major hurricane hits the central to western gulf and that would be a temporary spike and probably a regional spike as well.
Good on Edmunds for illustrating just how much the HS250 looks like a Corolla. The powertrain is nothing new at all, it's basically just a cut and paste from the Camry hybrid.
I'm not sure why Lexus even bothered with this. Why not just make an ES300h?
Ford has done very well for me. I hedged my bets a bit with the money I took out when the stock hit $4, but I've already moved that money on and am not concerned about it. The rest I'm keeping in, as its already given me a 4 - 1 return. I'm taking the wife to Lake Maggiore in August - on Ford. :shades:
"Sorry Charlie"... but I've got to give you the other point of view here. Consumer sales of gasoline might have been sluggish over Memorial Day weekend, but prices have continued to go up. Here is a great website showing the history of prices and links to the energy price outlook. You will see that the current price of gasoline is considerably higher than it was at those recent lows, and did indeed almost double in price. You will also see that there is a lot more upside potential, once we get past the economic slowdown and the current low demand.
As the linked article (energy outlook link) on the webpage points out and agrees with me, we will likely stay on this current high side for the remainder of the year, and then go even higher next year as the economy turns around and the inventories work themselves through the system.
BTW, this website represents the official energy statistics of the U.S. government... and those statistics agree with my position and my outlook.
link title
TM
Can't say I'm surprised. The IS is really the one bright spot for Lexus, and that's only because the old one was a total market failure. Other than that, their lineup is rapidly aging and bland. Lexus no longer leads in technology - heck most of their cars still come with cassette decks!
Being stuck with body-on-frame trucks is really starting to bite them, I think. And it looks like the GS has followed its predecessors down the path to irrelevance in only a few years, despite Lexus saying that wasn't going to happen again.
The threat from Infiniti and the Germans is significant. I would be very concerned if I were a Lexus exec.
Check out this page. $58/bbl in 2010 from your site. Basically, it is revising downward each month based on the demand destruction and inventory glut.
EIS - Short Term Outlook
Prices. WTI crude oil prices, which averaged $99.57 per barrel in 2008 (Crude Oil Prices), are projected to average $52 per barrel in 2009 and $58 per barrel in 2010. These prices are about $1 per barrel and $5 per barrel, respectively, below those projected in last month’s Outlook. However, a stronger-than-expected economic recovery or lower non-OPEC production (due to low oil prices, financial market constraints, or more aggressive action to cut production by OPEC countries) could lead to a faster and stronger rise in oil prices. As always, energy price forecasts are highly uncertain. Both recent experience and the sizable participation in near-term crude oil futures options contracts at strike prices that are significantly different from current futures market prices clearly demonstrate that crude oil prices can move within a wide range in a relatively short period.
EIA projects that regular-grade motor gasoline retail prices, which averaged $3.26 per gallon in 2008, will average $2.12 per gallon this year, down 4 cents per gallon from last month’s Outlook projection. Regular-grade gasoline retail prices are projected to rise to $2.30 per gallon in 2010, 12 cents lower than projected in the previous Outlook. These projections indicate that total gasoline margins, which had declined last year as a result of weakness in gasoline consumption and growth in ethanol supplies, are expected to stabilize, albeit at low levels, as consumption slowly recovers and increases in ethanol supplies moderate.
Diesel fuel retail prices, which averaged $3.80 per gallon in 2008, are projected to average $2.26 per gallon in 2009, down 4 cents per gallon from the previous Outlook. Diesel fuel retail prices are projected to average $2.48 per gallon in 2010, down 21 cents per gallon from the previous Outlook.
Your position is slipping!
Regards,
OW
I (and obviously Len and Circle) believe that it has gone up on over speculation and exuberance to make some easy money. It has been a sort of a mini bubble that I believe has started to burst today. The supplies are huge.
In any case, the "battle lines" are drawn or as Dylan wrote years ago:
The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is rapidly fadin'
And the first one now
Will later be last
For the times they are a-changin'.
We will see how this plays out. I believe we have just seen the high for quite a long time just as I believed we saw the low in the stock market several months ago and started buying stocks. One of us is going to be wrong and we will have to revisit this argument a few months from now if not a lot sooner.
BMW, which hasn’t held the No.1 title in the U.S. since 1997, also beat German rival Mercedes-Benz. While BMW sales are also down 30.5 percent, it sold more units than Lexus coming in with a total of 76,819 through the month of May. Lexus sold 73,186.
Nonetheless, luxury automakers still have many months to go before the year is over. Lexus has just rolled out its new 2010 RX 350 SUV and is also looking to introduce its first dedicated hybrid model, the HS 250h, by the end of the summer.
Oh, and Volkswagen-owned Bentley and Daimler’s Maybach - your uber-luxury brands - are down 60 percent so far this year. Maybach sold only three vehicles in May.
Such a beautiful place - one of my favorites. We stayed in Stresa.
We'll go back some day, but our Ford investment probably won't pay for that trip. We bought our shares in '99 & paid absolute top dollar.
Thank God for that. My wife is addicted to audio books that she borrows from our public library, which has only just begun migrating its substantial collection from cassette tapes to CDs & MP3s.
Note to Lexus: please don't drop the cassette decks from your cars until at least 2025. It'll take that long for our library to go completely digital.
To be very clear here... Len was already wrong on the first round, when he said gasoline prices would stay low. Since that time, prices of gasoline have gone up almost 100%, or essentially doubled. It doesn't matter that it was speculation that drove up the prices... it still happened... they still went up more than he expected. I think Len has posted his acknowledgement of this already, but has now gone further with some new predictions... which I also disagree with.
Specifically, moving forward, Len and OW (and you, Charlie) have predicted that prices are going to "tank"... and that we should "look out below". Len said this would happen when the Dow hit about 10,000... which he also said would happen later this year. That's a lot of predicting.
Apparently, I started this whole mess (LOL) when I posted that gasoline prices were getting higher and would stay relatively high and even go higher. Now, since I first posted that, gasoline prices have risen significantly, so I am already giving myself credit for being right on that one. We don't have to wait to see.
Going forward, now that we have already seen the price rises that I warned of, I maintain that prices will remain high, with fluctuations, of course. I do not believe that prices will "tank". And, if they were to drop in any large way, I am convinced that they would quickly work their way back up anyway, so any short-term drop doesn't count here. If you guys get a short-term drop, you won't convince me that you were right. If, however, the price of gasoline "tanks", and stays low for an extended period of time, like six months or more, than I would agree that you are right.
Again, to be perfectly clear, gasoline prices have risen just like I warned, and I am suggesting that they will stay on the high side, with some short-term fluctuations. Over the long-term, I see them maintaining high prices on average. Also, I expect the demand will increase once the economy starts to heat up again, putting enough pressure to maintain prices.
TM
I'm actually a big audio book fan myself. It's quite easy to migrate from cassette to digital. Just connect a tape player to a PC (via headphone or line-out), and use a program like Audacity to record to a digital file, and then either burn it to a CD or compress it to an mp3. Take that, Kindle!
Only stipulation is that prices need to be sustained for a while, and not a blip.
We've now injected some new excitement into the forum. Cars have been so boring lately... LOL. I hope the new model year brings about some interesting vehicles and we start hearing about some cool cars to get excited about. Tesla news just isn't enough anymore.
TM
I don't get it...
Regards,
OW
Another big thing supporting your estimate is the lack of transparency in the energy industry. That helped prices spike to $147/bbl. for oil and there are many out there predicting $300/bbl in a few years.
I just think the demand is not there globaly and the prices are inflated since the old system of hedging is still in play. If you are 100% correct, however, heating up ANY economy will take quite along time in relation to the velocity of the price increase.
How 'bout that new 5'er?
Regards,
OW
No logic, just arrogance. Simple as that. :lemon:
Regards,
OW
Cadillac
HUMMER
Volvo
Buick
Saab
Oldsmobile
Chevrolet
Pontiac
GMC
Saturn
Geo
I know they used to have a performance tilt, but some of the boats that they built back in the '60s were a sight to behold. I went to a formal dance in a rented Bonneville in 1967 that seemed to be to be bigger than any Chevy built then or since.
Cadillac
HUMMER
Volvo
Buick
Saab
Oldsmobile
Chevrolet
Pontiac
GMC
Saturn
Geo
Hmm.... I didn't realize Volvo was part of GM.
Had the Dow doubled after hitting its low, we'd have been all wishing we put every last dollar in it at the low. But when commodity prices have been rising, and energy prices have been on a rampage, perhaps we should have considered that some of us missed the boat. Now it's too late. Going forward the prices will fluctuate, but as I've said, I don't agree that they will "tank". Let me point out that we do indeed agree that the demand is not there yet. But, I don't see that as causing a collapse in prices as you guys do. From my perspective, it just means that when the economy heats up, the demand will also heat up and it will indeed support these higher energy prices from a more fundamental perspective as well as the investment perspective that we've been witnessing so far. Anyway, 'nuff said on all of this. Let's just see what happens.
Back to cars... yes, the new BMW 5er looks terriric from that pic! I really like what I see there. Impressive, IMO. Thanks for posting that pic.
TM
I'd have also eliminated Buick from GM. Maybe have kept Saturn, and re-worked the line-up, not sure. But definitely Chevrolet, Cadillac and GMC are the real keepers, IMO.
I would eliminate Mercury if I were running Ford. I would keep Lincoln, but dramatically improve its model line-up. Cadillac really kicks Lincoln's butt, and there should be more competition there from Lincoln, IMO.
Make every model meaningful and excellent in its class. Put the future in the cars sooner, rather than later.
TM
It's not. I didn't mean to put Volvo. Sorry folks!
The way that the crude oil market is soaring today (gained back all of yesterday's losses and then some), this contest might be over before it started :mad: . But obviously, one day's action does not tell us where the market will be several months from now
The oil market was set for a major selloff today. Shorts were loading up because what was going on in this market was a short players dream. Then Goldamn (the $150-200 oil people from last year) comes out with a virtually empty report saying oil hits $85 by year end - supposedly on fundamentals plus they put out a lower job loss outlook to buttress it. So what happens and I'll bet you millions on this. Goldman associated hedge funds start buying oil ahead of and behind the report, hedge funds shorts had to scramble as they got squeezed and you get a major bounce off of some of the most bearish oil news seen during an inexpicable rally that the bearish news was about to terminate. Just plain amazing and all easily manipulated thanks to 20:1 leverage ratios and one report that is as hollow as can be. This is the most manipulated market I've ever seen. Give it time because just like last year the higher it goes the bigger the fall is going to be. Obama needs to put in the same 2:1 leverage ratios as you have in stocks and this type of manipulation gets lessened severely.
GM's brand structure was built in the Al Sloan days, and it has been untenable since the end of the '60s. The fact that GM is just figuring this stuff out now is horrifying. I mean seriously, what has management been doing for the last fifteen years? Nothing? Why weren't these questions asked? Why did Lutz essentially have to apologize for "misspeaking" when he called Buick and Pontiac "damaged brands" several years ago?
Rick Wagoner's average work day must've been about 10 minutes long. Walk in, approve Chevy, Saturn, Buick, and GMC versions of the same car, pretend Pontiac, Saab, and Hummer don't exist, walk out. And he still managed to do a better job than Nardelli. It's unbelievable.
It appears that Ford is going back down the Nasser path of just starving Mercury to death. It's a good plan. Spend no money on it, introduce no new products, and just let all of the Lincoln/Mercury dealers become Lincoln dealers. That should let them avoid the Billion+ price tag that it cost to end Oldsmobile.
Now that Ford is over its PAG days, there's actually room for Lincoln to improve without bumping into the Jaguar ceiling. Ford must stop it's transparent rebadging, though. I don't know why anyone is fooled into paying for a Lincoln, but that strategy will never allow Lincoln to compete with anything more than Buick.
I would start by killing off the MKS (aka fancy Taurus) and replace it with a new LS. Actually all of the MK-nonsense needs to go, right now. People actually liked the LS. Make it RWD just like the old one, and find a competitive V8 and 6-speed manual to offer it with. Ride comfort needs to stay, but the sloppy Buick handling needs to go. A Lincoln should ride and handle like a Mercedes. Get it right, and people might actually buy them.
Palm Pre
No, collecting. That's about it. :lemon: :lemon: :lemon:
Regards,
OW
That began to change in the mid 70s, when corporate tried to control costs by forcing the divisions to use a common parts bin. That blurred the differences among brands. But the real villain was Roger Smith, GM chairman for most of the 1980s, who killed what remained of divisional autonomy, promoted badge engineering (Cadillac Cimarron!) & sucked the soul out of the company. After Smith, the company was living on borrowed time. If not for the low gas prices of the 90s, which touched off the big truck/SUV buying spree, GM would have folded 10 years ago.
TM
The LS was a handsome vehicle inside and out. The problem "I" think with the LS was it wasn't very spacious or comfortable. The front buckets weren't the least bit supportive and were difficult to find a somewhat comfortable driving position w/ good visibility. The rear seat space was horrible, though it was in keeping w/ the E39 5-series of the same time. It was a credible Euro-fighter, but Americans see/saw Lincoln as spacious and floaty. The LS was 180 degrees in the opposite direction. It even could be had with a manual transmission!!:surprise: It could've been a smash hit, but the sales staff was clueless when it came to selling it. You can't have a bunch of old fogies trying to sell a "young man's" car. :sick:
Amazingly, the LS was on my radar as an aspirational vehicle at the time. Heck, if they reintroduced it with the same philosophy (but more interior room,) I'd still consider one.
I know what you mean. In late 2000/early 2001, I seriously considered buying an LS. I had driven a loaded V8 at a Lincoln marketing event, & I liked the car's handling & its clean, all-American styling. If one of the local LM dealers could have put me behind the wheel of a stick-equipped V6 sport model for a test drive, I might have pulled the trigger.
But after hitting every store in 2 counties, I realized that the LM dealer network didn't understand the LS & had no idea how to present it to potential buyers. Lincoln had developed the LS specifically to compete against European sport sedans, but the dealers wanted to market it as a baby Town Car to their one-foot-in-the-grave base clientele. No one had a stick in stock - I don't know why this surprised me at the time - & no one was remotely interested in getting one for me to test drive. One LM salesman even suggested that I drive to an upstate store 4 hours away for my test drive & then come back to order the car from him.
I struggled not to lose my temper, thanked him for his time & drove to the closest BMW dealer, which did have a stick on the lot for me to sample.
Good looker, IMO.
TM
Well the thinking was also that in order for this platform to be profitable, it would have to be spread to several VWAG brands. I think an Audi version was always in the plan. It is good looking, but the front end is too VW-ish. It would have to be re-worked to incorporate an R8 style grille.
But, wouldn't it be smart to also combine Saab with Saturn? Afterall, they share roughly the same kind of nerdy customer and Saab could be the up scale Saturn? Or if actually buying Saab wasn't possible, work out a deal whereby Saturn would be the exclusive NA distributor of Saab?
No way. Can't agree with that at all.
Saturn has always had the potential to be iconic for modern, efficient, a bit high-tech, smart, progressive, and all those things at a value... but it never lived up to any of it very well. Roger could change the game for Saturn. The brand potential is still there.
Saab, OTOH, represents "different" to the point of nerdy weirdness with a bit of phony performance thrown in for good measure. Terrible brand that Penske will be smart to avoid, of course.
TM
I would agree with that. Saab hasn't been Saab since the days of the 900 in the '80s. They were known for really quirky turbo hatchbacks and poorly engineered convertibles for people who didn't like cars. Saab was never intended to be a luxury brand. They've only ever attempted two luxury cars, the Fiat based 9000 and the Opel Vectra based 9-5. In typical Saab fashion both ran/will run for 13 years, and both weren't any good.
Today, Saab is just a dumping ground for leftover GM platforms, mostly for Europeans who don't want to be seen with the Opel/Vauxhall badge. There's nothing left, it's just a hollow shell. No brand, no identity, no unique products, nothing. Penske would be much better off simply making up a name to slot above Saturn than trying to deal with Saab.
Regards,
Jose
I think you put Saab down too much. Saab, like Mack Truck, does well mainly in the Northeast. Afterall, before Suburu, Volvo and Audi came along with AWD, Saab was THE winter car. However it never kept up and up until this year was still only FWD while everyone else offerred AWD. Today the 9-3 seems to be bought by the hard-driving Audi A4 demographic and the 9-5 does well as a much less expensive, more winter-suitable alternative to a 5 Series. The volumes are not high enough though to make it a profitable stand-alone line for a dealer.
Could you integrate Saturn with Saab? Don't know. Of all customers, the Saturn buyer would seem most likely to migrate upscale to a Saab.
Regards,
OW
Penske is going to continue to sell a few current Saturns in the US under license from GM (Astra and Sky are going away), but eventually the plan is to sell Samsung cars from Korea, which are made by Renault apparently, as Saturns. So I guess Saturn will become an alternative to Kia/Hyundai. Not quite sure how that's going to work.
Sorry, but I just don't buy that. In order to buy a 9-5, somebody has to say, "I don't want an E class, or a 5 series, or an A6, or an M, GS, RL, XF, S80, or even a Lincoln MKS. I don't want anything designed in the last decade. I want a mediocre car that handles poorly and isn't particularly luxurious, I want a 4-cylinder, and I want to pay $40K for it."
How many of those buyers can there possibly be? Twelve? It's time to let it die.