They think China demand after Olympics will force prices back up.
Among their well-presented and well-researched data, The Oil Drum says, referring to the chart – does it look like prices are crashing?
So, at this point, I’m still happy to continue my “Countdown to $200 oil series” and see no reason why the recent lull in prices would be a sign of a serious trend change in the market.
In fact, I’ll say again that our energy policies should focus on one thing first and foremost: demand reduction.
SemGroup just filled bankruptcy after a $3.2bn trading loss in commodities. Interestingly, they were short oil, meaning they expected prices to drop. But a wildly flucuating oil market combined with other traders smelling SemGroup blood in the water forced them to liquidate their positions at a huge loss. Thus, speculation may have been directly responsible for a drop in oil prices.
From the comments to the post on Naked Capitalism.
Sorry to be dense, but why would covering a short position cause prices to fall? Seems like they would instead rise as the position was bought in.
Other market participants will be aware of their predicament and deliberately move the market against the hapless trapped firm in order to force a liquidation. Once they succeed, they can take off their own positions.
Gasoline historically has been extremely cheap. It still costs less than beer or most any other liquid. Matt Simmons thinks gas could go to $12-15 a gallon. Demand is increasing while supply is dropping. That’s the problem.
He sees the biggest obstacle stopping us from going to renewables is the mistaken belief that oil prices are temporarily high and will drop. So rather than deal with the problem, we’re going on a witch hunt to see who is keeping prices up.
Even if we started drilling offshore everywhere now, we wouldn’t see the results for ten years. One big problem. All the offshore rigs are already in use. He thinks 5-7 years hard work in renewables like geothermal and wave power could “get us out of a very deep hole” but we need to start now. We also need to, among other things, eliminate long-distance commuting and grow food locally.