"Major Crude Oil Crash Is Coming Says Analyst"

[ou48A]

We have been here before and seen such predictions before. I have a hard time believing that oil would go as low as this prediction but never the less it’s noteworthy.
I don’t think I need to remind anyone what this would do to our local economy.
I don’t know how low it would go……. but a crash in crude oil prices is a distinct possibly.
There is a good amount of new oil coming on line around the world and the demand is not strong due to a lousy economy.
This IMO is part of the cycle.

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Look Out Below! Major Crude Oil Crash Is Coming Says Analyst

By Jeff Macke PostsWebsiteBy Jeff Macke | Breakout – 22 hours ago

http://finance.yahoo.com/blogs/break...170127530.html
Crude oil has fallen 20% in less than 2 months. The drop has been sufficient to prompt most bears to declare victory and cover their shorts or even ponder getting long near last year's lows in the mid-$70s. But Jeff Kennedy, chief commodity analyst at Elliott Wave International thinks those buyers are early by about $40.

He bases his outlook on pattern recognition and psychology. His work suggests crude will plunge to the December 2008 lows of $38 a barrel then pause prior to falling another 50%. All in, Kennedy is forecasting an additional 80% drop in crude to $16.70 a barrel; a level not seen since November 0f 2001.

As a technician Kennedy pays little heed to the standard crude narratives involving Middle East tensions, supply disruptions, and refining. To him the charts tell the story and "the story right now in the crude oil price chart argues for a further decline well into 2013."

One of the contributing factors for the drop in crude is strength in the dollar, particularly against the beleaguered Euro. The thesis for getting long dollars and shorting euros is simple: the Eurozone is perpetually on the brink of collapsing, taking its fake currency with it. Sometimes simple works.

Fundamentally, technically and in every other way Kennedy likes the dollar as a breakout play on the dollar index and a breakdown trade against the euro. You can quibble with his methodology but you can't accuse Kennedy of hedging his bets.

[Maynard]

With West Texas Intermediate crude oil trading with an $80 handle, near two year lows, while stocks remain within a few percent of their four-year highs, one has to question just what it is that stocks believe about our bright new future of growth and demand that the all-important energy markets do not. Between Europe's recession, last night's dismal China PMI, and a significantly trending rise in US unemployment claims, it seems more likely that the global demand picture painted by the oil market is a better reflection of reality than the earnings/multiple picture painted by the nominal price of US equities. We know that bad is good when it comes to the front-running of Bernanke's print button but wouldn't bad being good raise the USD-nominal price of oil also?

(WTI, S&P 500, 10-Note overlay)

[Just the facts]

How come I can sit at home with access to very little charts and graphs and come up with same predictions (actually I am more right) as these multi-million dollar guys. Hello!!!! Earth to investors... come in investors. The US is going to into recession again - price of oil to drop. Of course, we know the high price of oil is what causes the economy to stop expanding so we just have to wait for the price of fuel to drop, the economy picks back up, gas prices rise, economy tanks... repeat until ready to try some other kind of transit system (or until 2020).

[1972ford]

Oil will never get that low as OPEC would make sure of it

[ou48A]

At the time of this post WTI = $78.30 down - $3.15 so far today.

[Just the facts]

As the time of this post WTI = $78.30 down - $3.15 so far today.

That is because the oil nivestors look out across the country and ask - who is going to buy this gasoline with jobs declining, retail sales dropping, manufacturing dropping, etc...? The answer, no one. Your customers can't afford your product and 12 million of them don't need it anymore because they are save the inconvience of having to drive to work. For my part, half of all my trips are now on bicycle.

[Maynard]

As the time of this post WTI = $78.30 down - $3.15 so far today.

Oil's 2-day drop is the largest in 9-months.

[SoonerDave]

Interesting that in the last few months...really, weeks, we've seen oil lose about 40% or so of its per-bbl value, yet gas did a bizarre u-turn a couple of weeks ago...off lows of around $3.05 and back up to the $3.30's. Don't know if anyone tracks it, but it would seem to me that a ratio of oil price to gas price would be off-the-charts high right now.

Would gas suppliers be seeing this price drop and using a gas spike as a hedge in some way? Companies that have opted to go long on oil may be in for a very bumpy ride even if only current pricing holds for much longer...if you can find someone that's sold short, they're in a position to do quite well if this persists....

[ou48A]

Oil will never get that low as OPEC would make sure of it

I have a hard time believing that it would go that low but there are members of OPEC who do not want Iran to develop nuclear weapons and they will use oil as a weapon to put pressure on Iran’s economy.

Saudi Arabia is producing at record rates this despite the recent decline in prices. The Saudi’s also wanted to strengthen the western economies. They need us for protection as much as we still need their oil.
More new oil from Iraq is going to be coming on line. Some project that Iraq can eventual produces 3 times their current rate. They also need a strong USA for their protection.
Other producers have been ramping up their production. The USA has seen production increases with lower demand. The demand is also down in Europe.

We may not see $16 crude but barring an unforeseen event a major decline from here ($78.30) still seems likely IMHO?

[ou48A]

That is because the oil nivestors look out across the country and ask - who is going to buy this gasoline with jobs declining, retail sales dropping, manufacturing dropping, etc...? The answer, no one. Your customers can't afford your product and 12 million of them don't need it anymore because they are save the inconvience of having to drive to work. For my part, half of all my trips are now on bicycle.

I don’t disagree.
This is all part of the cycle that in time will be repeated time and again.
You can make a lot of money by timing the cycle.

[ou48A]

The Dow was down 250 points today….. The likelihood of a deeper recession is increasing.
But cheap oil would help us pull out of it quicker.

[Maynard]

The Dow was down 250 points today….. The likelihood of a deeper recession is increasing.
But cheap oil would help us pull out of it quicker.

The bond market seems to be pricing in a depression -- 10-year note @ 1.618%!

[1972ford]

gas is up due to a few refineries have unscheduled shutdowns those refineries in turn have stopped buying oil. Saudi Arabia has no choice but to produce more more oil in times of declining prices since they started giving the people more of the oil revenues. oil prices will continue to drop to around $60 before speculators say hey time to jack up the prices again right now they are selling in mass to lock in profits

[Just the facts]

Interesting that in the last few months...really, weeks, we've seen oil lose about 40% or so of its per-bbl value, yet gas did a bizarre u-turn a couple of weeks ago...off lows of around $3.05 and back up to the $3.30's. Don't know if anyone tracks it, but it would seem to me that a ratio of oil price to gas price would be off-the-charts high right now.

Would gas suppliers be seeing this price drop and using a gas spike as a hedge in some way? Companies that have opted to go long on oil may be in for a very bumpy ride even if only current pricing holds for much longer...if you can find someone that's sold short, they're in a position to do quite well if this persists....

Gasoline is not oil. One of the hidden dangers (although it can't be too hidden since I know about it) is that oil refiners are not making a profit at current gasoline prices. For them to be profitable gasoline has to be over $4/gallon but the economy can't support that price. We run the risk of having to not only import our oil, but our gasoline as well which will put the US on the international gasoline market which is north of $8 per gallon. Good luck surviving in an automobile dominated economy with $8 gasoline. We need to be pursuing alternative forms of transportation - and we need to do it real soon. We need to have economic activity without everyone needing a car.

In the 70's we had a fake fuel shortage, in the 2010's we might have a real one.

[ou48A]

The bond market seems to be pricing in a depression -- 10-year note @ 1.618%!

WOW
The economic outlook doesn’t look good.
There are some who seem to feel that we will see our national debt downgraded again.

[Spartan]

I have been saying for a while that OKC is going to be in trouble if we don't diversify. However I am personally rooting for high gas prices.

[SoonerDave]

The Dow was down 250 points today….. The likelihood of a deeper recession is increasing.
But cheap oil would help us pull out of it quicker.

I, for one, never believed the gov't kool-aid that we truly emerged from the previous one. We were klunkered and stimulused into believing we had.

[SoonerDave]

I fully realize that gas is not oil. But there's a non-trivial relationship between the price of crude and the price of oil, and there's a departure in the last few weeks that's just a little odd. Gas prices go up rapidly with increases in the price of oil, and go down slowly.

Refineries also don't derive their profit exclusively from gas, nor selling their gas domestically. I think the broader picture of refinery profit is more complicated than just the price of gas at US pumps.

[soonerguru]

I, for one, never believed the gov't kool-aid that we truly emerged from the previous one. We were klunkered and stimulused into believing we had.

It's actually gone about how I expected, if not marginally better. Our recent history of recessions (and this one was by far the deepest), is that we have emerged from every one of them with a retracted employment sector. It was widely predicted that unemployment would stubbornly persist for years, as it has.

The risk of a second recession is real, but it has mostly to do with uncertainty about Europe. Until they decide to let go of the austerity campaign, we'll be at risk of another recession.

The decline in gas prices is a welcome development, however, as it will prevent stagflation and acts almost like a tax cut.

I've felt for some time that if we could get unemployment below 8% the momentum would carry the economy forward from its anemic pace of growth.

[venture]

So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL

I'm going to be like Spartan here (gasp) and say DROP BABY DROP. Let oil freaking crash. My pay check will love em for it. Though OKC's economy is going to be pretty screwed because of it. Granted we've diversified a ton since the 80s, but there is still way too much exposure to oil/gas industries to avoid feeling what the rest of the nation has for years.

Luckily I'm in an industry to where the lower oil prices go, the better position we are.

[ou48A]

So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL

I'm going to be like Spartan here (gasp) and say DROP BABY DROP. Let oil freaking crash. My pay check will love em for it. Though OKC's economy is going to be pretty screwed because of it. Granted we've diversified a ton since the 80s, but there is still way too much exposure to oil/gas industries to avoid feeling what the rest of the nation has for years.

Luckily I'm in an industry to where the lower oil prices go, the better position we are.

The lower crude goes the more production will be shut in forever.
When the economy recovers this will set us for the next phase of the cycle for even higher price spikes than we seen before. Just as it’s done before, it will damage the economy.
Very few in the energy industry want extremely high prices, because they know that within a few months a crash is sure to come.

[ou48A]

A mandated US floor price for crude oil would level off the price swings and help protect the economy.
If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.

The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.

[Just the facts]

So how bout them $5 per gal gas prices we were suppose to have...for each of the last 3 or 4 Summers. LOL

The US economy crashed instead.

[Just the facts]

The risk of a second recession is real, but it has mostly to do with uncertainty about Europe. Until they decide to let go of the austerity campaign, we'll be at risk of another recession.

You got that backwards I think. The only thing keeping us afloat is the problems in Europe. Our problem is that we have a currency system that requires exponential growth to work, and that simply isn't possible. Our money supply is limited by the amount of debt we can take on and everyone is tapped out for debt. there is nowhere to go but down - or if we can get a few million people to come here from another country and take out fraudulent home loans to pump money into the system... oh wait, we tried that. Maybe then if we could get the federal reserve to pump money into the system... oh wait, we tried that also. I know, let's get students to borrow massive amounts of money to go to college so they can apply for food serivce jobs - so far so good, $1 trillion in new debt. Good thing college students are stupid.

[Dubya61]

A mandated US floor price for crude oil would level off the price swings and help protect the economy.
If set high enough (say $80) It would help keep low producing wells on line. It would protect US producers from OPEC’s over production. It would keep billions of dollars flowing to US, state, and local governments. If the world price fell below the mandated level the US government could collect the price difference.

The mandated level would also need to be high enough to keep conservation efforts alive but low enough to aid economic development.

There is a movie from the early '80s called Rollover that I always liked. According to the critics, it sucked as a movie, but the plot has always intrigued me. Something like: all the markets and funds are so closely linked together that if one entity decided to do something rash, we'd all fall like a house of cards. This thread makes me think of that plot.