What is the Consensus for 2009?

The consensus oil price for the end of 2009 are the following:

Indeed, much of Wall Street expects oil prices to average about $50 a barrel in 2009. Some of the firms and their specific forecasts include:

Deutsche Bank predicts an average price of 47.50 for all of 2009; The chief energy economist of Deutsche Bank, Adam Sieminski, said recently that the demand for oil in 2009 will drop more than any other time in the last quarter of a century, due to the weak economy. Sieminski forecasts oil traded in New York falling as low as $30 and averaging $47.50 for the whole year.

Merrill Lynch has a very similar prediction, saying that prices will average 50 dollars; (if they could predict anything they would of remained independent...)

Moody’s Investors Service also says crude will average 50 a barrel in 2009

Goldman Sachs is predicting that prices will average $45 for all of next year – but predicta a drop to 30 dolars a barrel in the first quarter; (but Goldman just five months ago predicted oil prices would hit $200 a barrel in 2009).

Marc Faber doesn`t make any specific price prediction, but is buying oil at these prices;

Jim Rogers says that oil will reach 200 dollars a barrel maybe in 2013;

The Energy Information Administration projects crude oil will trade at an average of $51 a barrel in 2009

Barclays Capital has given its forecast of 76 a barrel for average U.S. crude in 2009, saying improving demand and a supply slide will combine to lift oil prices.

The forecast, at more than $17 above a consensus $58.48 in the most recent Reuters poll, was among the highest in the survey of 30 analysts.

Morgan Stanley predicts 82 for 2009. Morgan Stanley is the most bullish investment house on the street.

Bloomberg Consensus: Oil futures may rebound from their worst year to average $60 a barrel next year. The forecast, the median of 33 analysts compiled by Bloomberg, represents a 54 percent gain from today’s $39.03 price.

But please note that they were all wrong in the past. The Oil Traders Blog price for the end of 2009 is 60 dollars a barrel. Most of the move will be a direct consequence of the money printing scheme the FED put on and the dollar fall. Demand will remain weak, which can depress prices in Q1 and Q2.

Oil Loses 4 Years of Gains in 5 Months

Oil prices have fallen 70% since hitting a record 147.27 a barrel in July, which means in just five months, crude has given up all the price gains it made in the past four years.

That is a true roller coaster ride.

China: Is Adding to the Strategic Oil Reserve

China plans to use the fall in global energy demand to boost its fledgling oil reserves against future supply shocks, as it speeds up development of nuclear and wind power and cuts reliance on coal, a top energy official said.

China was the trigger of the last commodity rally and might very well ignite a decent upsurge on this news. Don`t forget that China will be the world`s biggest economy in 15 or 20 years.

Zhang Guobao, head of the National Energy Administration, said:

The severity of the economic downturn has brought a marked decline in demand for oil and unprecedented pressure on prices. The amount of crude oil on the international market still far exceeds global demand.

China will push ahead with building the second phase of its strategic oil reserves, having largely completed the first, Zhang said.

That could increase import demand and help global crude oil prices to get into forward gear, having been stuck in reverse since hitting a record high in July.

Oil Rebounds 6.7%

Crude-oil futures rose Friday for the first time in four days as traders bought the contracts on the heels of their 9.3% slump in the previous session.

Crude for February delivery ended up more than two dollars or 6.7%, at $37.71 a barrel on the NYMEx. Even though oil ended the week down 11%.

Futures are down more than 60% so far this year, poised for their worst year on record since crude started futures trading on the New York Mercantile Exchange in 1983.

This was the performance of several financial assets last week:

Oil At a 4 Year Low

Today Oil is rebounding from extreme oversold levels Wednesday the crazy ride continued to test new extremes on a shortened trading day as the price fell more than 9% to 35.35 a barrel. This was the its lowest close in more than 4 years. So far, the price of oil has plunged nearly 76% after reaching a record high of just over 147 in July. That`s quite a drop, for a 5 month period, isn`t it?

What might the catalyst be for a turnaround? A weak dollar and some improvement on the economic front. Our survey for the price of oil in the end of 2009 is under way and pointing to 60 to 70 dollars a barrel.

Oil has lost 33% so far in December, poised for its worst month on record since crude started futures trading on the New York Mercantile Exchange.

Word on The Trading Desks

“The United Arab Emirates’ cut is the reason we’re strong this morning,” Rob Laughlin, senior broker at MF Global Ltd

“Saudi Arabia and the U.A.E. seem to be fully compliant” Oliver Jakob, managing director of Petromatrix GmbH in Zug, Switzerland

Jim Rogers on Oil: It will Comeback

Jim Rogers, the famous Indiana Jones investor said today that Oil Reserves are dropping 7% a year. These drop in reserves will cause serious supply problems in the near future. Jim Rogers concludes "Oil will make a big comeback".

Today Oil Futures are down again in the pre-open session. We are in a true selling climax. Will this be a once in a liftime buying opportunity?

Inventories Released Tomorrow

Inventories probably rose 900,000 barrels last week, according to the median of analyst responses in a Bloomberg News survey. The department is scheduled to release its next report at 10:35 a.m. tomorrow in Washington.

Word on the Trading Desks

``The drop in consumer spending is not just being felt in the U.S., it's being felt everywhere. And that's a big part of why crude oil is trading at $40.''

``The problems that Toyota is having underlines the problems we're seeing in the world today,'' said Jonathan Kornafel, director for Asia at Hudson Capital Energy in Singapore

"The bears appear to be in control, aided by weak equity markets as the global economic slump offers a depressive ring to the festive period," said Rob Laughlin, senior oil analyst at MF Global in London

Japanese Oil Imports are Down

Japanese crude oil imports fell 17% to 3.71 million barrels a day last monthand South Korea's oil demand dropped 12% in November from a year earlier, Korea National Oil Corp. said.

Japan is the world's third biggest oil importer according to the U.S. Energy Department. South Korea is the fifth-biggest importer.

Oil Falls Again: Are We Bottoming?

Oil prices fell again today as investors continued last week's practice. Crude oil futures fell 2.45 to settle at $39.91 a barrel.

Word on the Pits:

"This is a market that still needs to see proof of demand," said Phil Flynn, senior market analyst with Alaron Trading in Chicago.

"Given crude oil's weakness since OPEC's announcement, it is safe to assume the market is a bit skeptical regarding the group's ability to comply," Schork wrote in his daily publication, The Schork Report

"Large stockpiles of crude throughout the (Organization for Economic Cooperation and Development), falling demand in China and negative refining margins make it difficult to see how such supply-driven initiatives can have a near-term positive effect on crude prices," said Addison Armstrong, director of market research at Tradition Energy.

All the "professionals" are bearish on Oil. Its time to buy. At the very least it will rebound because is very, very, very Oversold.

Contango Scares USO and DBO Investors

Contango is the deepening discount of near month oil futures contracts against later months. This little monster is scaring investors off simple passive funds such as USO, DBO and OIL that helped drive the big oil rally in the last 6 years.

Passive index plays like USO and OIL found big profits during much of oil's rally to over 147 a barrel in July by selling front month futures contracts and buying cheaper ahead the curve contracts, something possible only in a market structure called backwardation.

Oil prices have collapsed to 35 dollars a barrel pushing front month futures contracts into a discount to later months. This is a market showing contango, which forces investors to pay out rather than profit when shifting cash from one month to the next. Now its extremely expensive to buy and hold oil. The rollovers will just kill you. The only explanation I have for this deep discount in fron month is the Government selling oil to stimulate the economy. But that would be too much, wouldn`t it?

Oil is Cheap vs. Gold

Nice article about Oil being cheap when compared to Gold.

20 year chart of gold to oil ratio:


"The lower and upper horizontal bands in the chart above show an oz of gold has exchanged between 22 and 10 barrels of oil since 1989. The ratio dipped to as low as 7 and right now it trades at 20. One shouldn't buck against the trend and I expect the ratio to exceed 20 to reach perhaps 30 or more.

You can play with two of the three variables (oil, gold, and ratio) and come up with the third. For example, at ratio of 30 and oil price of $50/barrel, the formula produces a gold price of $1,500/oz. I honestly have no idea what future lies, except

- Oil is oversold and cheap
- Gold is not expensive by historic means
- The gold-to-oil ratio will keep rising until it comes down.
- Fundamentally gold is attractive as investment of last resort. It's no good to leave money at the banks earning zero interest, or buy real estate that is faltering, or invest in equity market during recession.

While gold's blow-off phase is yet to come, I like to offer a word of caution. Given how quickly things can change, it might soon be a good idea to hedge gold positions by going long oil." in Seeking Alpha

Oil Crash Graph

This is the most impressive downtrend I have ever seen. Oil is being decimated every week. Can Oil keep imploding? I doubt it. There will be a major upswing in the near term. Look for 50 dollar oil in a few weeks.

I have seen some scary projections, some predicting a 10 dollar oil. That is a complete nonsense. They sound like those calls to 300 dollar oil in the summer. Its the same thing on the opposite side. Its time to BUY OIL.

As JIm Rogers says Buy Panic and Sell Hysteria. This is clearly a panic mode crude oil market. It always pays to go against panic.

Is the Government Trading Oil?

January contract keeps falling but the oil is up longer the curve. I read something really interesting today about the Government selling front month crude oil and buying down the curve for late 2009 delivery.

Arguably the Government is trying to stimulate the economy trying to drive down oil prices. With the Quantitative Easing policies still fresh in my mind anything is possible these days. One of these days the Fed ranks first as the trader in the bond, stocks, forex and oil pits. Maybe they should of bought Lehman Brothers just to clear their trades and do their back-office.

We are living in crazy times and I really believe in this intervencionism theory in Oil. The Contango is huge. The February is trading 8 dollars higher then front month. That`s over 20%. I have never seen such a mismatch. Is Paulson selling Oil?

Oil Crashes

Who could imagine just a few months ago that oil futures could trade at 36 dollars a barrel? Pretty amazing. In the financial markets the old and bold traders tell you all the time to expect the inexpectable. Planning for extreme scenarios is absolutely necessary for survival in the markets these days.

We are witnessing an OIL CRASH.

As Jim Rogers says "Buy Panic and Sell Hysteria". Its probably a good time to add a few barrels to your portfolio and forget about them. You will surely be in the money for the long run. For the short term traders, the bear side is still the right way to play this market but be careful because a huge reversal might be just around the corner.

Futures show Contango

A market condition called contango, in which oil futures contracts going forward are higher than ones for the immediate future, has traders scrambling for crude storage as they attempt to lock in future profits.

Phil Flynn, vice president at Chicago-based trading firm Alaron, said the oil contango has created a frenzy for storage space.

“You pay as much as $2 a barrel to store it but you can lock in the profit instantly today and make out like a bandit,” he said.

The scramble for oil storage, combined with reduced demand in the recession, has lifted U.S. inventory numbers to 321 million stockpiled barrels, an 8 percent increase over this time last year, according to the latest report from the Energy Information Administration.

Oil ETF like USO, OIL and DBO are much more expensive to carry with the oil market showing this kind of Contango.

Oil Falls Below 40

Crude Oil Futures dipped below 40 dollars a barrel for the first time in more than four years. Today the API said supplies climbed for the 11th time in 12 weeks.

OPEC Cut, But Oil Falls

“They are facing the distinct possibility of oil falling to 30 dollars a barrel and even lower,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.

“The OPEC announcement looks big on first glance but really isn’t. They are playing with smoke and mirrors.” Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc.

UBS Expects 70 dollars a barrel by the end of 2009

In a research note entitled "Ten Surprises for 2009" UBS analysts say they expected a combination of supply discipline from oil cartel the OPEC and the beginning of a moderate global economic recovery in the second half of 2009 to stabilize oil prices near current levels and then lift them toward US$70 by year's end.

OPEC makes Bigger than Expected Cut

OPEC agreed to cut oil output by 4.2 million barrels a day from September production levels, Secretary-General Abdalla El-Badri said. The Organization of Petroleum Exporting Countries will cut output from a daily level of 29.045 million barrels three months ago, indicating a new quota target of 24.845 barrels a day. The reduction will take place from the start of next year.

Even with this bigger than expected cut, crude oil futures are trading down 4.2%. Sentiment is still very dark in the oil market and demand is falling rapidly.

Oil goes down on good news. Look for lower prices.