Oil Futures Back Below $40 a Barrell

[lib2DaBone]

I wonder if the price of gas will go down by 50 cents a day... (Like it did when the price went up 50 cents a day last week)?
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http://www.marketwatch.com/news/story/Oil-futures-back-below-40/story.aspx?guid=%7B274E30D3%2D416F%2D491C%2DB0E9%2D5752F5B6BA4B%7D

LONDON (MarketWatch) -- Oil futures fell below $40 a barrel in electronic trade on Monday, slipping $2.29 to $38.54 a barrel as investors continue to react to news of the worst year for U.S. jobs since 1945. "This has fuelled concern about a further fall in demand, especially in the USA, who remains the world's biggest oil consumer at around 25%," said Eugen Weinberg, an analst at Commerzbank.

[The_Casual_Observer]

1. Where is the speculation money going instead right now?

Pay day loan companies?

[Zynx]

2. The speculation machine is somewhat broken at the moment.

Commodities was their last big play and they got wiped out on that too.

[Idealism]

3. Real estate was a bigger market than commodities

But you are right, the speculation machine is not doing so well at the moment. Banks aren't as freely lending money as they did just a year ago, which means less speculation possible for people playing on borrowed money.

[Zynx]

9. Commodities came after real estate.

Real estate was busted by the end of 2006. Commodities didn't break until the second half of 2008.

[Idealism]

10. I assume you mean the bursting of their bubbles

Considering commodities and real estate have been around for 5000 years. If that is what you were trying to point out, it does not change the fact that the commodities market was small compared to the real estate market at their apex.

[The_Casual_Observer]

4. There is always speculation money. There are rich people all the time.

They aren't borrowing it, they are lending it to somebody/something. I'm thinking it's going to the payday loan businesses.

[backscatter712]

5. Didn't Congress close the Enron loophole last year?

I doubt that the speculators will be able to game the system and jack us with $4.00/gal gas again.

My guess is that the recent price spike was fretting over the Israel/Gaza thing, which means we might see prices spike again, but my guess is that traders are figuring that the Gaza thing will simmer down in a few weeks as Israel faces increasing pressure from the world to chill out.

[4 t 4]

6. looking for oil to go down

to between 15-25$ ?

[backscatter712]

7. Maybe $25. Probably not that low.

Now that the speculators have bailed, my guess is that oil prices have pretty much fallen to their natural levels now.

[Statistical]

8. You do know there are production costs ....

many wells in the US have production cost of $20 - $25 per barrel.

They will simply stop selling oil rather than sell it at a loss.
Some oil production companies (smaller ones) are now renting super tankers to use them as floating oil tanks.
To hold the oil for future delivery (where future contracts are higher).

We may see oil touch $35 and maybe get down to $30 for brief period of time.

Long term oil is going up again. The world economy will recover. It will grow slower than last 2 decades but it will grow. People are buying SUV. People are building houses further out in suburbia. Demand will outstrip demand and peak production is on a decline so that won't be hard to do.

Within a year expect oil to be $50-$60
By end 2011 if the economy has recovered I think we will be in the $60-$80 range for oil.