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Lehman Bros. Report: Oil Bust in the Cards
MoneyNews.Com ^ | April 25, 2008

Posted on 05/11/2008 4:38:50 PM PDT by TennTuxedo

Is $120 oil even real? Not if you ask the Saudis, or even Lehman Bros. The investment bank’s oil expert said this week that the oil boom is due to bust. Economic growth across the globe will slow just as new refineries kick in, raising supply.

(Excerpt) Read more at moneynews.newsmax.com ...


TOPICS: Business/Economy; Culture/Society; Extended News
KEYWORDS: business; economy; oil
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I won't hold my breath. It will be interesting to see if OPEC recognizes that they are about to slaughter the golden calf.
1 posted on 05/11/2008 4:38:50 PM PDT by TennTuxedo
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To: TennTuxedo

Very wishful thinking.


2 posted on 05/11/2008 4:44:03 PM PDT by netmilsmom (I am very mad at Disney. Give me my James Marsden song!!!!!)
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To: TennTuxedo
Now we need a bunch of Freepers to chime in there is no bubble, in order for it to burst.
3 posted on 05/11/2008 4:45:27 PM PDT by Mark was here (The earth is bipolar.)
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To: TennTuxedo

and in this corner... Goldman Sachs:

“Oil prices threaten to hit $200 a barrel in a final “super-spike” over coming months as producers fail to keep pace with blistering demand from China and the Middle East, according to a controversial report by Goldman Sachs. “

http://www.freerepublic.com/focus/search?m=all;o=time;q=quick;s=oil%20super%20spike


4 posted on 05/11/2008 4:45:40 PM PDT by gusopol3
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To: TennTuxedo

I’m inclined to agree with this. Note that this was published a little over two weeks ago.

The price of oil has gone parabolic. That can’t be sustained, regardless of the commodity. Price moves like the most recent, combined with non-stop coverage of it, is always bad for those that fall for it and buy in. I wonder how many green traders are getting ready to learn their first big lesson in the old pump and dump routine.

For those so inclined, spare me the “it’s different this time” babble. I heard it with the dot coms and I heard it with real estate (hmm.. diminishing supply, increasing demand, etc. were all present in real estate). A bubble is a bubble, regardless of the asset.

Now, I’m only speaking from a trading perspective. The long-term trend in oil remains up and there is no reason to expect that to reverse. However, near-term, betting against oil might not be such a bad idea.


5 posted on 05/11/2008 4:46:38 PM PDT by bluefish (Hey! Where did this come from?)
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To: TennTuxedo

I’m hoping it’s the early 70’s all over again. Meaning high oil prices lead to a significant drop in gasoline demand leading to a drop in prices. Although it hurts, I like to see two stages. The one with $3 to $4 gasoline and $100/barrel oil leads to R&D, new alternatives and infrastructure development (oil sands production and new pipelines for wider distribution possibilities) and another brought on by a move to higher mpg vehicles.

End result is fewer bucks for oil producers.


6 posted on 05/11/2008 4:51:23 PM PDT by meatloaf
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To: TennTuxedo

I just wonder if all the oil speculators are also Opec members?


7 posted on 05/11/2008 5:00:28 PM PDT by Recon Dad (Marine Spec Ops Dad)
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To: TennTuxedo

Ping this article to Canada. They are the largest importer of oil to the USA.


8 posted on 05/11/2008 5:00:50 PM PDT by Westlander (Unleash the Neutron Bomb)
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To: bluefish

“The price of oil has gone parabolic.”

Not to nitpick, but I think quantum is the proper term.


9 posted on 05/11/2008 5:06:20 PM PDT by shaft29 (Just your typical black woman.)
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To: bluefish

Agree, with one addition: we could say the same for many commodities.

Gold and silver appear to have finally broken down a bit. They usually lead the commodity boom on the way up... and down.


10 posted on 05/11/2008 5:24:36 PM PDT by NVDave
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To: TennTuxedo

The article is dated April 25. Two-week old analyst forecasts are very old news.


11 posted on 05/11/2008 5:32:02 PM PDT by balls
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To: TennTuxedo

I agree, oil is overblown and should make a blow off top. Then there is the Iranian situation. Just when you thought it couldn’t go any higher.


12 posted on 05/11/2008 5:33:53 PM PDT by sasportas
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To: bluefish
It is the instability of oil producers that is pushing the bubble, at least in part. It will be interesting to see what happens when the bubble busts and Iran and Venezuela, who are already overspending with $100 plus oil, have to make do with $60 oil.
13 posted on 05/11/2008 5:48:08 PM PDT by marktwain
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To: TennTuxedo

If there is really a shortage, why aren’t there any lines?


14 posted on 05/11/2008 5:59:03 PM PDT by stinkerpot65 (Global warming is a Marxist lie.)
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To: TennTuxedo
Lehman is now predicting prices at $83 a barrel in 2009 and as low as $70 in 2010.

Gee, how bad is it when $70 a barrel looks good?

Now they could be looking to get out [of oil funds], warns Waldron. He figures the money effect has driven anywhere from $20 to $30 into the barrel price.

No doubt speculators are easily adding $30 to a barrel.

15 posted on 05/11/2008 6:01:45 PM PDT by Obadiah (I dream of the day when chickens can cross the road without having their motives questioned!)
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To: TennTuxedo

New refineries won’t solve the problem. Crack spreads are already low, telling us that is not where the problem is. Inventories are near five year lows (that’s OECD inventories on a days supply basis) despite the high prices. Geology is trumping economics for now.

Rumor is that Russia’s production will decline over the next year. They were down in the first quarter, first time that happened in over a decade. They say things will ramp up later in the year. The Russians have been the only real source of non-opec production growth. If they do peak this year, my guess is we’ll see $200 this year.


16 posted on 05/11/2008 6:25:40 PM PDT by grayhog
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To: bluefish
For those so inclined, spare me the “it’s different this time” babble. I heard it with the dot coms and I heard it with real estate

I've seen it with oil before.

Much of the price 'increase' in oil is a result of the crash of the dollar. If the dollar recovers, oil will move sharply down.

17 posted on 05/11/2008 6:34:47 PM PDT by PAR35
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To: shaft29
“The price of oil has gone parabolic.” Not to nitpick, but I think quantum is the proper term.

Quantum? I like parabolic. A parabola starts out low and gets steeper and steeper.

Quantum physics deals in tiny increments with no possible values in between, such as an electron "leaping" from one energy level to another. These are called "quantum leaps". It's kind of a physics joke. Contrary to popular belief, a quantum leap is small.

18 posted on 05/11/2008 6:43:51 PM PDT by Right Wing Assault ("..this administration is planning a 'Right Wing Assault' on values and ideals.." - John Kerry)
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To: TennTuxedo

$120 a barrel says more about how this government supports the dollar than it does about the value of oil.


19 posted on 05/11/2008 6:51:27 PM PDT by muir_redwoods (Free Sirhan Sirhan, after all, the bastard who killed Mary Jo Kopechne is walking around free)
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To: Recon Dad

“I just wonder if all the oil speculators are also Opec members?”

And/or others with the purpose to keep Republicans out of the White House or Congress.


20 posted on 05/11/2008 6:53:40 PM PDT by willk
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To: meatloaf

Whatever happened to the big North Dakota Bakken field announcement???


21 posted on 05/11/2008 6:55:08 PM PDT by cookcounty (Obama reach across the aisle? He's so far to the left, he'll need a roadmap to FIND the aisle.)
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To: marktwain

My understanding is that the Saudis have considerable excess production capacity: look for that to come on-line to help McCain and stick the Iranians and Chavez in the shorts a few months before the election.


22 posted on 05/11/2008 6:59:05 PM PDT by pierrem15 (Charles Martel: past and future of France)
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To: Right Wing Assault

So why didn’t the old standby “exponential” make the cut?


23 posted on 05/11/2008 7:00:58 PM PDT by Yardstick
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To: TennTuxedo

It’s different this time and I’ll tell you why.


24 posted on 05/11/2008 7:03:45 PM PDT by Revolting cat! (You're gonna cry 96 Tears on my Pillow!)
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To: TennTuxedo
"Is $120 oil even real?"

Of course it's not real. [It's over $125 now.] We've seen the wishful thinking behind that propaganda since before the 1st of December, when the "recession" was started with an early lock against hiring. The "recession" didn't work. It didn't bring freight fuel down or the dollar up.

Freight fuel is going up. So are prices of Asian products. It's time to start manufacturing more at home, to stop discouraging engineering education for Americans and to start allowing domestic competition again.


25 posted on 05/11/2008 7:05:27 PM PDT by familyop (Worthless male weekend warrior has-been trash with no degree.)
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To: TennTuxedo
"It will be interesting to see if OPEC recognizes that they are about to slaughter the golden calf."

No, they aren't. The countries that our business and political leaders have built up (China, India,...) will continue to buy all of the oil that OPEC can provide in order to produce real wealth (by making things).


26 posted on 05/11/2008 7:08:23 PM PDT by familyop (Worthless male weekend warrior has-been trash with no degree.)
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To: Yardstick
So why didn’t the old standby “exponential” make the cut?

As long as you have a negative exponent on 'e', it will work, too.

27 posted on 05/11/2008 7:08:40 PM PDT by Right Wing Assault ("..this administration is planning a 'Right Wing Assault' on values and ideals.." - John Kerry)
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To: gusopol3
and in this corner... Goldman Sachs:

Who predicted $100/barrel in 2005. I will take GS over Lehman any day.

28 posted on 05/11/2008 7:14:56 PM PDT by montag813
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To: Right Wing Assault

I gotcha.


29 posted on 05/11/2008 7:22:36 PM PDT by Yardstick
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To: Recon Dad
I just wonder if all the oil speculators are also Opec members?

Nope....and I can very much guarantee that.

30 posted on 05/11/2008 7:25:22 PM PDT by Osage Orange (molon labe)
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To: balls
Good point....and anyone who was persuaded by that news bite...was toasted in the short term.

Trends are what they are..............

31 posted on 05/11/2008 7:27:17 PM PDT by Osage Orange (molon labe)
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To: familyop
Freight fuel is going up. So are prices of Asian products. It's time to start manufacturing more at home, to stop discouraging engineering education for Americans and to start allowing domestic competition again.

You are absolutely right. Expect any product that we get from Asia to have a 25% or higher increase in cost due to the price of oil. Its already happening in the furniture industry.

32 posted on 05/11/2008 7:27:31 PM PDT by TennTuxedo
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To: montag813

I’ll take Boone Pickens over them both............


33 posted on 05/11/2008 7:34:50 PM PDT by Osage Orange (molon labe)
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To: cookcounty

“Whatever happened to the big North Dakota Bakken field announcement???”

It’ll be tied up in Enviro lawsuits for the next 20 years, with taxpayers yet again making Envirolawyers filthy stinkin’ rich.


34 posted on 05/11/2008 7:38:59 PM PDT by tcrlaf (VOTE DEMOCRAT-You'll look great in a Burka!)
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To: TennTuxedo

John McCain is against new drilling and new refineries.

Why he says? Because “I’m an environmentalist!”


35 posted on 05/11/2008 7:40:28 PM PDT by Spouting Horn (Terrorism is a tactic. The battle's against Shariah and Jihad.)
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To: TennTuxedo

THE LOW DOLLAR EFFECT:

The lower dollar reduces the profitability of producing overseas, which means some manufacturing COMES HOME. (ie. Plasma TV production in Fort Wayne, Indiana)

This works ONLY as long as Democrats don’t ruin the trend by yet again raising the taxes and costs on employers.
(is.”Carbon Taxes” and “Universal” rationed Healthcare)


36 posted on 05/11/2008 7:41:56 PM PDT by tcrlaf (VOTE DEMOCRAT-You'll look great in a Burka!)
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To: Spouting Horn

“Why he says? Because “I’m an environmentalist!””

It’s easier for many spineless politicians to go along, than be demonized as “CHILD KILLER!!” by the Left for daring to stand against them.


37 posted on 05/11/2008 7:43:42 PM PDT by tcrlaf (VOTE DEMOCRAT-You'll look great in a Burka!)
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To: TennTuxedo
"You are absolutely right. Expect any product that we get from Asia to have a 25% or higher increase in cost due to the price of oil. Its already happening in the furniture industry."

...and also due to rising consumer demand in some very populated parts of Asia. When consumers there pay more, we pay more.


38 posted on 05/11/2008 7:45:46 PM PDT by familyop (Worthless male weekend warrior has-been trash with no degree.)
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To: Westlander

I think you mean “exporter.”


39 posted on 05/11/2008 7:59:16 PM PDT by coloradan (The US is becoming a banana republic, except without the bananas - or the republic.)
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To: bluefish

I’m no T. Boone Pickens or anything, but I am giving oil a price target of $50-$60/bbl within 2 years.

DUG is your friend for those wanting an easy way to short crude.


40 posted on 05/11/2008 8:17:36 PM PDT by adm5 (Roger That. - MA2 Michael A. Monsoor, USN - Medal of Honor Recipient Posthumously)
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To: tcrlaf

Not true. Most of the Bakken is wide open for development. It is also a fairly expensive place with very long horizontal deviations and massive hydraulic fracturing required.

The Bakken will produce a lot of oil, but it isn’t close to being a new Texas ... and the US needs about three new Texas sized increments of production [at the peak in Texas production] to get close to independence. Don’t hold your breath.


41 posted on 05/11/2008 8:21:50 PM PDT by R W Reactionairy ("Everyone is entitled to their own opinion ... but not to their own facts" Daniel Patrick Moynihan)
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To: adm5

Hard to predict price, but the price you have suggested would probably require a massive depression. If you are not predicting a depression, where is the new oil going to come from?


42 posted on 05/11/2008 8:25:43 PM PDT by R W Reactionairy ("Everyone is entitled to their own opinion ... but not to their own facts" Daniel Patrick Moynihan)
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To: tcrlaf

How can it be tied up in court when so many of these oil rigs are being leased on private property? Some of these people were millionaires on their first royalty check.


43 posted on 05/11/2008 8:50:18 PM PDT by Not just another dumb blonde
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To: Osage Orange
I’ll take Boone Pickens over them both............

You're right! He predicted before them all. What's he saying now?

44 posted on 05/11/2008 8:53:01 PM PDT by montag813
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To: Right Wing Assault

On the upside and the downside.


45 posted on 05/11/2008 8:53:42 PM PDT by A Strict Constructionist (We have become an oligarchy not a Republic.)
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To: stinkerpot65

Because inventories are adequate to meet demand. In fact, this very fact belies the notion that this is a speculation-driven “bubble.”

When the Iranians cut us off in the late 70s price increases were driven to a considerable extent by hoarding. That’s not the case this time. The price spriral is strictly a function of supply and demand, the former being driven by India and China.

People are in for a shock when the increases of the past few days start showing up at the gas pump. This is why I’m leery of McWeird’s proposed gas tax “holiday.” It’s not going to have any political mileage when you consider that the federal tax on gas becomes rather inconsequential when the cost per gallon tops $5.

Fact is, most everyone I know will greatly curtail or cancel summer trips when that 5-dollar barrier is crossed, which seems inevitable given the upward pressure on the cost/bbl.


46 posted on 05/11/2008 9:11:03 PM PDT by libsmacker75
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To: cookcounty

Who knows? You don’t always get to drill where there’s oil.

http://corner.nationalreview.com/post/?q=ODllNTFlNzA0ZGViNGJjMWZiOTIwYWZhN2FhOWQwNjU=

My guess is that Brazil is a sure thing. I’ve read production will commence 2010.


47 posted on 05/11/2008 9:15:13 PM PDT by meatloaf
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To: TennTuxedo

The real answers are to go nuclear (on this, and perhaps only this, the French are right,) and to open ANWR and the central Gulf of Mexico by giving explorers maximum tax incentives.

As to the enviros’ objections: hit ‘em with SLAPP and RICO suits rooted in national security considerations. Toss any who defies the suit in jail—the price for their obstructionism and outright treason.


48 posted on 05/11/2008 9:18:10 PM PDT by libsmacker75
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To: meatloaf
"The one with $3 to $4 gasoline and $100/barrel oil leads to R&D, new alternatives and infrastructure development (oil sands production and new pipelines for wider distribution possibilities) and another brought on by a move to higher mpg vehicles."

I agree.

At less than 3.50 a gallon the little home brew E100 Machine has popped up. www.efuel100.com

Wait till gas hits ten a gallon! There will be dozens of US Entrepreneurs fielding alternatives.

49 posted on 05/11/2008 9:34:20 PM PDT by NoLibZone (The Huge Demonstrations by Illegals in 2006 prove they have more of the Spirit of 76 then we do)
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To: R W Reactionairy
If you are not predicting a depression, where is the new oil going to come from?

You're right, I don't thing supply is the answer. But I think looking at prices just two years ago we were in the high $60's/bbl, so it's not unrealistic to think that we could correct that much two years from today.

And I don't necessarily think a "massive depression" would be the root cause. (maybe a 4 to 6 quarter recession would contribute)

Reverse Engineering Crude Oil Prices:

Let's chalk $25 of the $125 price to the futures traders being futures traders.

So now we're down to $100, $25 can reasonably be attributed to the weak dollar (inflation). The dollar is in uncharted terrority. Most commodities, including precious metals, have all gone insane in the last two years partly because of this.

Now we're at $75, and that 4 or 6 quarter recession that is coming will give the U.S. economy a sniffling sneezing coughing aching stuffyhead fever which will, of course, cause the rest of the world to need to be rushed to the E.R., thus driving down crude oil demand worldwide AND causing our dollar to make strong gains vs. those weakening currencies, which is bearish for commodities.

I know this is overly simplistic, but I just don't think it's as far-fetched as you and others might think.

50 posted on 05/11/2008 9:41:42 PM PDT by adm5 (Roger That. - MA2 Michael A. Monsoor, USN - Medal of Honor Recipient Posthumously)
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