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Oil Bubble Set to Pop: Crude to Fall 25 Percent in 6 Months, Says Invesco's Garnick

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Gman Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:21 PM
Original message
Oil Bubble Set to Pop: Crude to Fall 25 Percent in 6 Months, Says Invesco's Garnick
Edited on Thu Jun-26-08 12:22 PM by Gman
Source: Yahoo Finance

Oil Bubble Set to Pop: Crude to Fall 25 Percent in 6 Months, Says Invesco's Garnick
Posted Jun 26, 2008 01:03pm EDT by Aaron Task in Investing, Commodities
Related: OIL, USO, DUG, GLD, XLE

Oil prices surged again Thursday after Lybia threatened to cut production and OPEC's president forecast $170 crude this summer. The Fed's inability to raise rates to support the dollar is also keeping crude prices aloft, as well other commodities like gold.

But oil is a bubble that's going to pop soon, says Diane Garnick, investment strategist at Invesco, which has nearly $500 billion of assets under management.

Demand for oil in the emerging market has been "overstated," says Garnick, who foresees a 25% decline for crude in the next six months. Garnick may be right about demand, but I'm still of the view that supply constraints are the fundamental reason for rising oil prices. That said, I'll note commodity maven Marc Faber of the Gloom, Boom & Doom report has also turned cautious on the sector, at least for the next 6 to 12 months.

Read more: http://finance.yahoo.com/tech-ticker/article/30380/Oil-Bubble-Set-to-Pop-Crude-to-Fall-25-Percent-in-6-Months-Says-Invesco%27s-Garnick?tickers=OIL,USO,DUG,GLD,XLE



In related news.... pigs have been observed to be evolving wings. Analysts predict pigs will achieve the ability to fly within 6 months.
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Xipe Totec Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:25 PM
Response to Original message
1. I'll believe it when I see him short the oil market with his personal money nt
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Warpy Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:30 PM
Response to Reply #1
4. Same here
Right now, the thing keeping those ridiculous spot market futures prices high is the threat of another war in the Middle East. If there is one, the futures traders will be rolling in it. If there isn't, they're all going to be crying poverty.

Six months is about the time period, too, since it's unlikely Stupid will start a war during the transition period from one administration to the next. I sincerely doubt the military will go along with it if he tries.

The wild card is Israel. If their hotheads prevail, oil will shoot up to $200-300 overnight and the futures traders will be in fat city....if they can find a place to spend it during a world war.
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Ytzak Donating Member (287 posts) Send PM | Profile | Ignore Thu Jun-26-08 01:24 PM
Response to Reply #4
15. Read about Operation Restore hope launched in 1992 by Bush Sr.
Operation Restore Hope/Battle of Mogadishu
This is exactly what G.H.W. Bush did in December of 1992, comtted the US to an active role in Somalia. Stupid will simply fallow in his father's footsteps.
In December 1992, in one of his last acts as President, George Bush proposed to the U.N. that United States combat troops lead the intervention force. The U.N. accepted this offer and 25,000 U.S. troops were deployed to Somalia.
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MadHound Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:25 PM
Response to Original message
2. Big whoop, so it will go back to the prices we had last winter
And we'll be paying $3.50/gal instead of 4.25. Then next summer it will get jacked up to five or six a gallon, and people will be longing for the "good ol' days of four dollar a gallon gas:eyes:

Is is all so much media manipulation bullshit. Sorry, but gas isn't going down significantly, for a long period of time, ever again in our life time unless something really radical occurs. Instead we'll continue with this seasonal up and down, with the overall price tending upwards and further up.
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pokercat999 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 06:35 PM
Response to Reply #2
24. The only way gas goes down in any significant amount is if
we don't need it anymore. Which would mean an alternative fuel or a replacement for the internal combustion engine.

Your assessment of the price increases and small drop back only to be increased again ever higher and higher is big oils way of bringing the water in the pot to boil without the frog jumping out.
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colt equalizer Donating Member (57 posts) Send PM | Profile | Ignore Thu Jun-26-08 12:25 PM
Response to Original message
3. Great article on China, etc exploiting frozen methane hydrate.
China and India Exploit Icy Energy Reserves
By Gerald Traufetter

China and India have reported massive finds of frozen methane gas off their coasts, which they hope will satisfy their energy needs.

On the surface, it looked like any other drill core from the ocean floor. Its shimmering grayish-green surface was both slippery and grainy at the same time. But the sample only revealed its exciting secret when the geologists on board the "Bavenit," a drilling ship, lowered the pressure in the steel tube and held a lit match to the upper end. Suddenly a yellowish-red flame began licking from the slick material.

"As astonishing phenomenon," noted the scientists from the Guangzhou Marine Geological Survey. So astonishing, in fact, that when their ship pulled into the harbor at Shenzen on June 12 of this year, the scientists were all smiles.

Shengxiong Yang and Nengyou Wu, the two expedition leaders, stand an excellent chance of going down in the history of their country as heroes. The material they pulled from the muddy ocean floor of the South China Sea has the potential to satisfy the energy needs of China and its fast-growing economy.
The flames in the drill core were coming from methane hydrate, a material first discovered in the 1970s. Its unique characteristic is that it is a seemingly frozen and yet flammable material.

In the West, this potential fuel from the ocean floor has for the most part been the stuff of fantasy. But it's a different story in Asia. The People's Republic of China is investing millions to study this massive source of energy. The same holds true for India, South Korea and Taiwan, all nations that are on a fast track to surpassing the West as economic powers.

These countries -- especially China, which produces one third of the world's steel and aluminum and half of its cement -- are playing a key role at the United Nations Climate Change Conference, currently being attended by roughly 10,000 delegates on the Indonesian island of Bali.

The needs of these emerging economies continue to rise. Each year, China increases its power consumption by an amount equal to France's total annual power production. By the end of 2007, the country, with its population of 1.3 billion, will have surpassed the United States as the world's No. 1 producer of greenhouse gases.

It is one of the ironies of the Kyoto Protocol that China is still treated as a developing country, which means that, legally speaking at least, it is not obligated to pay any heed to climate protection issues. However, China and the world's other budding economic superpowers will no longer enjoy that status under a follow-up agreement to Kyoto, which the delegates in Bali plan to initiate.

The Chinese government is pursuing a double strategy. On the one hand, it expresses great concern over climate change. Observers were astonished to note that Prime Minister Wen Jiabao used the terms "environment," "pollution" and "environmental protection" 48 times in his address to the National People’s Congress this year. China, he said, will not repeat the mistake of "polluting first and cleaning up later."

At the same time, however, China is energetically seeking new ways to satisfy its voracious demand for more energy. And Chinese officials are pinning their hopes on methane hydrate as one of these ways.

Methane, trapped in an icy cage of water molecules, occurs in permafrost and, in even greater quantities, beneath the ocean floor. It forms only under specific pressure and temperature conditions. These conditions are especially prevalent in the ocean along the continental shelves, as well as in the deeper waters of semi-enclosed seas (see graphic).

World reserves of the frozen gas are enormous. Geologists estimate that significantly more hydrocarbons are bound in the form of methane hydrate than in all known reserves of coal, natural gas and oil combined. "There is simply so much of it that it cannot be ignored," says leading expert Gerhard Bohrman of the Research Center for Ocean Margins (RCOM) in the northern German city of Bremen.

A few months ago, Chinese Premier Wen Jiabao held the material in his hand -- or rather, in a metal ice bucket with flames shooting from the top. He was visiting an Australian research center at the time, but now he can just as easily watch the same spectacle unfold in Chinese research laboratories.

The Chinese researchers found the methane hydrate, also known as crystal gas, because of its molecular structure, in a layer of sediment 15 to 20 meters (50 to 65 feet) thick off the Chinese coast. "It was embedded in clay and silt ," says John Roberts, whose firm Geotek provided the technical equipment for the drilling expedition.

This is the sort of information natural gas companies like to hear. The porosity of this sediment mix is well suited to drilling for the gas. "The gas hydrate has never found in this form before," Roberts explains. It suddenly seems conceivable that production using conventional techniques could work.

One possible method would involve the use of drilling tubes that would conduct heated fluid into the cold reservoirs. This would dissolve the icy cage encasing the methane. The next step would be to capture the gas through a second opening.

These are the kinds of prospects that have inspired others to emulate the Chinese researchers' success. Japan has built the world's largest research drilling ship, the Chikyu, primarily to study methane hydrate. India has invested €200 million to launch a major national program -- and has already reported successes.

http://www.spiegel.de/international/world/0,1518,523178,00.html


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madrchsod Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:36 PM
Response to Reply #3
5. oh great ..methane hydrate
let`s put an end to 99.99% of the life on the planet....
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colt equalizer Donating Member (57 posts) Send PM | Profile | Ignore Thu Jun-26-08 12:40 PM
Response to Reply #5
6. So sure of that are you? Are you willing to jeapardize everything on that belief?
Because if you are, Americans will not continue paying $4, $5, or more per gallon of gas and just sit and listen to politicians looking for someone to blame. They will take it out at the voting both, if not in 2008, then 2010, or 2012. Right now the attack is going strong on our lack of drilling for 20 years and "look what the chinese, indians, norwegians, etc are doing".

PS: what if they are wrong about the dangers of methane hydrate? 1,000 years or more supply just sitting at the bottom of the ocean waiting for someone to use it.
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Barrett808 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:03 PM
Response to Reply #6
8. Like "oil shale," hydrates will never produce significant flow rates
And we also risk destabilizing a giant and delicately balanced store of sequestered carbon.

This is a lose-lose proposition.
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NickB79 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:09 PM
Response to Reply #6
10. Read up a bit on the Permian mass extinction
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madrchsod Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:14 PM
Response to Reply #6
11. i`m a pessimist
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lakeguy Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:14 PM
Response to Reply #6
13. it's already happened before. what more proof do you need? nt
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endarkenment Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:52 PM
Response to Reply #6
17. Europe has been paying way more than that for a long time
and they seem to be doing just fine. In fact many European nations have a better quality of life than we do. Then again, they used high tax rates on petrolium to subsidize the development and operation of an extensive mass transit system, plus they have invested a lot in alternative energy sources. They seem to be doing something about getting themselves off of the auto-culture trap while we seem determined to drill our way out of anything that gets in the way of our god given right to drive big ass suvs.

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daleo Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 09:08 PM
Response to Reply #6
26. Let's play Russian Roulette with the Earth
Five out of six times, you do alright. The other time you're dead, so who cares.
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David__77 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 12:47 PM
Response to Original message
7. I wouldn't count on it.
There are numerous geopolitical faultlines and the degree of uncertainty is very high with energy. I wouldn't stake my reputation on such a claim.
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keepCAblue Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:06 PM
Response to Original message
9. IF they go down, it'll likely be just in time for the ...
... November election, in a desperate effort to make the Rethuglicans look good.
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KillCapitalism Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:14 PM
Response to Original message
12. I call bullshit. n/t
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Bob3 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:20 PM
Response to Original message
14. yep just wait a firedman unit and things will be fine
how often have we bloody heard that?
yessh.
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boomerbust Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 01:25 PM
Response to Original message
16. CNBC
OIL to hit $140/barrel any second now. Look to the left to get the Bush answer!!!
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slackmaster Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 02:28 PM
Response to Original message
18. It will collapse shortly after enough small investors get suckered into buying futures contracts
:hi:
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Captain Angry Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 02:38 PM
Response to Reply #18
19. Exactly.

People that don't know how the markets work are buying high and selling low. And they wonder why they never get ahead of their bills.

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slackmaster Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 02:42 PM
Response to Reply #19
20. I think it would be interesting to quantify the amount of advertising you see for commodities
And compare that with actual price trends.

Ads in newpapers, AM radio, etc. for gold bullion peaked right about the time the price hit $1,000 per ounce. (I sold most of my gold and silver very near the top BTW.) They're still telling people the price is going to double. That may be true, but it may not happen for 20 years.
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Captain Angry Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 02:58 PM
Response to Reply #20
22. I did something similar.

When the crowd all runs one way, it pays to look the other direction sometimes.

I finished my degree last month, only 17 years after I started. (life interfered). Anyway, I was in a classroom with a bunch of 20 year olds. They ALL bet on gold. They ALL lost. I told them about when I got into gold, $450, and where I thought it was going. All this after they all bet big and lost millions in their simulated portfolios.

They all bet on oil, and it dropped during the trading period. I explained supply, demand, refining, transport, and they all still bet on the high priced asset.

The advertising is rampant.

There's several classes of bad advertising as well.

1: Buy this one time minting of specially gold clad coins. We took the most famous gold coin ever, worth thousands of dollars today, and our craftsmen created a perfect replica clad in splendid X carat gold... Yours now for $20.00. Our cost? $1.25, but we won't get into that.

2: I sold my wedding ring from my first marriage to be melted down. No mention that the money offered is way less than she'd have gotten at a jewelry store, etc.

3: I now work from home selling stock contracts and options. (non-typical results)

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Art_from_Ark Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 11:23 PM
Response to Reply #22
28. How did they lose on their gold bets?
Edited on Thu Jun-26-08 11:32 PM by Art_from_Ark
If you own physical gold (bullion coins) outright, you don't lose anything until you actually sell at a loss. Gold isn't for day-traders, it's more for people worried about long-term inflation. And as long as "money" can be "created" out of thin air, inflation will be with us well into the forseeable future.

But on edit, I can see where someone might get suckered into buying "gold clad coins" (what the hell are those?), and gold jewelry usually sucks as an investment (unless you can get it for close to "scrap" or "melt" value).
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Captain Angry Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jun-27-08 01:34 AM
Response to Reply #28
29. Gold was being used for day trading.

They lost because in their young minds, gold always goes up. I mean it was $450, and now it's $1000. It will never go down again! Good thing it was a simulated account.

The gold clad coins sucker people because they hear that gold is valuable, but can't buy it. And now here's gold for $20.00.

The jewelry bit is harsh because people will sell their gold to somebody on TV for a fraction of what they could get locally.


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Art_from_Ark Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jun-27-08 03:17 AM
Response to Reply #29
30. I can understand all of that
People should never try to day trade in gold-- even if it goes up $30 in a day, which it did recently, it only represents a 3- 3.5% increase in price. Chances are, the next day it will fall because the dollar suddenly "strengthens" (which is a load of crap).

"Gold clad coins" is a new one to me, but it automatically sounds like a sucker play, since there is no such thing as an investment-type "gold clad coin". Technically, the use of the word "coin" is supposed to be restricted to metallic objects produced by governments to be used as money, or as monetary media. Everything else is a token, a medal, or a "round".

And people actually sell their jewelry to hucksters on TV? Wow. I feel sorry for people who don't know any better and fall for that sort of thing.
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boomerbust Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 02:57 PM
Response to Original message
21. June 27 2008
Black Friday?
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CatholicEdHead Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 04:44 PM
Response to Reply #21
23. Today (Thursday) was not exactly bright
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NMDemDist2 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 07:55 PM
Response to Original message
25. wow, all the way down to $105 a barrel
Edited on Thu Jun-26-08 07:56 PM by AZDemDist6
be still my heart...

do i really need the :sarcasm: ??
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ileus Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-26-08 09:20 PM
Response to Original message
27. keeping my fingers crossed.
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