In October 2010, Lindsey Williams predicted crude oil prices would be
between $150-200 per barrel by June of 2011 based on information he had
from "insiders." Others provided real market evidence of _crude oil
hoarding_ in the futures market at that time. The unrest in the Middle
East is just "show time" for the manipulation of crude oil prices.
On 03/09/2011 07:27 AM, MJ wrote:
*Oil will go up 'ballistically' if unrest shifts to Saudi Arabia, says
Marc Faber
*Source: BI-ME , Author: Posted by BI-ME staff
Posted: Tue March 8, 2011 10:09 pm
INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom
editor sees oil prices extending their bull run despite the 15% run-up
this year alone.
In an optimistic scenario demand for oil will rise as the global
recovery takes hold, and in a pessimistic scenario prices still go up
if the Middle East unrest spreads and crude production is curtailed.
In both cases, he says, you should be long energy and energy related
shares.
Speaking to CNBC <http://www.cnbc.com/id/41961949> today, Faber said:
" I think long term you should be exposed to energy in either
scenario....if you are extra bearish and believe that War World III is
going to start soon, as I believe, or in an optimistic scenario".
Addressing the fundamentals of the oil market, Faber said: "What we
had over the last couple of years is essentially a reduction in demand
from the developed world, the US, Western Europe and Japan, and
continued growth in emerging economies.
"So, if you take a very optimistic view of the world, namely a global
economic recovery, demand in the Western World will pick up and demand
in the Emerging World will continue to rise strongly, so from a very
optimistic point of view you should be long oil," he recommended.
On the flip side, "in a very pessimistic scenario you have to assume
that unrest will shift to Saudi Arabia and other countries in the gulf
and at that stage the production is curtailed and in that case
obviously oil will go up ballistically."
Brent crude futures could hit US$200 a barrel if political unrest
spreads into Saudi Arabia, Societe Generale said on Monday.
Under what the bank called Geopolitical Scenario 3, "unrest spreads to
Saudi Arabia and threatens Saudi crude exports and any remaining spare
capacity. Brent price range of US$150-US$200 a barrel," it said in a
research note.
"In this most extreme, worst-case scenario for the oil markets,
serious unrest spreads to Saudi Arabia. In this case, it does not
really matter if Libya or any other producers are shut down or not.
Saudi Arabia is OPEC's biggest producer and the world's biggest
current holder of spare capacity," the bank added.
Saudi Arabia is the world's top exporter of crude oil, meeting about
10% of the global oil demand.
Oil prices dropped today, with North Sea Brent crude dipping briefly
below US$113 per barrel, after Kuwait's oil minister said OPEC was
considering boosting production for the first time in more than two years.
"You can increase production but to increase the reserves is very
difficult and very costly and the fact is simply that the world is
burning more oil than it is adding reserves every year," Faber told CNBC.
"So, the level of proven reserves or the existing oil fields, that
production will go down, so you have to find new oil fields and
develop new ones all the time and that is very costly," he said,
adding I would estimate the marginal cost of new oil around US$80 per
barrel.
Asked if prices can go up if US demand stays low, Faber said the
importance of demand in the developed world is diminishing and the
importance of very low per capita consumption countries such as China
and India is increasing.
"For the first time in the history of Capitalism you now have
essentially demand in emerging economies exceeding demand in the
developed world," he said.
What is the best oil investment vehicle?
Faber said he doesn't favor investing in commodity ETFs given the high
rollover costs. Investors in ETFs were bound to lose money in the long
run given these costs, he suggested.
"In the commodities space, either you go long commodities yourself
through the futures market or you buy companies that produce
commodities," Faber advises.
http://www.bi-me.com/main.php?id=51517&t=1&cg=4
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