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Deej (others are requested to chime in too),

Continuing our thread from MF GLobal board....

I understand the global demand for oil. I don't think you have to convince me on that. However there must be a rational price level for each demand level. I cannot give you the reference of where I read it but I read that during the last 12 months (or 6 months), the global demand of oil went up by 2.5%, the production went up by 2%. But the price went up by more than 100% ($60-$130). IF these figure are correct (even marginally), how do you justify the oil price rise based on demand?

My impression is that almost all of the recent price rise is a result of speculative futures trading. I don't think oil producers are making $130 per barrel. More likely they are near $50 per barrell.
As such, I feel this is a bubble that will collapse sometime. On top of this there are distinct moves afoot to limit speculative trading, reduction in air traffic, road traffic, boosting of porduction from existing oil field (OPEC is thinking of 10% boost) and oil production from shale (although environment unfriendly). Shale oil is already at $70 per barrell. It was uneconomical when oil was below 60. But now this is an economical prospect.

I got into oil in 2003. I think the run from this point onward is irrational. I have liquidated my positions in XLE, MDR, FRO and COP. I am still keeping all the TMF recommended oil related stocks from II, GG, SA and HG and some other natural gas stocks. VLO is the only refinery stock I have now. I have also liquidated my positions in steel. Shifting all the cash to financial sector and a few other speciality stocks like FCX and OMG (primarily for molybdenum (FCX) and other speciality chemicals and metal products (OMG)).

Some of my data and my understanding may be faulty. This board is a good place to set it right. I will appreciate your impressions about my thinking.


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