Yen Carry Trade, unravelling feeds into oil

Sponge Bob

Some of yiz may wonder why oil prices are heading south so quickly. Now $63 a barrel instead of $79 at peak.

Its because the Yen Carry Trade is drying up and is no longer supplying the finance for speculators to future trade the commodity ( or other commodities) at a low cost to themselves.

Shutuplaura

Lyndon La Rouche! isn't he nuts? I've actually heard about these in work - I remembered after staring blankly at the screen for a minute. From what I know the dangers are over stated here. The world economy is dependant on these things, they are just a potentially handy way to make money.

Sponge Bob

very handy, the Japanese underwrote stack of hedge funds at 0% interest

dunkamania

Commodity prices are dictated by supply and demand,demand for oil has declined slightly and inventory has increased.In addition hurricane season has impacted Gulf coast operations less than expected,and politically volatile oil producing regions have been stable lately.

PDelux

http://money.cnn.com/2006/09/05/news/companies/chevron_gulf/index.htm

Sponge Bob

which means that this is not a complete pipe dream then

http://www.providenceresources.com/html/dunquin_prospect.html#img

Pa ElGrande

Amaranth's energy-trading desk lost $5 billion in about a week. Its assets under management have dropped to $4.5 billion, from $9 billion at the start of September, according to The Wall Street Journal.

US hedge fund loses $5 billion in a week on energy bets
http://www.finfacts.com/irelandbusinessnews/publish/article_10007335.shtml

That's gotta hurt...:eek:

Sponge Bob

did I not say "unravelling" Pa ??

PDelux

Interesting article on this in the latest Businessweek magazine, "How low can it go?".
Essentially discussed three scenarios:

1.
Sanctions hit Iran and Iran hits back affecting oil supply. Recession in US and slowdown in China.
$100+

2.
Slowdown in US but no recession. No surprises, things keep ticking along
price hovers in the $60-$70 range

3.
Recovery in 2007 in US and China picks up. Everything rosey in the Mid East. Increased supply.
price drops to $20.

OPEC will like to keep it at around $60 shouldnt let it drop.

silverharp

The marginal cost of producing oil is around $40 (tar sands oil) , the global cushion is about 1.5mbd (it used tobe 10mdb in the 90's). No new "North Seas" have been found in the past 10 years.

So short of a global recession oil is unlikely to fall below $50 and will probably go back up (after the US elections ;-)