Oil Will Continue to Move Higher To $100
Oil continues higher towards $100 by July. It pulled back on the mini-panic yesterday morning, from $87 to $84. But the bottom for now seems to be at $80. Short of any major economic disasters, the price must go higher. Demand is only increasing around the world.
The data show that the use of oil per capita in America is over 25 bbls per year. In the growing economies of Asia (India, China, etc) and Latin America (Brazil) where 2/3 of the world population lives, the per capita use is less than 2 bbls. As those economies "Westernize" their population will require more oil. Even if the developing world only gets to 10 bbls per capita in the next 20 years, where will all that oil come from. A quick estimate will be a requirement to more than double current world production of around 85 mm barrels per day. That is just not possible. There isn't that much more oil to find. Oil companies today have a hard time just finding enough oil to replace the depletion of older wells.
Price is what must give. The only way to balance is through higher prices that bring down Western demand.
Today, I bought additional PennWest (PWE), using the July $20 Call and Put Options. I sold the July $20 puts for $0.55 to pay the time premium on the July $20 calls which cost $1.75 with PWE trading today at $21.45. $20 is the new floor for PWE with 2006 price of $30 being the new target price.
Tags: Asia, Bbls, Brazil, Call options, Developing World, Download Flash, Economic Disasters, Flash Player 9, Hard Time, India China, Latin America, Oil, Oil Companies, Pennwest, Per Capita, Put, PWE, Target Price, World Population, Yesterday Morning




