tag:blogger.com,1999:blog-18183714.post115923844807620299..comments2024-03-08T20:25:35.963+08:00Comments on Malaysia-Finance Blogspot: SalvadorDalihttp://www.blogger.com/profile/06868577716920232901noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-18183714.post-1159287956653129072006-09-27T00:25:00.000+08:002006-09-27T00:25:00.000+08:00Hi Dali,nice write-up on the energy sector.However...Hi Dali,nice write-up on the energy sector.However there are a few points that are quite confusing.Hopefully you can clarify further.Thanks.<BR/><BR/>You have mentioned that oil price should not drop too much too fast as that could easily ignite good-feelings among consumers (especially in the US where their housing starts and activity depends largely on sentiment and liquidity). Too fast a drop may cause housing figures in the US to spike up and may leave the Fed with no choice but to raise rates again come the next round.<BR/> <BR/>If I remember correctly,the FED's have to raise interest rate 17 times this year to control inflation which is mainly due to the spike in oil prices.As such,it would be safe to say that,with the current downtrend in the oil price inflation should moderate and this renders further increase in rates by Fed's unjustifiable.The Fed's are concern about the housing market too but it is not the only indicator that they look for to determine the interest rate directions.My take is that,if the housing market growth is good and yet inflation is within limits,the Fed's will not increase rates further as it will impede economic growth.<BR/><BR/>Amaranth hedge funds,as its name implies,its a hedge fund.My question is,why are they not hedge in their investment portfolio?Too much are invested in the energy sector which resulted in significant losses in its funds.<BR/><BR/>You have mentioned that you expect oil price to be in the range of USD62 - USD64 for the rest of the year.However,I would like to point out that most oil analyst report or articles that I have read predicts a lower range of about USD50 - USD60.Some of the reasons cited are<BR/><BR/>1) More funds are expected to suffer losses and this will cause many funds to reduce or pull out completely their investment in the energy sector thus causing the price to plummet further.<BR/><BR/>2)IEA predicts a lower demand for energy consuption next year.<BR/><BR/>3) Probe on BP for price manipulation by the US authorities.<BR/><BR/>4) A large amount of speculative premium are not there any more.<BR/><BR/>5) New energy discoveries.<BR/><BR/>6) Increase in usage of alternative energy source such as biodiesel,ethanol,solar and etc.<BR/><BR/>7) Calmer geopolitical enviroment.Iran is willing to negotiate now.Less riots in Nigeria<BR/><BR/>8) Opec is not cutting production now.Cutting production by the oil cartel might backfire according to some analyst.Part of the premium in the oil price is due to the market perception that there are no or limited extra capacity currently.By cutting production this fear premium is removed.<BR/><BR/>Predicting oil price is highly debatable and your guess is as good as mine.However its a relieve that price had fallen and we look forward that the government will not increase our petrol price next year.Lastly,I would like to say that I enjoy reading your post and do keep up the good work.Cheers!!!!<BR/><BR/>Starter.Starterhttps://www.blogger.com/profile/11597664067173897055noreply@blogger.comtag:blogger.com,1999:blog-18183714.post-1159281013250875822006-09-26T22:30:00.000+08:002006-09-26T22:30:00.000+08:00Oil ran up because of speculative play. Down becau...Oil ran up because of speculative play. Down because of speculation gone wrong. The rich cause misery to the poor. Even if the rich lose 60% of their money, they are not really affected. Only the poor.swifzhttps://www.blogger.com/profile/08690485820518235097noreply@blogger.com