Oil prices drop below US$50
LONDON - Oil prices sank under US$50 a barrel in London on Thursday, reaching the lowest levels for three and a half years, as the market was plagued by weak energy demand.
Brent North Sea Crude for delivery in January tumbled to US$48.54 a barrel - last reached in May 2005. The contract had closed on Wednesday at US$51.72.
In New York, light sweet crude for delivery in December dived to US$50.20 a barrel - the lowest level since January 2007. -- AFP
Charles Maxwell of Weedan has been following oil for almost 50 years. He appeared on the Bloomberg around September when oil was around US $ 100. He said oil to hit US $ 300 in 7 years. But he thinks next six month will hover within US $ 75 - US $ 115 but will not go down to US $ 30-40 / barrel.
He appeared again with Marc Faber recently on the Bloomberg(November). Marc described him as a walking encyclopedia of oil industry. He thinks oil is finding a bottom in the next 16-24 months when it is around US $ 60 / barrel now. He sounds a bit cautious now but I think the thesis of oil going up will hold up.
Buffett has been adding energy to his holding in Q3 2008 .
The Omaha, Nebraska-based insurance and investment company said it owned 83.96 million shares in Houston-based Conoco, worth $6.15 billion, as of the end of September, equal to a 5.6 percent stake. That is up from 59.69 million shares as of June 30, and 17.51 million three months earlier.
While I don't know how high the oil price will go but I'm convinced this will be a long term profitable investment. Buffett and Bill Gates generated a lot of sensations when they made a private trip to Canada to look at oils sand in late August. He subsequently appeared on CNBC and not sure US $ 120 is sustainable, well he is right but watching what he does, I think the long-term trend is up.
QUICK: Wait, does that make you think that an investment in a tar sands company, somebody who's making--taking advantage of that would not be worth it at $120 a barrel for oil?
Mr. BUFFETT: Well, the biggest variable in whether it's a good investment is the price of oil. Now, it's important to know how much they can get out and what their costs are going to be and what the capital costs--all of that is important and that fits into it. But you still have to figure out what your own feeling is about what oil's going to be selling for three years from now or five years from now. Because you could be the world's greatest mining engineer, but if you were wrong about the price of oil in a big way it would negate all that knowledge. So it--I can tell you that if 100--if you had $120oil from now till, you know, 50 years from now, that the tar sands would be--would work out very well. But I don't know the answer to that. And I may form an opinion at some point, and I've got it--I'm prepared to form that opinion now.
QUICK: But you are not actively looking right now to invest in any of these companies?
Mr.BUFFETT: Do I have a buy order this morning? The answer's no.
A word of cautious though, don't get in too early while the story of global recession is still unfolding.
Closing: The issue of oil and water, both are finite resources, make it to the big screen - 007. A year ago and now is still the same - defying fundamentals - from extreme optimism to extreme pessimism. Demand did soften but is the pricing falling t another extreme justifiable? Just something to think about.
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