Iran Doesn't Want Higher Oil Prices

[Kate Turlington + 44]

The Saudis want to keep tightening the market and pushing prices up and now Iran's come out with an official statement against higher oil prices. They want $60-$65. Of course, Tehran thinks it's about to see sanctions renewed (coming up this week), and they'll want to tighten the screws on the Saudis. Under sanctions, higher oil prices won't help Iran, just the Saudis. 

[Tom Kirkman + 8,860]

I'm in Dubai for a few days.  Had a chat with the taxi driver on the way to the hotel.  Surprisingly, he was also concerned that oil prices might go too high, and mentioned that $100 oil would crash.  And I agree with that sentiment, $100 oil is too high.

I've commented many times this year, I would be happy with $65 oil this year.  To me, that seems about right - not too high, not too low.  Getting greedy and pushing for triple digit oil prices will have bad consequences later on.

[Tom Kirkman + 8,860]

Kate, you might want to read this article, related to your comment:

Saudi Arabia's Needs have become Iran's Problems

[Marina Schwarz + 1,576]

No driver in their right mind would want oil at $100 or more. Even non-drivers such as myself don't want that. More expensive oil makes everything else more expensive, too, regardless of where you are. Except in Saudi Arabia, I guess. They still have fuel subsidies, right? Or did they nix them?

[FeetDontFailMeNow + 4]

Fuel subsidies have gone I believe as part of the drive to correct the budget deficit. I'm still not entirely convinced Trump will pull out of the Iran deal, to be honest. I think it's his usual negotiation posture, the big ask followed by something watered down slightly. Pulling out would result in a spike in oil prices but would be sharply revered once Iran starts opening the taps to make hay whilst the sun shines. 

[jose chalhoub + 388]

I guess Maduro would want an oil barrel at 100+$ to keep himself in power ... Although i hardly doubt that will save the venezuelan oil industry from collapse.. 

[Royalblood + 14]

yeah, still have to get it out of the ground ...

[HILLARY + 15]

Quote

 

Overly high oil prices would in the final analysis hurt thee world economy on the overall! A fair oil pricing regime should be between  $60-70 per barrel .

[Tom Kirkman + 8,860]

6 minutes ago, HILLARY said:

Overly high oil prices would in the final analysis hurt thee world economy on the overall! A fair oil pricing regime should be between  $60-70 per barrel .

Agreed, I've been hoping for a $60 to $70 range since the beginning of this year.

The $80 to $100 range that some have been calling for is too high, and unsustainable, in my opinion.

Edited May 7, 2018 by Tom Kirkman

[HILLARY + 15]

One will hope that the global economy will not be plunged into a rather embryonic bumpy times in form of growth rates going southwards and a 'recessional' phase ?

[William Edwards + 708]

Let us all keep in mind the fact that there is currently no mechanism that controls the price of oil at any level. It is the random result of speculative trading and has no bearing on needs, wishes or potential problems. It’s just what it is.

[Stephen T. Harris, CPL + 23]

Oil at $80 - $160 used to also be called unsustainable, and until SA decided to impel the US producers, in a facile attempt to repeat 1986 oversupply-to-gain-increase-market-share strategy, most State oil companies were quite content with the largess and even argued such was sustainable. The recent strategy by SA and Russia was in response to indefatigable George Mitchell's American persistence to achieve what most all of us in the industry thought was simply not possible. The last strategy failed, but the "first one " succeeded beyond expectations and wiped out an entire American generation for our industry - the effects are still seen today. If one really wants to figure out what the global markets are telling the industry, then all sorts of predicates must be factored in, which are not generally discussed due to their complexities, such as: global tanker supply and demands; global floating storage volumes (which a lot is considered state secrets); market positions of crude, LNG and product traders worldwide;  supply and demand stats...to a small degree; pipeline takeaways domestically, and for our neighbors like Canada; international politics and government data; and about a hundred other factors. What Iran wants is not material as their regime, like Venezuela and others of the same ilk, are outliers and almost pure political. In other words, what Iran says or does is immaterial in real world calculations in my opinion.   

[Rodent + 1,424]

2 hours ago, William Edwards said:

Let us all keep in mind the fact that there is currently no mechanism that controls the price of oil at any level. It is the random result of speculative trading and has no bearing on needs, wishes or potential problems. It’s just what it is.

Breakevens (and subsequent bankruptcies for those who can't compete on breakevens) have a lot to do with setting oil price. WHO AM I KIDDING? Not much to bankruptcies these days. It's all bailout, bailout, bailout--instead of letting inefficient companies wither on the vine like they should. Seriously, though, in the US at least, oil production tends to lead the way in setting price. 

Thankfully, no single producer is in control of prices--not even OPEC anymore. 

[William Edwards + 708]

Possibly it is time for a refresher regarding the history of crude prices. Here is the chart from 1861 onward, courtesy of BP, expressed in 2016 dollars. Please take note of the fact that the price has been above today's price for only ten percent of the time, with the average being below $40/B. The past forays above $40/B appear as temporary spikes. It makes it difficult to justify the expectation of a sustained price even as high as today's level.

 

 

Edited May 9, 2018 by William Edwards

[Tom Kirkman + 8,860]

4 hours ago, William Edwards said:

Let us all keep in mind the fact that there is currently no mechanism that controls the price of oil at any level. It is the random result of speculative trading and has no bearing on needs, wishes or potential problems. It’s just what it is.

William, it's great to see you here on Oil Price Community.  I was hoping you would check out this forum.  How are you doing these days?

[William Edwards + 708]

Nice to hear from you, Tom. I see that you are still keeping the industry on track.

I just recently got into oilprce.com and am trying to learn the ropes. Like you, I think that some of my past writings are still appropriate, so I may post a few at an appropriate time. I saved pdf's of all my Oilpro posts, so I can spread my thoughts without having to re-invent the wheel.

Any pointers that you can pass along will be appreciated.

[Tom Kirkman + 8,860]

Thanks, and it's great to have you here, William.  And good news that you saved pdfs of all your old Oilpro articles. 

For the sake of those on this forum who are not familiar with your views, perhaps you would consider re-posting some of your old articles here?

 

 

[William Edwards + 708]

I will share some of the posts, but with discretion and moderation.

[Tom Kirkman + 8,860]

1 minute ago, William Edwards said:

I will share some of the posts, but with discretion and moderation.

Understood, and much appreciated, William. 

Looking forward to reading your unique musings again; it's been a while.

[Bhimsen Pachawry + 72]

12 hours ago, William Edwards said:

Let us all keep in mind the fact that there is currently no mechanism that controls the price of oil at any level. It is the random result of speculative trading and has no bearing on needs, wishes or potential problems. It’s just what it is.

There are mechanisms like "environmental clearance", taxes, leasing cost, royalty charges etc. which are used to control oil prices. The speculative trading does effect oil prices but within a limit of a band of +/- 5% of the price. The increase or decrease of prices by any larger amount is dependent on other factors, not speculation. Definitely, speculation is not what increased oil prices from $60 to $75

[Tom Kirkman + 8,860]

33 minutes ago, Bhimsen Pachawry said:

There are mechanisms like "environmental clearance", taxes, leasing cost, royalty charges etc. which are used to control oil prices. The speculative trading does effect oil prices but within a limit of a band of +/- 5% of the price. The increase or decrease of prices by any larger amount is dependent on other factors, not speculation. Definitely, speculation is not what increased oil prices from $60 to $75

I'm going to question and disagree with both of your points.

● I'll question this:

"The speculative trading does effect oil prices but within a limit of a band of +/- 5% of the price."

Where do you come up with the seemingly random figure of +/- 5% ?  Please explain your rationale.

● And I'll disagree with this:

"Definitely, speculation is not what increased oil prices from $60 to $75."

From what I can see, speculation is indeed what increased prices.  To me, no other real world event except speculation explains the reasons for the price increase.

 

Just my opinion; as always, you are free to disagree.

 

Edited May 8, 2018 by Tom Kirkman

[Bhimsen Pachawry + 72]

1 hour ago, Tom Kirkman said:

I'm going to question and disagree with both of your points.

● I'll question this:

"The speculative trading does effect oil prices but within a limit of a band of +/- 5% of the price."

Where do you come up with the seemingly random figure of +/- 5% ?  Please explain your rationale.

● And I'll disagree with this:

"Definitely, speculation is not what increased oil prices from $60 to $75."

From what I can see, speculation is indeed what increased prices.  To me, no other real world event except speculation explains the reasons for the price increase.

 

Just my opinion; as always, you are free to disagree.

 

The figure of 5% is arbitrary. I just wanted to convey that the speculation of commodity which is extremely hot in demand is not going to change much about the pricing. Also, lot of the oil is sold on a government to government deal whereby the pricing is not fully speculative.

About, oil price increasing from $60 to 75, the reasons have been several. The oil production hit in venezuela is causing supply restraint, the global growth led by India and China has increased oil consumption. Indian oil consumption has grown by 4-5%% which amounts to increase in about 200000 barrels a day. Chinese consumption also has grown while Chinese oil production slighty declined. The Europe and Japan are also on growth mode. Japan has stopped contracting oil consumption while Europe. Greece, Spain and Italy are recovering. France is showing growth. The increase in USA production is offset by the increase in consumption of China and India and the other demand increase and supply cuts is taking a toll

[HILLARY + 15]

50 minutes ago, Bhimsen Pachawry said:

The figure of 5% is arbitrary. I just wanted to convey that the speculation of commodity which is extremely hot in demand is not going to change much about the pricing. Also, lot of the oil is sold on a government to government deal whereby the pricing is not fully speculative.

About, oil price increasing from $60 to 75, the reasons have been several. The oil production hit in venezuela is causing supply restraint, the global growth led by India and China has increased oil consumption. Indian oil consumption has grown by 4-5%% which amounts to increase in about 200000 barrels a day. Chinese consumption also has grown while Chinese oil production slighty declined. The Europe and Japan are also on growth mode. Japan has stopped contracting oil consumption while Europe. Greece, Spain and Italy are recovering. France is showing growth. The increase in USA production is offset by the increase in consumption of China and India and the other demand increase and supply cuts is taking a toll

I agree with your assertion. The global economy is gradually but 'speedily' getting by on the wings of growth rebound and naturally  the oil demand worldwide will naturally go on the increase.If the supply does not one for one respond to these demand structure then we expect oil prices to increase though not a sharp increase at least in the short run.why is no one talking about the impact of Electric cars on cooling off oil demand globally ?

[William Edwards + 708]

Both Hillary and Bhimsen might find it instructive, in fact, eye-opening, to test their ideas against the past fifty years of oil industry growth and pricing. Demand grows at 1-1.5% every year, except for the sporadic dampening effect of huge price spikes. Supply growth has always  kept pace. The industry has not suffered a true supply tightness for almost fifty years. 

I suspect that you both are in for a big surprise from the upcoming drop in the speculatively-determined price.

[Tom Kirkman + 8,860]

Thanks William, a big upvote from me.  I'm currently in transit, travelling overseas from Dubai, it's 3:00 am and I can't sleep on planes.  Only have a few minutes transit till next flight, so I can probably respond better when it's not so rushed.

My quick advice to readers and lurkers is .... please at least consider what William Edwards says.  You might not like much what he says, but he sure as heck beats the hell out of the mindless blatherings by much of mainstream media.

Plane boarding now, gotta go.  William - back over to you.