Oil prices going Up? NO!

[William Edwards + 708]

7 hours ago, Osama said:

Whats at stake? Bragging rights?

Actually, what is at stake is everything for which the price of oil is significant. The hog's actions dramatically influence the price.

[Jesse Man + 17]

It seems like the Oil prices have fluctuated quite a bit lately and now has dropped 60 cents again today.

[Tom Kirkman + 8,860]

6 hours ago, Jesse Man said:

It seems like the Oil prices have fluctuated quite a bit lately and now has dropped 60 cents again today.

Probably best not to worry about short term fluctuations.  There is still some market uncertainty about what OPEC's reductions on production restrictions will actually result in.

[William Edwards + 708]

3 hours ago, Tom Kirkman said:

Probably best not to worry about short term fluctuations.  There is still some market uncertainty about what OPEC's reductions on production restrictions will actually result in.

I am amazed that there is still uncertainty on the path of prices. I believe that I informed the world of what to expect a few weeks ago. Is it possible that there is a lack of confidence in my assessments?

[Outlaw Jackie + 78]

I think Putin and al-Falih both realize the possibility of a global recession caused almost entirely by the recent spike in energy costs. Global quantitative easing has masked the underlying weakness of the economy, and alone will no longer be able to fix the problems. Developing economies are crushed by the run-up in energy costs.  This additional supply may mute the adverse effect of Trump's tariffs and Iran sanctions. 

[Jesse Man + 17]

Outlaw Jackie, I think there will be another manufactured recession so the rich people can buy up even more stuff for cheap. All stock market crashes and recessions are manufactured. The rich people control everything, they can put oil prices at whatever they want to by controlling how much oil is produced.

[Bhimsen Pachawry + 72]

On 6/23/2018 at 6:41 PM, Jan van Eck said:

But you do have to remember that, despite outward appearances, there is no true ideological basis or foundation for anything that President Trump does.  For him, it is all "transactional."  for example, you hear him railing against "immigrants," which in America is code-speak for those who are not totally white  (especially for various "browns," such as Mexicans).  Trump is perfectly happy with totally-white immigrants; all of his wives have been white immigrants!  He even made a remark at one time about how the US needs more immigrants from Norway.  

Ideological Republicans loathe and abhor the North Koreans.  The Donald has no qualms about running off to Singapore and shaking hands with Mr. Kim, who, let us remember, is a murdering cutthroat psychopath. I invite any reader here to name another Republican who would do that.  (For that matter, I invite any reader to name any American who would do that, besides Dennis Rodman.)

Then you have this craziness about The Wall.  Republicans don't even want to do that, it costs too much.  Plus, the effectiveness is dubious.  IN one section, where The Wall was constructed of pounding Steel Sheet into the sand, a Mexican, in classical entrepreneurial spirit, simply cut a door panel out of the wall, welded in a pair of hinges and a clasp, and put a padlock on it.  When some migrants wanted to cross, the Mexican would unlock his private door and charge the migrants fifty cents each to simply walk through.  Nothing like a door to make life easy. 

But do remember this about America: for Americans, Washington is more about Entertainment than Government. Trump, the man from the reality shows, understands this. Americans are a very ingenious people, and they cleverly figure out ways to make money not because of Government (outside of the contractors building 100,000-ton aircraft carriers, of course) but in spite of Washington.  The Government is in effect a giant parasitic drag on the economy and on the society; it no longer really contributes anything, except bombast on TV, which is purely entertainment.  The real work is done by individuals, in spite of the efforts by politicians and bureaucrats to be obstacles. And those individuals, precisely because America has attracted so many clever people to go live there, have managed to do well for themselves and the society in spite of the best efforts of the bureaucracy to wreck things. 

Welcome to America, the land of impossible contradictions.  Expect craziness when you live here!

You seem to disrespect the petrodollar being maintained by Washington. Without petrodollar, USA economy wouod have been far lower. Without the backbone of petrodollar USA economy is just a bubble. 

[Tom Kirkman + 8,860]

5 hours ago, Bhimsen Pachawry said:

Without petrodollar, USA economy wouod have been far lower. Without the backbone of petrodollar USA economy is just a bubble. 

This is actually a pretty key point, both for the U.S. economy, as well as the global oil & gas industry.

I've discussed the upcoming decline of the PetroDollar a year ago on a Texas energy program and also for a year now have commented extensively on LinkedIn about the slow-moving but unstoppable rise of the PetroYuan.

[Osama + 248]

Now Trump should not blame anyone else for higher oil prices (but this time it is WTI so). Here is another of those (geopolitical) wild cards: Tensios with Iran. 

US crude oil surges 3% settling at $70.

Link: https://www.cnbc.com/2018/06/26/oil-surges-after-state-dept-orders-buyers-to-cut-iranian-imports.html

[cathalibm + 4]

I get confused with all the different news reports about oil. . 1 minute its bad news for crude which should bring the price down but oposite happens, then there is a good news story and yet the doesnt come down. If it does its like a blip and heads up again. I know that the price shouldnt be detaked by the news but at times if feels like some guy/girl (political correctness) randomly throwing darts at a dart board and that sets the price! 

[Jesse Man + 17]

Oil has jumped four dollars in two days, will we see 80-100 dollar oil soon?

[Osama + 248]

1 hour ago, Jesse Man said:

Oil has jumped four dollars in two days, will we see 80-100 dollar oil soon?

Well, @William Edwards here have explained in detail why will we not. You may refer to my other post "Oil prices going down" for more detailed answers.

[Osama + 248]

5 hours ago, cathalibm said:

I get confused with all the different news reports about oil. . 1 minute its bad news for crude which should bring the price down but oposite happens, then there is a good news story and yet the doesnt come down. If it does its like a blip and heads up again. I know that the price shouldnt be detaked by the news but at times if feels like some guy/girl (political correctness) randomly throwing darts at a dart board and that sets the price! 

Sentiments....indeed .... that is the case! You will notice that nothing has yet happened even (November is the deadlines for the sanctions to take place in the real sense) but the prices (WTI) jumped 3% ! 

This is how it works.....after all you know it is a (strategic) commodity and people have to make profits out of it.

Edited June 27, 2018 by Osama
Had to add detail

[Osama + 248]

Different factors rallies Crude (WTI) to new highs: https://www.cnbc.com/2018/06/27/oil-supply-disruptions-in-focus-as-us-tries-to-cut-iran-from-markets.html

 

Oil prices rose to their highest level since November 2014 on Wednesday after a bigger-than-expected drop in U.S. crude stockpiles added to a rally fueled by a major Canadian supply outage, concerns about Libya's exports and stepped-up efforts by the Trump administration to disrupt Iran's petroleum exports.

 

U.S. commercial crude inventories dropped by 9.9 million barrels in the week through June 22, the U.S. Energy Information Administration reported on Wednesday. Analysts expected a drop of about 2.6 million barrels, according to a Reuters poll, while earlier industry data showed a 9.2 million barrel decline.

[Osama + 248]

6 minutes ago, Osama said:

Different factors rallies Crude (WTI) to new highs: https://www.cnbc.com/2018/06/27/oil-supply-disruptions-in-focus-as-us-tries-to-cut-iran-from-markets.html

 

Oil prices rose to their highest level since November 2014 on Wednesday after a bigger-than-expected drop in U.S. crude stockpiles added to a rally fueled by a major Canadian supply outage, concerns about Libya's exports and stepped-up efforts by the Trump administration to disrupt Iran's petroleum exports.

 

U.S. commercial crude inventories dropped by 9.9 million barrels in the week through June 22, the U.S. Energy Information Administration reported on Wednesday. Analysts expected a drop of about 2.6 million barrels, according to a Reuters poll, while earlier industry data showed a 9.2 million barrel decline.

@William Edwards, @Tom Kirkman, @Jan van Eck, as we will  near November . . . . . When the sanctions really get in-effect . . . . . will Crude continue surprising us? Do you see it setting new highs (short term)? You might find it irritating but what are the immediate/short-term/imminent bearish factors that you think can take this rally away? 

My guess: Any inventory build up (like this huge and unexpected withdraw), also as we will enar November and if in case the markets didn't see any significant effect on oil supplies (?), moreover, the sanctions on Iran---as I have opined in few of my articles can also put the Vienna agreement into jeopardy, Iran might get out due to rising political tensions----. What else? Or does any of my hunch qualifies?

Edited June 27, 2018 by Osama
Had to add detail

[Jan van Eck + 7,558]

1 hour ago, Osama said:

@William Edwards, @Tom Kirkman, @Jan van Eck, as we will  near November . . . . . When the sanctions really get in-effect . . . . . will Crude continue surprising us? Do you see it setting new highs (short term)? You might find it irritating but what are the immediate/short-term/imminent bearish factors that you think can take this rally away? 

My guess: Any inventory build up (like this huge and unexpected withdraw), also as we will enar November and if in case the markets didn't see any significant effect on oil supplies (?), moreover, the sanctions on Iran---as I have opined in few of my articles can also put the Vienna agreement into jeopardy, Iran might get out due to rising political tensions----. What else? Or does any of my hunch qualifies?

Osama, remember that the "short term" or spot price of oil(s) is not a function of anything fundamental, it is the result of traders who think they know everything and have IQs of at least 182  (I.e. they leave Bobby Fischer in the dust) and have this hot-line to some omniscient power circling the earth at 225,000 feet.  And those guys are motivated only by greed and fear.  So: the prices will crash when the trader crowd starts to feel fear.  

What brings on fear?  I sure don't know what will, this time around.  Your hunch is as good as mine.  Suppose Mr. Trump decides to release 150 million barrels sitting in the Naval Oil Reserve into the market, and is asking for bids.  That should do it.  Suppose all that oil sitting in tankers off Hamburg or wherever it is parked in Northern Europe hits the market, as the big traders need to liquidate the speculative purchases of the assets and the leases on those big boats are up.  Again, that should do it.  Those are sharp. short-term unexpected developments that should rattle the cages of the traders. But who knows?  Not me, that's for sure. Cheers.

[Tom Kirkman + 8,860]

Osama, as much as I would hope and prefer oil prices to average $65 this year, it looks increasingly likely that due to geopolitical machinations, oil may be heading toward $80-ish this Summer.

[Osama + 248]

8 hours ago, Jan van Eck said:

Osama, remember that the "short term" or spot price of oil(s) is not a function of anything fundamental, it is the result of traders who think they know everything and have IQs of at least 182  (I.e. they leave Bobby Fischer in the dust) and have this hot-line to some omniscient power circling the earth at 225,000 feet.  And those guys are motivated only by greed and fear.  So: the prices will crash when the trader crowd starts to feel fear.  

What brings on fear?  I sure don't know what will, this time around.  Your hunch is as good as mine.  Suppose Mr. Trump decides to release 150 million barrels sitting in the Naval Oil Reserve into the market, and is asking for bids.  That should do it.  Suppose all that oil sitting in tankers off Hamburg or wherever it is parked in Northern Europe hits the market, as the big traders need to liquidate the speculative purchases of the assets and the leases on those big boats are up.  Again, that should do it.  Those are sharp. short-term unexpected developments that should rattle the cages of the traders. But who knows?  Not me, that's for sure. Cheers.

Ah . . . the fickle, whimsical traders!

[Osama + 248]

Top Oil Buyers Are Thinking of Shunning Iran Oil----As the American administration piles pressure on its allies to entirely halt purchases of Iranian supplies, Japan’s Fuji Oil Co. and Taiwan’s Formosa Petrochemical Corp. are considering ending imports from the OPEC member -- though they are yet to make a final decision. South Korea has already put some imports on hold while Emirates National Oil Co. in the U.A.E. is trying alternatives to cargoes from the Islamic Republic.

At the heart of the problem for Iran’s biggest customers is a U.S. threat to cut off access to the American banking system for foreign financial institutions that settle trades with the Middle East nation’s central bank.

(Here comes in the savior) Much will depend on what is done by China and India, Iran’s two biggest oil customers. It’s unclear if either have made a decision yet. While Beijing has held strategic talks with the Middle East nation, it hasn’t disclosed whether it might scale back imports in light of renewed U.S. sanctions. When the restrictions were in place earlier this decade, the Asian nations had persisted with purchases from the Islamic Republic in spite of American criticism.

[Guillaume Albasini + 851]

The oil price is going up on 3 assumptions :

1 -  oil demand will remain strong

2 - oil supply will be affected by several problems affecting oil producing countries (Venezuela, Angola, Libya, Nigeria, Iran...)

3 - oil production hike decided by the recent OPEC and OPEC+ Vienna meeting will not be enough to offset the supply outages.

 

But all these assumptions could be wrong

1 - the emerging trade war could impact world growth and oil demand more and earlier than expected

2 - Iran oil production could be less affected than expected by US sanctions if China retaliate against the US tariffs imposing a 25% tariff on US oil imports and decides to import more iranian oil to replace oil imports from the US. An unexpected improvement of the venezuelan oil industry could happen ending the production freefall (I know that the probability of such an event is low but the government could end up accidentaly naming someone really competent to run PDVSA).

3 - the recent OPEC and OPEC+ meeting having delivered a statement with all the clarity of a usual White House press briefing, each oil producing country involved in the agreement seems to have its own interpretation of the agreement and this could lead to a production hike higher than expected.

[Dennis Coyne + 82]

It's doubtful that OPEC and NOPEC have the capacity to add more than 1 Mb/d of oil output.  This increase barely covers likely decreases from China and Mexico and Venezuela.  If World consumption of C+C increases by 800 to 1000 kb/d and there continues to be lack of pipeline capacity in Alberta and the Permian basin, then the World may be a bit short on oil output until these pipeline constraints are relieved in 2019.  In the mean time oil consumption is likely to continue on its 1982 to 2017 trend of 800 kb/d higher levels each year and the World's oil producers may have difficulty meeting this level of output.

Speculators determine short term spot prices, but in the long run the annual average oil price will be determined by oil market fundamentals of output and consumption.

William may be wrong about long term oil prices decreasing before 2030, after that we might see a recession due to fear over peak oil and high oil prices will lead to substitution for oil by other modes of transportation (rail, light rail, hybrids, plug-in hybrids, and EVs over the 2020 to 2040 time frame.

[Osama + 248]

7 hours ago, Guillaume Albasini said:

The oil price is going up on 3 assumptions :

1 -  oil demand will remain strong

2 - oil supply will be affected by several problems affecting oil producing countries (Venezuela, Angola, Libya, Nigeria, Iran...)

3 - oil production hike decided by the recent OPEC and OPEC+ Vienna meeting will not be enough to offset the supply outages.

 

But all these assumptions could be wrong

1 - the emerging trade war could impact world growth and oil demand more and earlier than expected

2 - Iran oil production could be less affected than expected by US sanctions if China retaliate against the US tariffs imposing a 25% tariff on US oil imports and decides to import more iranian oil to replace oil imports from the US. An unexpected improvement of the venezuelan oil industry could happen ending the production freefall (I know that the probability of such an event is low but the government could end up accidentaly naming someone really competent to run PDVSA).

3 - the recent OPEC and OPEC+ meeting having delivered a statement with all the clarity of a usual White House press briefing, each oil producing country involved in the agreement seems to have its own interpretation of the agreement and this could lead to a production hike higher than expected.

And the trade war, I opine, has already started...we are in the midst of it.

[Jan van Eck + 7,558]

11 hours ago, Osama said:

Ah . . . the fickle, whimsical traders!

One of the problems with print is that it gets difficult to read the tone of the writer. So it is hard to tell if you are being sarcastic or serious.  OK, let's assume serious.  

I don't think oil traders are either whimsical or fickle.  Those guys are playing with real dollars in an intense, high-stakes trading game; there is a lot of big money on the table.  In reality, those traders are reacting to every possible tiny blip of a signal that might prove to be the tip of something much larger.  You remember that fellow Alan Greenspan, over at the Fed, he was famous for saying the most utterly inscrutable things that traders used to spend days and days trying to dissect to figure out if the Fed was going to raise or lower interest rates.  Have you ever asked yourself why he was so inscrutable?  It was precisely to stop traders from roiling the bond markets. 

So the reality of the traders is that they make market unstable.  What are the benefits?  Traders make market liquid, in that you can take an illiquid asset - whether it be a future crop of soybeans or pork bellies or oil - and convert those future assets into cash today. And buyers can lock in the prices of what they need to by today for delivery in the future. And the traders who pump the cash in try to make money on the arbitrage.  Are traders inherently evil?  Not at all; they provide cash up front for some future asset, in that sense they do what bankers do not, they finance farm crops and oil sales and bond resale markets. But traders do it for the money, not out of some social do-gooder or charitable purpose, let's remember that.  And thus traders inevitably will upset markets with trade swings, as each thinks he is smarter than the others. So the net result is that traders do roil markets  (including that unique capitalist sub-section of trader, the short!).

[Osama + 248]

5 minutes ago, Jan van Eck said:

One of the problems with print is that it gets difficult to read the tone of the writer. So it is hard to tell if you are being sarcastic or serious.  OK, let's assume serious.  

I don't think oil traders are either whimsical or fickle.  Those guys are playing with real dollars in an intense, high-stakes trading game; there is a lot of big money on the table.  In reality, those traders are reacting to every possible tiny blip of a signal that might prove to be the tip of something much larger.  You remember that fellow Alan Greenspan, over at the Fed, he was famous for saying the most utterly inscrutable things that traders used to spend days and days trying to dissect to figure out if the Fed was going to raise or lower interest rates.  Have you ever asked yourself why he was so inscrutable?  It was precisely to stop traders from roiling the bond markets. 

So the reality of the traders is that they make market unstable.  What are the benefits?  Traders make market liquid, in that you can take an illiquid asset - whether it be a future crop of soybeans or pork bellies or oil - and convert those future assets into cash today. And buyers can lock in the prices of what they need to by today for delivery in the future. And the traders who pump the cash in try to make money on the arbitrage.  Are traders inherently evil?  Not at all; they provide cash up front for some future asset, in that sense they do what bankers do not, they finance farm crops and oil sales and bond resale markets. But traders do it for the money, not out of some social do-gooder or charitable purpose, let's remember that.  And thus traders inevitably will upset markets with trade swings, as each thinks he is smarter than the others. So the net result is that traders do roil markets  (including that unique capitalist sub-section of trader, the short!).

I was referring to the same point Mr. Jan. Indeed they are playing with real money and indeed they ought to earn money hence the fluctuations. That they react on the news, as you mentioned, gives us a chance to predict (albeit only a certain trend) that in what direction the markets are going to move in future. 

The tone of the comment rather had philosophical undertones (Wink). (It was never sarcastic!).

[Dan Warnick + 6,100]

On 6/28/2018 at 1:40 AM, Osama said:

Different factors rallies Crude (WTI) to new highs: https://www.cnbc.com/2018/06/27/oil-supply-disruptions-in-focus-as-us-tries-to-cut-iran-from-markets.html

 

Oil prices rose to their highest level since November 2014 on Wednesday after a bigger-than-expected drop in U.S. crude stockpiles added to a rally fueled by a major Canadian supply outage, concerns about Libya's exports and stepped-up efforts by the Trump administration to disrupt Iran's petroleum exports.

 

U.S. commercial crude inventories dropped by 9.9 million barrels in the week through June 22, the U.S. Energy Information Administration reported on Wednesday. Analysts expected a drop of about 2.6 million barrels, according to a Reuters poll, while earlier industry data showed a 9.2 million barrel decline.

I'm sorry, Osama, and I don't mean to take out my angst on you specifically, but:

You seriously quote CNBC news stories?  That's how you gauge what's happening with oil consumption, or supply?  Do you believe that Saudi officials, of any rank or position, are telling the truth about, let's see, anything?  Russia?

Drop in stockpiles?  What is the significance of this?  I know it's on the news, but......  Virtually every source that keeps tabs on U.S. output puts U.S. export oil at 3 MB/D.  And increasing by the week!  What oil man in control of "inventories" or "oil in storage" wouldn't pump it out and replace it with new oil as the prices on the market increase?  That would seem prudent to me.  The last time I checked there was nothing on the news about U.S./North American consumers lining up at the pump HOPING for another truck full of gas.

The U.S. strategic reserve holds over 700 MILLION BARRELS of oil, which was acquired at an average price of just over $29 per barrel.  The U.S./Trump could pump 50 million barrels out at half world market prices and not feel any pain whatsoever.  And then fill it back up again, from U.S. oil reserves, without any help from our friends around the world.  That, together with the output of North America of somewhere between 10-15 MB/D (maybe a whole lot more) ought to have some effect on the world's prices, don't you think?

William and Jan put forth very good arguments about this, but let me put it another, simpler way:  there is NO SHORTAGE OF OIL!  Iran can take its oil off the market, either in protest or have it cut off via U.S. pressure and the only people who will be hurt by that are the leaders, and unfortunately the people, of Iran.  NOBODY ELSE!  Nada, Nil, Nobody!  Starting today Saudi Arabia, Russia and the U.S. could supply the world at 1/2 the price and there would be no shortage of oil, unless they wanted there to be a shortage of oil.  They don't want there to be a shortage, for many of the reasons that you and others have stated.  Any time we hear that there might be shortages of oil, it is the traders talking, nobody else.  But CNBC and most of the other outlets make their money off of sensationalism, and they rally around the cry that oil shortages are imminent!  Iran's not happy!  Venezuela has a crises!  A transformer went out in Canada!  Katy bar the door and get the kids to the storm cellar!  Canada lost a transformer, oh my! 

(edited to take out political view)

Sorry.  Rant over.  Please carry on.  ☺️

Edited June 29, 2018 by Dan Warnick