What happens if Asia don't buy US OIl?

(edited)

Like i said in an earlier post, certain countries may circumvent OPEC and purchase oil directly from Iran, or others. Could oil hit $50 then? Is this the Elephant in the room? Look at article below, which just came out, about South. Korea and China, maybe India going directly to Iran.

https://www.zerohedge.com/news/2018-07-08/chinese-refiner-halts-us-oil-purchases-may-use-iran-oil-instead

Edited by Top Oil Trader
pressed wrong button
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India will be happy to soak up some of the US oil that was going to China.

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Those who need oil will get it from anywhere as long as the price is right. Even if it's not right, they'll still have to buy oil, so...

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1-The US still has a lot of potential as a coal exporter
2-It needs to happen a shale boom in Asia or methane hydrates boom to east asia to stop buying us oil
3-The US can still use it for themselves
4-The US can sell it to other countries specially India, Banlgadesh, and SouthEast asia, or even Africa
5-they could sell it to Europe
6-they could sell it to Mexico

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On 7/9/2018 at 1:16 PM, Rodent said:

India will be happy to soak up some of the US oil that was going to China.

India will be more happy to soak up Iranian oil

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55 minutes ago, TraderTate said:

happier? :)

more happier-est

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3 hours ago, TraderTate said:

happier? :)

ecstatic?  😎😎😎

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I do not see how one buyer switching purchasing from one supplier to another really changes anything price-wise.  In the aggregate, you still end up with the same amount being transferred between buyers and sellers, only the deck chairs have been rearranged.  

The more interesting issue is whether the other countries, not China, will be sensitive to Donald trump putting an embargo on Iran, and how far they are prepared to go to tempt fate and anger the famously irritated Trump.  If India goes off and buys oil from Iran what they are doing is expanding the amount of oil in the market, because otherwise Donald shuts it in.  That should motivate the day traders to go to shorting the market, in the hope that the market price is headed for a fall.  Short pressure should cause an immediate prop in the day trading market.  (I mean, I'm just guessing; I am not a trader  in futures contracts.)  

China no longer cares about Donald and his tariffs.  China is prepared to go toe-to-toe, I don't think that is particularly smart of them, but hey the Chines have internal political dynamics that we know little to nothing about.  China has a need to shrug its shoulders and say "So what?" to Donald, in part to demonstrate to the world that China is the new top dog on the trade stage.  That is not the case with India.  India is vulnerable to the US imposing some form of sanctions, including tariffs, as India needs access to the US markets and US capital.   After watching Trump whack Canada, I don't picture countries vulnerable to being shut out of the US markets wanting to tempt fate. 

On that note, I anticipate that Trump is going to hit the Canadian auto industry with tariffs, simply because 85% of Canadian production flows to US buyers.  That will totally wreck the industry there and the Canadian Auto Workers union. But as long as Mexican production is also whacked with import tariffs and quotas, it will bring quite a bit of production to the US assembly plants.  What it does to the parts industry is yet to be seen. 

Will a semi-recession brought on by tariff fights reduce oil demand and seriously drop the price?  Probably.   But if that happens, the further risk is that it falls a lot farther than $50.  And if you couple that with product substitution, then oil really takes a bath. Oh, well. 

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Since the US is a net oil importer to the tune of 2.7 mbpd according to the EIA don't expect the US to be a stable exporter. Call the US traders more like oil swapers. They import oil, store it, swap it, refine it but short on production to be a convential type exporter. 

Typically the US produces light oil. They import heavy oil to mix with it to achieve 32 API, what the refineries want. Think of Cushing OK as a big blender.

 

 

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I can comfortably hold my breath for good 20 sec and can do a minute after hyperventilating...

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What happens if Asia doesn't buy US oil?  Probably this: 

11 hours ago, Sebastian Meana said:

The US can sell it to other countries

But assuming this doesn't happen, then short term supply and demand rules would dictate that the excess oil in the US would cause prices to fall in the US, which causes energy inputs for US companies to fall, which results in an economic boom for all US businesses (except US oil businesses...but they only amount to 6% of US GDP, so the loses will be more than offset by the gains).  Of course, in the long run we treat aggregate supply as a constant, so this could imply the temporary falling prices could (but due to other factors might not) cause US oil companies to eventually declare bankruptcy or otherwise be involuntarily forced to reduce production due to lack of funding for exploration, expansion, etc.  

So, short term = great.

Long term = more questionable.

Of course, this all assumes the US doesn't sell it to other countries.  If they do sell it to other countries, then it should only minutely affect oils prices since supply relatively capped at the moment.  This means if Asia stops buying US oil, US oil price will fall to the point that other nations will gobble the excess all up.  Since oil is a commodity, the price will not have to fall very far for all of that excess to disappear into the market.

 

However, all of the above assumes that Asia can and will end US oil purchases.  Yet, to do that, they need to find new oil somewhere else, which is why Top Oil Trade wrote this:

On 7/9/2018 at 12:12 PM, Top Oil Trader said:

certain countries may circumvent OPEC and purchase oil directly from Iran

 So the real question is isn't if Asia decides to stop buying US oil.  The real question is whether or not US will impose sanctions on Asian countries for buying Iranian oil.  As demonstrated by Venezuela, North Korea, Oleg Deripaska, and come November, Iran itself, US sanctions can really hurt the checkbook.  The question then will be whether the US imposes sanctions on China or other Asian countries for importing Iranian oil and whether or not that nation can survive those sanctions.  I would imagine some of those countries would put up more of a fight than Venezuela and North Korea did, but I sincerely disagree with Jan when he wrote this:

6 hours ago, Jan van Eck said:

China no longer cares about Donald and his tariffs.  China is prepared to go toe-to-toe

 

China talks big in hopes that will help them in the trade war.  First they talked big in hopes of brokering a better deal that would allow them to avoid the trade war.  When that failed, they talked big in order to posture for support from other nations that they would then leverage to pressure the US to back down.  That also failed, because the reality is that talk is cheap.

It turns out that the USA will only let nations rip them off for 30 years before they get so mad that they elect a Donald to fight for them.  It's not about the wisdom behind electing the Donald (there likely wasn't any)...its about the anger.  And we all know what happens Americans finally get angry.  You stay out of their way!  

End the end, even the Chinese will be left with only one choice: submission or bankruptcy.  

We all know Xi won't submit.  So the only real question is this: will the Chinese people allow Xi to let the banks take away all of the new toys they earned over the last three decades?  

I don't know what will happen next, but if I was Xi right about now, I would double down on his life insurance policy.  

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18 hours ago, Marina Schwarz said:

.

if the U.S fails to sell its oil elsewhere, it could downsize the U.S. dollar

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...which will be good for oil sales in general.

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