Saudi Crown Prince to Trump: We've Replaced All Iran's Lost Oil

[ATK + 355]

On 10/6/2018 at 7:26 AM, Dan Warnick said:

Pick an article and even though one goes one way,

China's possible decision to increase its imports of Iranian oil

and the other one goes the other way,

Tommy Yang - China is likely to resume crude oil imports from the United States in the near future, after Chinese authorities reached consensus with industry leaders that halting such imports was an unnecessary sacrifice amid escalating China-US trade tensions, experts told Sputnik.

all I see are the words "possible", "may", "likely", etc.  And those articles are from the same publication.  Uncertainty is the name of the game and therefore I'm going with higher oil prices for at least the next 3-4 weeks.

 

Still likely to see another crude build this week (genscape) that would make 3 weeks of builds in a market "desperate" for oil. Iranian Sanctions argument getting weaker as we get closet and the numbers disprove hedge funds expectations 

[Jo Mack + 43]

Need to add Libya to the list since it's been increasing its production considerably.  Mexico has asked US companies to help bring their technology up to date.  Everything considered, Iran is in deep trouble since supplies will meet demand without them.

[AMR + 6]

India decided to continue to buy Iranian oil save the government , and also made a deal with Russia..

https://www.aljazeera.com/indepth/features/india-signs-400-deal-russia-sidestepping-opposition-181005123634219.html

 

[Arjun + 39]

Looks like iran oil concessions are coming. 

[Marina Schwarz + 1,576]

15 hours ago, Jo Mack said:

Need to add Libya to the list since it's been increasing its production considerably.  Mexico has asked US companies to help bring their technology up to date.  Everything considered, Iran is in deep trouble since supplies will meet demand without them.

Tehran likes this.

[Boat + 1,323]

Let's not forget the uncertainty from Venzuala, Libya, Nigeria and the approx 1.5 mbpd of growth in world oil consumption. Seems like supply is riding the ragged edge. 

[William Edwards + 708]

On 10/5/2018 at 11:25 PM, Dan Warnick said:

This item seems like the most telling bit of information.  Those of us who have not followed the history of the oil game for more than the last decade or two would do well, I think, to consult someone who has studied the subject all the way back to the beginning, like @William Edwards  Perhaps William, or others, could share their thoughts on just how much of a factor the mere perception of 2.5 million barrels/day, or a similar percentage, being removed from the market has had on confidence, and therefore prices, throughout the last 100 years (not that William has personally witnessed each event!).  Unfortunately, it does not look like William has been following along on OilPrice for some time, so we may not be able to find out his thoughts on the matter. 

My thoughts on the matter are these:  1. Obama and Trump are very different (you didn't notice?) and even under Obama's sanctions Iran's exports went down to roughly 1 million barrels/day, as noted from @ceo_energemsier's comments above.  2. The Trump administration, including the formidable Mike Pompeo, have been working very hard and staying very firm in their position.  They want the cuts to go to zero and they are putting a tremendous amount of pressure on world powers to make it a reality.  3. China is the only major wildcard/holdout, and that is to be expected due to ongoing trade negotiations/lack of negotiations, but that doesn't mean they won't abide.  It only means we don't know yet.  I say this because the risk/reward of ignoring the sanctions on oil from Iran at this time may end up being too great.  We just don't know.  4. The previous point leads to this point: What we do know is that a very significant amount of oil is being removed from the supply chain.  What we don't know is whether or not China will continue to buy Iranian oil, and we don't know whether or not production capacity can sustainably replace the lost Iranian oil.  

I think that last point is the key to the uncertainty and the big reason behind current high prices and the risk of even higher prices.  Even if we find out demand is being met after the sanctions kick in, we don't know if the suppliers can sustainably produce enough or grow enough within the next 6-12 months.  In this case, uncertainty rules the day.

Thoughts?

I do not receive notifications of questions, so I just stumbled upon this, Dan. May I suggest to you and others that you alter your basic thinking on oil supplies. There is always "enough" oil. The valid question is not whether there is enough supply. That is a given. A valid question is "Who contributes to that supply?" Currently the Saudis contribute about 10 MMB/D to the 100 MMB/D total supply and Iran contributes 4 MMB/D. Does it really matter if Iran's contribution drops to 3 MMB/D and the Saudis increase to 11 MMB/D? Or if the US steps up their supply from 9 MMB/D to 10 MMB/D? Or even if the price soars and drops 1 MMB/D? You see, we are just talking distribution of supply.

But, you object, doesn't the price change? Of course it does. In our current system the price is set by the whims of the traders, not the fundamental cost of total supply. The cost of supply is essentially constant, so prices should not vary. But if prices are determined by whims, not economics, It logically follows that a momentary price can be, literally, anything. And the reasonableness of the price is directly proportional to the IQ (Ignorance Quotient) of the traders. So as long as this system of pricing remains in play, price forecasting is  simply a guessing game. And descriptions of the "reasons" for price movements are simply commentators trying to identify the whims of the high IQ trading community.

So enjoy the game!