Gloom and Doom, and Oil at $120

[Marina Schwarz + 1,576]

There's a 50-50 chance Trump is about to trigger a global oil shock

A lovely dramatic piece from the Daily Telegraph. I felt especially bad for poor CNPC and Sinopec having to bow to American pressure. Also Reliance. Poor Reliance.

[Dan Warnick + 6,100]

Woo-hoo!  It's on!  I commented just earlier today to @Osama that it was odd that IRANIAN SANCTIONS had not raised its ugly head in recent days, surprisingly.  Well, Katy, bar, the, door! 

The article is full of old news:

"All this works perfectly so long as there are no supply problems anywhere. But Libya and Nigeria are political wild cards, and Venezuela is collapsing," said Helima Croft from RBC Capital Markets.

"You have already had three Saudi tankers attacked in the Red Sea by (Iranian-backed) Houthis and one was sunk. You can't rule anything out," said Mrs Croft, a former Mid-East analyst for the US Central Intelligence Agency.

and "says who?" lines such as this:

"In practical terms, the spare capacity of global oil producers will fall below 1 per cent by early next year for the first time in the history of the post-war energy markets."  Says who?

and self-evident self-interest:

Jean-Louis Le Mee and Will Smith, from Westbeck Energy, said Saudi Arabia, Opec, and Russia cannot lift output much further to plug the Iranian deficit even if they bend every sinew. "Every producer globally is currently squeezing every last barrel," they said. Westbeck is betting on a "furious rally" in November and December, culminating in a $US150 crescendo next year.

This article either dies on delivery or is the start of the barrage.  If it is the barrage, we can expect WTI up towards $100 and Brent at $110'ish.  Throw in any type of threat, any at all and the facts simply won't matter.

I maintain that there is no problem at all, but the markets (read Wall Street and Oil Company money men) need their rocket ship and this may be the launch pad.  This cycle repeats EVERY time the price of oil gets down this low.  There are simply too many bad loans on the books and $100's of Billions of $$ to be made or lost.  That is the danger Donald Trump poses: Taking Away Profits!  And that is a huge motivator to misinform, go to extremes and prompt a war or even just the threat of a shooting war, or sabotage a few pipelines or ports, etc.

One thing about the article would seem true:  If they bring the price up to the levels the article talks about, the world is going into recession or worse, and the ramifications of it will be bad, very bad indeed.  Donald may not trigger it, but if this takes off he will not be reelected and it could make real the possibility of his impeachment.  Voters don't like bread lines!

[Dan Warnick + 6,100]

1 hour ago, mthebold said:

Are you arguing that prices have nothing to do with fundamentals, therefore a price spike is likely? 

I would argue that the prices of just the last few days are based on fundamentals, but how long does anyone expect them to stay at this level?

IF this is the beginning of a barrage of DANGER, DANGER, then there will be no stopping a spike and then a climb on up to the $100 levels IF some real event happens.

[Marina Schwarz + 1,576]

meanwhile oil actually took a nosedive on what was it, production growth? I feel bad for the author of the above story. The nosedive could've waited a few days.

[Auson + 123]

The news might have been production growth but Hedgefunds have been cutting long bets ( possible profit taking ) they could be begining to load up again. 

[Mike Marcellus + 157]

Holy crap the sky is falling again

[Dan Warnick + 6,100]

14 minutes ago, Mike Marcellus said:

Holy crap the sky is falling again

...and again, and again, and again...

[Marina Schwarz + 1,576]

Well, you asked for it. (Don't worry, everyone, it's a song)

[oilexpert.nl + 36]

12 hours ago, Dan Warnick said:

I would argue that the prices of just the last few days are based on fundamentals, but how long does anyone expect them to stay at this level?

IF this is the beginning of a barrage of DANGER, DANGER, then there will be no stopping a spike and then a climb on up to the $100 levels IF some real event happens.

Today we saw impact of rumors Trump and China getting closer...stock market jumped significantly and within 8 hour back to zero. nobody believes an agreement will be made that easily. Sell the rumor, buy the facts.

Fact is that Trump needs lower oil prices for his sake, SA not in the position now to increase tensions (SA increasing output). Within a few weeks we will read China deal far away and, unless real events happen, I do see a further USD 2-4/bbl drop possible. Today Oil companies can absorb 10-20% lower oil prices (at least Royal Dutch can as per yesterdays Q3 financial analysis (Dutch Telegraph; " up to 20 %").   Russia producing at top levels now and SA informing market to increase output does not make it likely production will be curtailed soon. No 180 degrees turn.

So to answer your question: I think 2-3 weeks at lower levels. What makes you think a steep increase up to USD 100 is likely when an event takes place? 

 

 

[Dan Warnick + 6,100]

38 minutes ago, oilexpert.nl said:

Today we saw impact of rumors Trump and China getting closer...stock market jumped significantly and within 8 hour back to zero. nobody believes an agreement will be made that easily. Sell the rumor, buy the facts.

Fact is that Trump needs lower oil prices for his sake, SA not in the position now to increase tensions (SA increasing output). Within a few weeks we will read China deal far away and, unless real events happen, I do see a further USD 2-4/bbl drop possible. Today Oil companies can absorb 10-20% lower oil prices (at least Royal Dutch can as per yesterdays Q3 financial analysis (Dutch Telegraph; " up to 20 %").   Russia producing at top levels now and SA informing market to increase output does not make it likely production will be curtailed soon. No 180 degrees turn.

So to answer your question: I think 2-3 weeks at lower levels. What makes you think a steep increase up to USD 100 is likely when an event takes place? 

 

 

I pretty much agree with your first two paragraphs.

2-3 weeks sounds reasonable, and it could go 20% or so lower over time.  If the oil market does not suffer a barrage of "scary" press which stokes uncertainty.  By an event, I mean a ship blown up in the Strait of Hormuz or some similar such event.  Would you agree that that type of event could trigger a rapid spike and, if not resolved quickly, a possible climb up to $100'ish oil?  $100'ish meaning +/- $10.

[Dan Warnick + 6,100]

Here is a bit less biased and more balanced report.  If this becomes the recurring tone, we have a chance keeping some semblance of sanity, but who knows what the powers that be will do.

Iran sanctions are coming back. Here’s what you need to know

[Dan Warnick + 6,100]

I'll take a stab:  India is the world's largest democracy.  They are having elections soon (don't know the correlation, but it is a point), India is having a rough time with finances.  According to the sanctions text, and to Mike Pompeo's public explanation, the U.S. will do everything it can to help countries source replacement oil at an affordable price.  The administration has discretion in the form of waivers to help struggling countries ease off Iran oil until lower priced oil can be sourced.  This will benefit India, which by the way is also a strategic ally.  India is also keen to continue joint technology development and service with the U.S., so offsets can be worked out.

I like the Hamms Beer reference!

[John Foote + 1,135]

India just signed a very large deal to buy Russian arms. India is not strategic ally to anyone. And to the best of my recollection, India never has been a classic ally to anyone since WWII. Often more aligned with the U.S.S.R than the USA for much of the cold war. Pakistan and India have a joined at the hip friend-a-me relationship, complete with nukes to keep it from ever getting serious. Mountain ranges mostly historically protect their borders, or extreme poverty by their neighbors to the east. They do have alliances. And they are a large market for oil imports. They'd probably find a way to buy Iranian oil, whether Trump allows it or not. It's a country that's never seen fit to manage a public waste water system, half the country lacks a toilet, $2,000 a year makes you middle class, yet they can manage top level theoretical physicists and I work with capable engineering groups there weekly. Having over a billion people makes them a player. My driver in KSA had a college degree, owned a medical lab, but made more money as a driver and dog walker in Saudi. 

[Dan Warnick + 6,100]

4 hours ago, John Foote said:

India just signed a very large deal to buy Russian arms. India is not strategic ally to anyone. And to the best of my recollection, India never has been a classic ally to anyone since WWII. Often more aligned with the U.S.S.R than the USA for much of the cold war. Pakistan and India have a joined at the hip friend-a-me relationship, complete with nukes to keep it from ever getting serious. Mountain ranges mostly historically protect their borders, or extreme poverty by their neighbors to the east. They do have alliances. And they are a large market for oil imports. They'd probably find a way to buy Iranian oil, whether Trump allows it or not. It's a country that's never seen fit to manage a public waste water system, half the country lacks a toilet, $2,000 a year makes you middle class, yet they can manage top level theoretical physicists and I work with capable engineering groups there weekly. Having over a billion people makes them a player. My driver in KSA had a college degree, owned a medical lab, but made more money as a driver and dog walker in Saudi. 

Good points all, John.