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Kuwait “Over-Supply” Concerns Send WTI Tumbling Back To $42 Handle
Kuwait “Over-Supply” Concerns Send WTI Tumbling Back To $42 Handle
Reversing all of yesterday’s FOMC-inspired idiocy, WTI has plunged back to reality this morning. Following comments by Kuwait’s comments that OPEC had no choice but to keep production steady, refocusing the market on global oversupply, April WTI is back down to a $42 handle.
All of yesterday’s idiocy unwound…
Kuwait’s oil minister said on Thursday he was concerned by the 50 percent drop in oil prices since June because of its impact on the Gulf Arab state’s budget, but saidOPEC had no choice but to keep output steady.
“We don’t want to lose our share in the market,” Ali al-Omair told reporters.
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The Oil Markets Are Rigged – Here’s How
The Oil Markets Are Rigged – Here’s How
We have remarked numerous times, thanks in many cases to the detailed analysis of Nanex LLC, that oil markets (among others) are manipulated or rigged. But, just as Michael Lewis was what equity market participants needed to comprehend what was occurring stocks, so WSJ reports today on ‘spoofing’ in the oil markets. Spoofing is rapid-fire feinting, which as Tabb group’s Matt Simon notes, “raises a question now about whether someone is engaging in legitimate market activity or clear market manipulation.” Here’s how they do it…
Ironically, the last time we commented on this was the day after The SEC charged another trader (and his machines) with spoofing.
But, as The Wall Street Journal reports, it continues…
The 2010 Dodd-Frank financial-overhaul law outlawed spoofing, but the tactic is still being used to manipulate markets, traders say. “Spoofing is extremely toxic for the markets,” says Benjamin Blander, a managing member of Radix Trading LLC in Chicago. “Anything that distorts the accuracy of prices is stealing money away from the correct allocation of resources.”CME, the world’s largest futures exchange, put out rule clarifications in August 2014 intended to end spoofing.
Here’s how it works…
Spoofing is rapid-fire feinting. A spoofer might dupe other traders into thinking oil prices are falling, say, by offering to sell futures contracts at $45.03 a barrel when the market price is $45.05. After other sellers join in with offers at that lower price, the spoofer quickly pivots, canceling his sell order and instead buying at the $45.03 price he set with the fake bid.
…click on the above link to read the rest of the article…
WAR & PETROLEUM RESERVES
WAR & PETROLEUM RESERVES
In the interest of analytical balance, we would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce.
These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening.
The United States and China are both increasing their Global Strategic Petroleum Reserves, with stockpiling taking place in Cushing, Oklahoma, and in provinces throughout China. The promoted script is that America is seeking energy independence and China is taking advantage of low oil prices to increase stockpiles, as they are an energy importer.
But other countries around the world are stockpiling oil and petroleum products as well, from the construction of massive storage tanks in Nigeria, to hundreds of oil tanker ships full of crude floating of coastlines. Crude and petroleum product stockpiles are increasing to record levels.
…click on the above link to read the rest of the article…
Increasing Demand For Refined Products Will Increase Oil Prices
Increasing Demand For Refined Products Will Increase Oil Prices
In last week’s article I posted a chart from the International Energy Agency’srecent Oil Market Report that shows global demand for refined products catching up to supply by the 3rd quarter of this year. My opinion is that all of the analysts who are now blaming the sharp drop in oil prices on a “glut” of supply could change their tune quickly as consumers adjust to lower fuel costs. Just as higher costs reduce demand for any commodity, lower costs will increase demand. This is especially true for a commodity that has a direct impact on standard of living, like oil does.
When the price of gasoline plunged below $1.00/gallon in 1986, demand for motor fuels and other refined products increased by almost 5% within twelve months. Today, world demand for hydrocarbon based liquid fuels (including biofuels) is over 92.5 million barrels per day. You can go to the IEA website and see for yourself that normal seasonal demand is expected to push demand over 94.0 million barrels per day within six months. I think both the IEA and our ownEnergy Information Administration (EIA) are grossly underestimating the price related demand increase that is already starting to show up in the data.
Last week’s EIA report confirms that demand is already surging in the United States. Granted, part of the year-over-year increase in gasoline consumption may be a result of the harsh winter weather we had last year, but I think this story is going to play out. If gasoline prices remain low until this summer, we should see a sharp increase in the number of Americans that decide to take long driving vacations this year. We do love our SUVs.
…click on the above link to read the rest of the article…
This Week In Energy: Asian Energy Empire Expansion
This Week In Energy: Asian Energy Empire Expansion
This week saw WTI prices break the psychological $50 threshold, compounding trader and oil company woes further. However, recent price updates from certain shale areas in the U.S. would seem to indicate many producers arereceiving far less for their oil (as low as $34 per barrel in some cases). As the oil markets now appear to be in contango, near-term prices are cheaper than longer term futures, more and more companies are storing crude in the hopes of reaping profits later in the year once the market stabilizes. Trading firms Vitol and Trafigura as well as oil major Royal Dutch Shell have all reserved oil tankers for up to 12 months, according to Reuters. However, with OPEC digging their heels in, stating that there was “no chance” of reassessing their position prior to their June meeting and that, “Naimi made it clear: OPEC will not cut alone,”when this market stabilization will occur is anyone’s guess. While bearishness abounds amid capex cuts, increased surplus forecasts for 2015 and slow economic growth in various key economies of the world, for others, it’s hunting season.
The state oil companies of major Asian players are, at present, replete with cash and see the coming year as an opportunity to snap up assets around the globe on the cheap. The Oil And Natural Gas Company of India (ONGC) is predicting crude prices to stay at around current levels for 10 months. This provides a once-in-a-decade opportunity to pick off debt-laden exploration companies in Africa, Latin America as well as North America. Competition is rife among Asian state oil companies with India, China, Malaysia and Thailand all looking to expand amid the current oil crisis. ‘‘The current oil and gas prices offer a new opportunity for us to leap-frog our growth trajectory,” ONGC’s Narendra KumarVerma said in an interview. ONGC is predicted to have a budget of around $4 billion to splurge on assets. However, this is dwarfed by China’s PetroChina Co. with an estimated budget of $12 billion. “They’re likely to scour Russia and traditional destinations including South America, Iraq and Africa,”said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. Meanwhile, Indonesia’s state-owned energy company PTPertamina, purchased a 30 percent stake in US-based Murphy Oil Corp. (MUR)’s oil and gas assets in Malaysia for $2 billion last year. Expect such predatory spending to change the face of global energy production and shift dynamics eastward should oil prices continue to remain low as we move further into 2015.
…click on the above link to read the rest of the article…
Oil Production Vital Statistics January 2015
Oil Production Vital Statistics January 2015
Another ‘guest post’ by Euan Mearns at Energy Matters. I thought that, given developments in oil prices, we can do with some good solid numbers on production.
- The oil price crash of 2014 / 15 is following the same pace of the 2008 crash. The 2008 crash was demand driven and began 2 months ahead of the broader market crash.
- The US oil rig count peaked in October 2014, is down 127 rigs from peak and is falling fast.
- Production in OPEC, Russia and FSU, China and SE Asia and in the North Sea are all stable to falling slowly. The bogey in the pack is the USA where a production rise of 4 Mbpd in 4 years has upset the global supply dynamic.
- It is unreasonable for the OECD IEA to expect Saudi Arabia to cut production of cheap oil in order to create market capacity for expensive US oil [1].
- There are likely both over supply and weak demand factors at play, weighted towards the latter.
Figure 1 Daily Brent and WTI prices from the EIA, updated to 29 December 2014. The plunge continues at a similar speed to the 2008 crash. The 2008 oil price crash began in early July. It was not until 16th September, about 10 weeks later, that the markets crashed. The recent highs in the oil price were in mid July but it was not until WTI broke through $80 at the end of October that the industry became alert to the impending price crisis. As I write, WTI is trading at $48 and Brent on $51.
…click on the above link to read the rest of the article…
Iraq Could Be Oil Market Linchpin
Iraq Could Be Oil Market Linchpin.
As hard as it may be to imagine, given today’s rock bottom oil prices and abundant supplies, the world may still struggle to bring enough oil online over the next few decades to meet long-term demand.
Global economic growth over the next several decades is predicated on continued growth in oil supplies. But meeting long-term supply needs will hinge heavily on one country in particular – Iraq.
Just two years ago, the International Energy Agency (IEA) predicted that Iraq would be able to double its oil production by the end of the decade, raising output to 6.1 million barrels per day. Even more compelling is the fact that the IEA also believes that Iraq will make up an inordinate share of global supply growth over the long term – more than U.S. shale, more than other OPEC members.
Related: The Global Energy Security War
But that looks increasingly unlikely for two major reasons. First is the onslaught from ISIS, which has torn the country apart. The militant group’s advance has been halted and is slowly being rolled back, but nevertheless, the presence of violence and the lack of security are already deterring investment in new production.
