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The Limits Of Oil's Rebound
We agree with Anatole on this one. As usual, the slide into summer will increase the cost of oil but only slightly, after the price will tend to drop, back into a doldrums. This is very likely to continue until one or more of the major producers finds it valuable to substantively cut production, placing supply, and demand more closely in line. Presently none of the major producer can, they need the revenue too much. In addition, Saudi Arabia cannot because it is in existential tension with Iran sussing out the Islamic Reformation, and Middle East power. Our position remains that the long term price for oil will fall to $30 plus or minus about $5. Although we would not be surprised if oil settled in at $40, we don't expect that to happen. Iran fulfils pledge to raise oil production - FT.com
"Iran is fulfilling its pledge to raise oil production and exports almost six months after western sanctions on the sector were lifted, surprising many analysts and commentators." Paris unveils first stretch of 'bicycle highway'
Presumably because the nations oil refineries are not producing any more automotive fuels. Watch out for racy (NSFW) Queen Bicycle Race video below the fold! Iran's oil production is making a big comeback
"Market data from Reuters shows that Iranian crude oil exports in April reached 2.3 million barrels per day, exceeding forecasts, while May exports are expected to be around 2.1 million barrels per day—or almost 60 percent higher than a year ago. Russia is freaking out about China's slowdown
Readers here have been tuned into this issue for quite awhile. The problem stems from the fact that the progressive model has finally begun to eat itself in the first world. The US economy is on extreme low simmer, Europe is only on extreme low simmer in a few of the best performing countries like Germany, while most of the rest are either room temperature, or in the ice box! The BRICS were knocked out by a solid shot on the chin, although India is only now sliding out into hard times. The rest of the world is puttering along, but there is not enough oomph to motivate anything like the world economy. Read more below! Saudi Arabia Delays Payment to Contractors, Considers IOUs: Liquidity Crunch at Best | MishTalk
The collapse is happening even faster than forecast here at the lair! For more follow the jump cut! Pipeline Outage Adds to Nigerian Oil Disruptions
The oil bulls will use these minor issues to run up the price again. Unfortunately these production problems do not drive supply to below demand, at least not over the long run. US oil supplies are drawing down the current near record levels of oil in the US. This is due to the fact that the oil bulls have run up the price artificially. The supply will continue to rise once the price returns to reasonable levels. No one today in the oil industry is willing to pay the prices oil is at today based on the fundamentals. The bulls will get burned in this, but it might take a while. Saudi Shift Brings Uncertainty on Oil
. . . they will lose their shirts on these trades, there is no support for the price of oil, demand is weak, supply strong, and no evidence anything will change that for a long time. "'In the Southern Persian Gulf, oil is becoming a political commodity, more than an economic commodity,” he said, though he lamented that shift. “OPEC is in a difficult situation.” In his first remarks as minister, Mr. Falih on Sunday said in a news release that the country would “remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy.'" Right, like we have been saying, oil is a political tool being used by both Iran, and the House of Saud in the existential war between the Shia, and the Sunni. Saudi cannot stop or slow production to support price unless it can verify Iran and the Shia oil producers will as well. This is desperation selling to keep the price low, and limit Iran's income, while making desperate changes to the Saudi economy in an attempt to create gold from straw. Good luck on that. The oil traders are as yet unwilling to believe that the House of Saud is actually willing to let the price tank. And so they continue to bid up the price on any minor problem, or supply bauble. But the metrics do not support pricing in this range without the House of Saud restricting the supply. Something the House of Saud has specifically said it will not do. Someone is going to get burned. Heh! |
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