[babystrangeloop]

first post

[pedalling_faster]

It seems to me that this dip to $91 a barrel (low was in the high $89's, but that was very temporary) is a "temporal phenomen" (as in temporary).



A combination of 60 million barrels being released from reserves, officially because of a shortfall in Libya's oil production.

With Saudi Arabia in the background, talking about how they are going to increase production to "get Iran".


BUT, given that we're coming into the summer driving season, with July 4 weekend NEXT weekend I think this is a short-lived dip in oil prices.

Can anybody think of why this dip in oil prices would be extended over a longer term ?


Background info -

http://www.reuters.com/article/2011/06/ ... ws&rpc=401

"UPDATE 1-Loss of Libya oil bigger disruption than Katrina-IEA"


http://www.theoildrum.com/node/8069

"Drowning in debt, the OECD did have one little nest egg tucked away in the form of strategic petroleum reserves (SPR). Yesterday the International Energy Agency (IEA), an OECD organisation, decided to raid these meagre savings in order to try and keep the global growth party alive. The recognition that high oil and energy prices were threatening a weak and faltering recovery is an admission by the OECD that high oil prices were threatening recession.

The decision yesterday to release 60 million barrels from strategic reserves over a 30 day period sent already weak and falling oil prices through the floor with Brent futures down 8% at one point. This represents 4% of total OECD public stocks of crude oil and refined products that totals 1547 million barrels."

[pedalling_faster]

2 more articles that appear relevant, below.

i could understand the reasoning, if they are being honest about the stated reasons ... which i doubt.

so, in addition to extracting oil more aggressively "using enhanced recovery techniques", they are also selling off reserves that might actually be useful in the future.

the good news for Libya is that the oil they conserve by reducing production is "money in the bank".


http://www.energybulletin.net/stories/2 ... oil-stocks

"The black lines indicate the level of yesterday's announcement, which called for a release of two million barrels/day, a rate that could be sustained for a little over two years. Initially, the call is to do this for thirty days, however:

International Energy Agency (IEA) Executive Director Nobuo Tanaka announced today that the 28 IEA member countries have agreed to release 60 million barrels of oil in the coming month in response to the ongoing disruption of oil supplies from Libya. This supply disruption has been underway for some time and its effect has become more pronounced as it has continued. The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery."


http://www.energybulletin.net/stories/2 ... c-reserves

"The United States has been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy. The situation in Libya has caused a loss of roughly 1.5 million barrels of oil per day – particularly of light, sweet crude – from global markets. As the United States enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were prior to the start of the unrest in Libya."

[Sys1]

I'm pretty amazed that us -meaning ordinary people- are far ahead of the elites. It's obviously a bad move to release SPR in order to ease prices. It seems that economic policy basically consists in preventing an economic crash for the next week. It's like getting drunk to ease your personal problems for several hours.

[John_A]

first post

Hey! I'm new too!

I think the price will crash. When speculators stop playing the game, the price will return to what the market will bear, rather than what it can be gamed to.

[John_A]

It's like getting drunk to ease your personal problems for several hours.

And millions of people do this for years and decades and sometimes, right up till they die.

[AirlinePilot]

I really think the price will re-stabilize somewhere around 85-95$. The speculation argument has been proven a fools errand, the market is moved very little by so called speculation. This release is IMHO a precursor to something else the IEA sees, rather than just attempting to tweak high prices. I believe they see serious issues in the third and fourth quarter with global supply, but wont come out and admit it.

This is a wrong move for the IEA to make. Its simply another form of kicking the can down the road just a bit more. I see prices remaining in a fairly tight band until there is another supply shock, or reality sets in with the acknowledgment that the plateau we have been on for almost 7 years is all she wrote.

So on Monday? probably a small move down followed by a re-trace to pretty much what we have been seeing lately..around 90$. I doubt the markets will sell off on this release, its just not big enough, and it points to some inconsistencies in supply, which when considered do not support a further fall in the price.

[AirlinePilot]

first post

Hey! I'm new too!

I think the price will crash. When speculators stop playing the game, the price will return to what the market will bear, rather than what it can be gamed to.

And just what price do you "believe" that to be? Do you have any clue as to the overall costs for finding/extracting/and refining crude? I frankly doubt we ever see what happened in 2008-09 occur again. Reality dictates the higher prices or the oil wont get produced. I wont say its impossible, but there is no "cheap" oil anymore. Wishing and hoping it into existence is not going to work.

[Outcast_Searcher]

... there is no "cheap" oil anymore. Wishing and hoping it into existence is not going to work.

+1

The problem is that in the first world, the masses are so used to expecting big government to "take care of them" when they whine, that they then expect unicorns, fairies, and politicians (oh my!) - to show up and "DO SOMETHING" whenever they get unhappy as a group.

Unhappy about your job, retirement benefits, etc? We have "big unions" clearly supported by the current administration to support that in the U.S.

Living in Greece and continuing to expect lots of something for nothing? Riot for awhile to get attention, and expect things to magically be fixed.

I could go on (and on), but the point is pretty clear.

Sadly, as a cluster of first world socities, we only have ourselves and our politicians (which we elect) to blame.

In the U.S. if you're willing to stand up, think independently, and support an unusual party (I'm a libertarian), or think about each issue for its own merits (I'm a moderate) then in America you're routinely called crazy, called out for "wasting your vote", etc. (Imagine, in the land of the free and the land of supposed free speech).

When this is the norm, or at least extremely common -- then why let science, logic, or facts get in the way in an issue like the global supply/demand factors for crude oil? Wishing and hoping makes folks SO MUCH HAPPIER.

After all, that's what the entire concept of religion is built upon (wishing and hoping), and something like 90% of folks believe in some concept of a "real living God" (called by whatever name a given religion chooses at the moment -- something like 25,000 names have been used over the years). In fact, some religious "enthusiasts" make GREAT SPORT OUT OF KILLING EACH OTHER if others call "the diety" by the wrong name. (Wishing and hoping said diety will be pleased, apparently).

And so it goes. Logic and the masses rarely mix. I rest my case.

[EnergyUnlimited]

Lets burn these SPR-s within next 2 years.
Why not?
2 years of fun more...

[John_A]

I really think the price will re-stabilize somewhere around 85-95$. The speculation argument has been proven a fools errand, the market is moved very little by so called speculation.

Well, that rollercoaster ride in 2008 was sure more than "very little"!

This release is IMHO a precursor to something else the IEA sees, rather than just attempting to tweak high prices. I believe they see serious issues in the third and fourth quarter with global supply, but wont come out and admit it.

Then why not more than 60 million barrels? 60 million is pretty pipsqueak in the greater scheme of things.

I see prices remaining in a fairly tight band until there is another supply shock, or reality sets in with the acknowledgment that the plateau we have been on for almost 7 years is all she wrote.

How do you define a supply shock? Something like an exporting country being taken off line, or Katrina, or just more of the peak oil world us in the know have already figured out we are living in and been prepping for?

[vtsnowedin]

My first thought upon hearing of the 60mb release was "less then a days consumption on a worldwide basis WTF" But thinking about it in terms of 2mb/d for thirty days ,that covers a 1.5mb/d shortfall from Libya with some room to spare. I can see that that would calm markets for thirty days but what then? These reserves are a very finite item and the holders of the stock cannot afford to spend them all now or even in the near future. So thirty days from now if peace and order hasn't returned to Libya we are back to square one with 60mb less in reserve. That's when the price will go back up into the 100+ dollar range.
At some point we may have to restrict purchases of oil futures contracts to those that really can take delivery of the oil. Suppliers, refiners, Airlines ,Railroads etc. can all be expected to buy ahead and take delivery on the due date but crack snorting brokers on Wall street or at the CBOT are just using the market as a casino and have to cash in every bet before the due date as they own no tank to put it in. Exclude them from the market(if that's possible) and things would be a lot calmer.

[PeakOiler]

Perhaps the price will fall to $79.65 over the next 30 days. (That's my low estimate in the po.com price challenge, btw). Then after those reserves are gone, the price will creep up again. Any further disruptions to oil supply in the second half of this year (hurricanes in the GOM) and any increased demand will put upward pressure on the price again.

[dinopello]

I was suprised to hear of the release so I thought about why they might have done this now. The most likely thing I think is that they are trying to throw a little uncertainty into the large oil speculator's calculation. That may be a prelude to what may be expected to be a further tightening of supply and the desire to mitigate the more volatile swing up in price that could occur due to speculators.

[pedalling_faster]

Perhaps the price will fall to $79.65 over the next 30 days. (That's my low estimate in the po.com price challenge, btw). Then after those reserves are gone, the price will creep up again. Any further disruptions to oil supply in the second half of this year (hurricanes in the GOM) and any increased demand will put upward pressure on the price again.

that puts a value on the US $, 1/80 of a barrel of oil. about 2/3 (55/80) of a gallon of oil per dollar. (55 gallons per barrel, i think.)

this is why the US has been maintaining the "special friendship" with Saudi Arabia for over a half century.

[AirlinePilot]

How do you define a supply shock? Something like an exporting country being taken off line, or Katrina, or just more of the peak oil world us in the know have already figured out we are living in and been prepping for?

Hurricane destroys the LOOP.

Iran closes the straights of Hormuz

Saudi Arabia begins withholding supply due to its inability to grow production...AND THE WORLD FINDS OUT ABOUT IT.

Iraq is unable to grow production above some much smaller amount than everyone gives them credit for.....AND THE WORLD FINDS OUT ABOUT IT.

A CAT 4-5 destroys the Houston ship channel..

Most of these could happen at any moment, but what I think this is more about....and this is strictly my take.....is that the IEA has been changing their tune for the last few years. They have become much less optimistic and they see something looming which they may or may not be able to do anything about. So they warn TPTB, that in order to maintain some status quo, they must release storage so that the end of the summer/fall doesnt take us into a demand/supply crossover as some have predicted.

Any supply shock probably completely negates this very small gesture, but for now..and the fairly short term..it placates the sheeple and gives them a few more months to keep the wool pulled over everyones eyes.

Its also an almost DIRECT from of liquidity injection into global economies and this gets them a bit of time to see how the end of QE2 here in the states goes without something catastrophic going down in financial markets. It cushions the immediate nature of the cessation of QE.

There are a lot of moving parts as of the moment and PO and any oil supply problems are the LAST thing global economies need while they attempt (in futility) to dig themselves out of the debt holes they are currently in.

[Sys1]

SPR release looks like picking up a mortgage to payback the precedent one... Brillant decision.
Things could get even worse if OPEC decide to "empty the gap" in order to maintain oil prices at a high level.
Anyway, since we have passed peak oil, the gap will get wider and wider. The only way for USA to survive the coming years is a European economic collapse. They may have chance on this with Greece looking like an economic black hole sucking whole Europe.

[Cog]

Oil prices will go up Monday. Not much a $1 or so and then stabilize in a $90-$95 range until the SPR release is over. I'm referring to WTI price not Brent.

[John_A]

So they warn TPTB, that in order to maintain some status quo, they must release storage so that the end of the summer/fall doesnt take us into a demand/supply crossover as some have predicted.

They only released 60 million barrels? That doesn't cover much into the end of summer or fall whatsoever, what did they claim, they just made up for Libya for a month? Libya has already been down for a month, so they aren't increasing anything, just making up for previous shortfall.

There are a lot of moving parts as of the moment and PO and any oil supply problems are the LAST thing global economies need while they attempt (in futility) to dig themselves out of the debt holes they are currently in.

Hey, as long as there are taxes to be invented and collected, they can do more then they have to date. At our expense obviously.