Category:

The Oil Price Fall: An Explanation in Two Charts

Don’t worry.  It’s not complicated. I offer a simple explanation for the recent fall in oil prices in just two charts.   Oil prices move up and down in response to changes in supply and demand.   If the world consumes more oil than it produces, the price goes up.  If more oil is produced than the world consumes, the price goes down. That’s where we are right now.  The world is producing more oil than it is consuming. The price of oil goes down.  It’s that simple. The chart below shows when the world has been in a production surplus and a production deficit since 2008. Right now, we are in a production surplus so the price of oil is going down. (Click image to enlarge) The important thing to take away from this chart is that the production surplus is smaller so far than the last time […]

Posted On : Published By : Tom Whipple
Category:

Carbon Counterattack

Around the world, carbon-based fuels are under attack.  Increasingly grim economic pressures, growing popular resistance, and the efforts of government regulators have all shocked the energy industry.  Oil prices are falling , colleges and universities are divesting from their carbon stocks, voters are instituting curbs on hydro-fracking, and delegates at the U.N. climate conference in Peru have agreed to impose substantial restrictions on global carbon emissions at a conference in Paris later in the year.  All this has been accompanied by what might be viewedas a moral assault on the very act of extracting carbon-based fuels from the earth,in which the major oil, gas, and coal companies find themselves portrayed as the enemies of humankind. Under such pressures, you might assume that Big Energy would react defensively, perhaps apologizing for its role in spurring climate change while assuming a leadership position in planning for the transition to a post-carbon […]

Posted On : Published By : Tom Whipple
Category:

The oil price collapse: what’s so special about it?

As I said in a previous post of mine, strong price oscillations are expected at or near the production peak. Prices can go up and down, but the drops don’t last for long and the overall trend is clear: it goes up. Graph by Frances Coppola. 10 Comments on "The oil price collapse: what’s so special about it?" Jerry McManus on Sun, 11th Jan 2015 2:01 pm  Perhaps Mr. Bardi could be bothered to answer his own fucking question rather than wasting everyone’s time by tossing off a totally pointless one-liner that only appears to short stroke himself. What a useless git. Bandits on Sun, 11th Jan 2015 2:06 pm  Oh boy comparing the past with now in this instance is a trifle naïve I’d say. Right now we have crippling debt, not yet peaked. We have peak oil, we have peak cheap oil, we have a couple of […]

Posted On : Published By : Tom Whipple
Category:

Saudi prince: $100-a-barrel oil ‘never’ again

Saudi prince: $100-a-barrel oil ‘never’ again thumbnail Saudi billionaire businessman Prince Alwaleed bin Talal told me we will not see $100-a-barrel oil again. The plunge in oil prices has been one of the biggest stories of the year. And while cheap gasoline is good for consumers, the negative impact of a 50% decline in oil has been wide and deep, especially for major oil producers such as Saudi Arabia and Russia. Even oil-producing Texas has felt a hit. The astute investor and prince of the Saudi royal family spoke to me exclusively last week as prices spiraled below $50 a barrel. He also predicted the move would dampen what has been one of the big U.S. growth stories: the shale revolution. In fact, in the last two weeks, several major rig operators said they had received early cancellation notices for rig contracts. Companies apparently would rather pay to cancel […]

Posted On : Published By : Tom Whipple
Category:

NYMEX crude settles down, bounces off US rig count-induced intraday lows

New York (Platts)–9Jan2015/445 pm EST/2145 GMT The NYMEX February crude futures contract settled lower Friday, but the close was firmer than looked likely early in the New York afternoon following the release of the weekly US rig count data. Front-month NYMEX crude settled 43 cents lower at $48.36/barrel Friday after trading as low as $47.16/b. The ICE February Brent futures contract ended Friday down 85 cents at $50.11/b, but managed to settle above the psychological mark of $50/b, rebounding from an intraday low of $48.90/b. The difference between ICE Brent and NYMEX crude narrowed 42 cents to settle at $1.75/b, its smallest margin since August 2013. The spread has been shrinking since December 18 when it stood at $5.16/b. "North America has backed out enough imports to put pressure on Atlantic Basic crude, narrowing the spread," said Andy Lipow, president of Lipow Oil Associates. "Enough pipeline space also exists […]

Posted On : Published By : Tom Whipple
Category:

Oil Tumbles to Seventh Straight Weekly Loss

Oil prices tumbled to their seventh straight weekly loss on Friday as concerns about a global crude glut intensified. Crude-oil futures have plunged more than 50% since June amid rising world output coupled with lackluster demand growth, and the latest losing streak is the biggest since the 2008 financial crisis. Brent crude, the global benchmark, fell 1.7% to a new more-than five-year low of $50.11 a barrel on Friday. Prices fell 11.2% in the week, the biggest weekly drop since late November, when the Organization of the Petroleum Exporting Countries opted to maintain its production quotas. Brent fell below $50 a barrel during intraday trading on Friday. Traders and investors said there wasn’t a specific driver behind Friday’s selloff. Market experts say oil output needs to be sharply curtailed for prices to stabilize. “We still have plenty of oil around the world,” said Carl Larry, director of oil and […]

Posted On : Published By : Tom Whipple
Category:

Oil Set for Seventh Weekly Drop as OPEC Reaffirms Supply Stance

Oil headed for a seventh weekly decline in New York and London amid speculation that OPEC won’t pare output to reduce a global surplus. West Texas Intermediate was little changed in New York after erasing a gain of 1.7 percent. The United Arab Emirates has no plans to reduce output no matter how low prices drop, according to Yousef Al Otaiba , the nation’s ambassador to the U.S. Representatives from Saudi Arabia, Kuwait and the U.A.E. stressed a dozen times in the past six weeks that OPEC won’t curb output to halt the biggest drop in crude since 2008. WTI’s discount to Brent shrank to its narrowest since October. “So far, there is no indication that OPEC will waver from its decision made at the meeting last year to maintain production,” Harry Tchilinguirian , head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. Oil […]

Posted On : Published By : Tom Whipple
Category:

Oil Traders Seen Storing Millions of Barrels at Sea on Slump

Oil companies are seeking supertankers to store 20 million barrels of crude as a collapse in the price of the commodity creates a trading opportunity last seen during the 2008-09 recession, a Greek shipping company said. Companies inquired about booking 10 very large crude carriers for storage in the past several days, Odysseus Valatsas, the chartering manager for Dynacom Tankers Management Ltd. near Athens , said by e-mail today. A “handful” have already been hired for the trade, he said, citing discussions with shipbrokers and others working in the shipping market. Dynacom’s fleet can carry about 65 million barrels of oil. Oil collapsed 48 percent in 2014 and prices for later this year are now so far above current costs that traders can make money from buying cargoes and storing them on ships, according to JBC Energy GmbH. As many as 60 million barrels could be held offshore within […]

Posted On : Published By : Tom Whipple
Category:

Kerry to Meet Iranian Counterpart Next Week Before Nuclear Talks Resume

WASHINGTON — Secretary of State John Kerry plans to meet with his Iranian counterpart next week in Geneva to try to advance the negotiations over Iran ’s nuclear program , the State Department said on Friday. Mr. Kerry’s meeting with Mohammad Javad Zarif, Iran’s foreign minister, will take place on Wednesday, a day before the American negotiating team is scheduled to resume formal talks in Geneva with Iranian officials. Mr. Kerry and Mr. Zarif will “provide guidance to their negotiating teams before their next round of discussions,” a senior State Department official said. Mr. Kerry is leaving Friday night for a long-planned trip to India but plans to stop in Munich on Saturday to meet with Sultan Qaboos bin Said of Oman, who has served as a conduit to Iranian officials. Talks on constraining Iran’s nuclear program have been extended twice, and a deadline for achieving a breakthrough is […]

Posted On : Published By : Tom Whipple
Category:

Saudi Arabia’s Cure for Shale Could Entail Shock Therapy

ENLARGE Workers use machinery to move drill sections near the Bazhenov shale formation in Salym, Russia. Bloomberg News In a price war, what counts is your ability to dish out pain and withstand it. Unfortunately for those counting on a rapid rebound in oil prices, Saudi Arabia’s capacity looks ample on both fronts. Leaving aside geopolitical considerations, Saudi Arabia’s apparent unwillingness to cut production to shore up oil prices reflects rational market strategy. With triple-digit oil having unleashed the genies of shale and demand conservation, artificially supporting prices would simply curb demand and shrink Saudi Arabia’s market share further. Letting the price fall, while painful, at least plays to its key strength: low per-barrel production costs. For many oil-exporting countries, though, the more important price is the one it takes to cover swollen public budgets. In the wake of the Arab Spring, this isn’t just an economic consideration. So […]

Posted On : Published By : Tom Whipple