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Brent Touches $120 Overnight After Chinese Oil Facilities In Libya Attacked, Bombay Stock Market Plunges
Global stagflation has moved from knocking gently on the door to pounding with a battering ram. Brent touched just south of $120 overnight, the highest level since the summer of 2008, just before the global economy imploded, after reports circulated that the oil facilities of CNPC, the largest Chinese oil producer, were attacked in Libya. "News of the attack will heighten concerns among oil industry executives that the turmoil in Libya may lead to widespread sabotage of oil facilities and that it would take many months or even years to return the country to full production capacity even if a semblance of peace returns. In a speech earlier this week, Seif al-Islam Gaddafi, the son of Colonel Muammer Gaddafi, warned that in the event of a civil war, Libya’s oil wealth would be “burned”. In a terse announcement, CNPC said it was in the process of evacuating its 391 Chinese employees from the country and had already repatriated 24 of them. Contacted by phone, CNPC confirmed the attack but did not provide details, saying that it was still waiting for the latest news out of Libya." Unfortunately, as we first suggested three days ago, it is now only a matter of time before the Libyan madman decides to set his oilfields on fire in recreation of Saddam's parting gift to Kuwait, as retaliation against the world. In the meantime, US GDP has just lost another $300 billion in 12 hours, wiping out the gains all the gains in the last quarter.
From FT:
Separately, foreign ministry spokesman Ma Zhaoxu acknowledged that some Chinese companies in Libya “had their local camp sites raided by gangsters, and some people got hurt.”
On Wednesday Misurata fell under the control of forces opposed to the Gaddafi regime but it is unclear who was responsible for the attack on the CNPC site.
China’s trade with Libya centres mainly on oil, but the $6.6bn in bilateral trade also includes companies in a wide range of other businesses, thanks in part to China never having imposed sanctions on the Gaddafi regime.
State media say more than 30,000 Chinese citizens were present in Libya at the time of the attack. Many of them are thought to be construction workers involved in infrastructure projects.
One Chinese railway worker delivered a dramatic account of an attack on a company camp via microblog posts on Chinese website Sina. Raiders set fire to equipment and cars and injured Chinese workers in an attack on Monday night, said the blogger known as “Happy Xufeng,” posting pictures of the inferno as well as desperate calls for help.
“We are in great danger,” he wrote on Monday night. “Chinese companies in Libya are in a state of emergency, our projects are being raided and communications are down.” By Wednesday the blogger, an employee of China Railway 11th Bureau, reported that he and his compatriots were being evacuated to safety
Not very surprisingly, in our oh so globalized world, Portuguese 10 Year bonds just hit another all time high as $120 Brent apparently is not very stimulatory...
Elsewhere, the Sensex dropped by over 3%, the most since August 2009, as the world slowly realizes the Koolaid hangover has set it.
And an update from Goldman on the coming oilpocalypse:
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The oil facilities of a rogue country were attacked by the mobs of another rogue country.
did somebody estimate/calculate how much of the price is supply/demand and how much is speculation?
Are you writing a PhD? Why does it matter? Oil is up and going higher...Which counteracts our noble hero's efforts to print us out of recession and into oblivion.
we don't write PhDs over here any more, don't ya know? we just recycle, copy and paste other people's stuff. just call up our defense minister if you need a tutorial on that.
The US government is said to be suppressing the WTI, which leads to the unusual spread between WTI and Brent. The suppression scheme is perhaps another form of speculation but I don't think anybody knows how large the scheme is.
I do - all of it.
NOT a suppression scheme..... it's a grand cluster fuck (typical oil patch pipeline constraint, aging equipment, refineries offline and pipeline constraints to refineries with spare capacity, new production from the Bakkan's coming on line, new pipeline from Canada etc etc....) once again a typical oil patch cluster fuck, the government not involved in this one.
ZH has beat the shit out of this issue a few days ago, pull it up and read or just read this
http://www.theoildrum.com/node/7519
1 buyer = 1 seller.
It is all supply and demand
All printing money.
I'm sure you think CDS's are 1:1, and no vapor, too.
Your handle is appropriate for sure.
Wow. Talk about "old school". LMFAO
the dumb speculator argument. without speculators there would be no demand and supply because there would be no liquidity. you will find out in due time. its all about liquidity
300 BIL?
That's not peanuts, isn't Ben's goal 600 BIL?
OUCH...that's going to hurty hurt hurt...
LMAO. You really think a $1 increase in oil wipes out $100B in GDP?
If thats the case, the rise in oil this week alone has wiped out 1.5Trillion, or 10% of GDP. And, since the bottom in 2009, the $70 rise in oil has wiped out 1/2 of the US GDP. Just a stupid theory that has zero basis in reality.
Whats 300 points worth on the market compared to GDP?
define rogue
does the US also fit your definition?
is there a country that does not fit your definition?
Iceland.
don't fear just get long PCLN....discounted hotel rooms in Libya...beautiful coastline. on fire but beautiful....
johnQpublic
+300B
Well, yesterday Cramer was screaming that USA has enough oil, so price of WTI shouldn't be rising despite record wti/brent spread. It was such a joke. I guess we need another 10$ jump in oil and 5% dip in stocks to calm him :)
He is trend rider when stocks are rising and always such a contrarian when markets are collapsing. Ladies and gentlemen, enjoy Jim Cramer at his best:
http://www.cnbc.com/id/15840232?video=3000007178&play=1
Did you guys hear that moron on CNBC just now? CQ asks him if the market is vulnerable given the shifting global landscape and he says "They still have to sell oil to US!!!! We are the customers!" Doesn't this moron know that the bulk of crude imported into the U.S. comes from Canada? And that if regime change occurs in Saudi, the U.S. Fleet base is toast. Fucking morons are everywhere.
The status quo has its defenders and denial seems to be winding around the entire planet these days!
Canada exports 2,510 thousand barrels per day to the United States, of a total crude oil imports of 8,608 thousand barrels per day. Thats NOT a "bulk"..........
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html
This is not good news. But on the flip side, can't the other OPEC nations just up production to cover the missing supply?
Even though Lybia's oil is higher in quality, it seems that the move up in the price is not really justified here. I find it hard to see how oil can stay @ $120 for long.
I know we are dealing with a Mad Man, but destroying the oil fields leaves him with an econmically crippled country, even if he is able to regain control.
Ever heard about spreading unrests? About shaking pants of saudis royal familly? About probably overstated excess capacity?
Math man - there is no way for other countries to up production, IMO, because everybody is pumping close to max. Sure, there is a bit here and a bit there that can be added, but overall, the "spare capacity" numbers are all bullshit promulgated to keep everybody in line.
If he sabotages the oilfields, it's a last gasp fuck you, he won't be bothered about a broken country. He's arrogant enough to do it just to piss everyone off. If only that were the limit to the consequences.
not to worry: o bum a's finance advisor stated yesterday: "raising oil prices will not hurt the recovery!"
Fertilizer and food transport costs just went up too.
Global Warming unexpectedly not involved. Whew!
Great time for O'Bamm to lift the Gulf moratorium.
$160. oil
$60. silver
$1800. gold
Coming to your local theatre this June.
Who cares, Ben is sure he will print and distribute enough FRNs for American people to buy gas and he is also 100% confident that it will not trigger even a slightest inflation. So, sleep well, dear comrades.
Does anybody know where the 101rst or 82nd airborne division are at the moment - I would not be surprised if they are in Afghanistan now - given how far US forces are stretched.
101st (my old unit 69-71) and 82nd have some over seas posting, where I'll let you guess Dork.
something I find more interesting: SF teams are very active in South America, as I have friends in those units I can not be more specific...not related to oil I am sure.
Yes its atrocious military planning to project these forces into sustained campaigns - has any of these Bozos played the game of chess ?
Its as if they want a failure..............................
...and every vehicle passing a pylon looks the same... to the pylon...
I don't where they are but they will be deployed to guard those FEMA camps pretty soon.
US GDP has just lost another $300 billion in 12 hours, wiping out the gains all the gains in the last quarter.
I have to ask, what gains are we talking about?
The paper gains due to creative accounting?!
Show me the fucking gains!
LMAO
Bullshit. You can certainly accomodate when the market prices oil at over $150, then many people will stop consuming so much.
You'll see some contagion all right! How about those protestors getting shot in Bahrain? Or the shit going down in a month in the Kingdom?
These protests are not isolated, the whole damn world is waking-up.
The swiftness is incredible.
You've captured my sentiment as well. I've been waiting for the oil pop since 2005 - thought I had it in 2008. Now that it's here, it's coming extremely quickly. Not the "see I was right" happy feeling I'd expected. More of a "what will diesel cost for spring plowing" feeling. Not good.
In the long history of mankind time is telling us it has been far too long that an all out global war has been prevented. There are entirely too many people, far to few resources and far too many lies and tension amongst friends.
Elite mentality has become increasingly detached from the people in every nation and very prominently here in the U.S. where our blue bloods believe they can stuff their pockets using us and our grandchildren's economic liberty. Even yesterday the disgusting display of hubris out of the Treasury department underscores their detachment. They will never admit causation but privately they are beginning to ask, "What happens to us when the most armed, technologically advanced and supposedly free civilization of American Snookites begins to revolt?"
When their time comes Nuremberg will not even hold a candle to this tribunal.
+10000000 -- Here Here
What is the pay scale for executioner. Forget it, I'll do it for free.
But sadly the fact is that too many of us don't want to know or don't give a shit as long as they can tweet or facebook their fart to entertain themselves.
I'm sorry, why aren't we drilling for oil off the U.S. coast?
Liberals enjoy the high prices.
They're all liberals now.
And do some homework - the amount of oil available in the U.S. by drilling more is virtually irrelevant to the world oil situation, and would affect price little if any. The drilling "debate" in the U.S. is a red herring meant to distract small minded people who still believe there's a difference between "left" and "right" in the "two" party U.S. system.
It's extrememly relevant.
Ramping up production in the Gulf, of the shore of California, Alaska, etc would help push prices down.
And no, it's not a "left vs. right" red herring.
http://www.sandiegogasprices.com/Price_By_County.aspx?state=CA&c=usa
Republican (red) states have lower oil prices because they are more oil friendly. Democrats want that shit regulated and taxed up the ass. Also, Obama has most domestic oil drilling on lockdown right now.
"Obama has most domestic oil drilling on lockdown right now."
In light of the drilling going on in the Bakkan (it's in the Midwest in case you are confused) that is a truly boneheaded comment. And just so we are clear I despise Obama.......
I agree that there's a difference b/w the parties, though it seems less significant than it once was. But I don't see why anyone would want to be "friendly" to the profligate use of oil. In the first place it's dangerous and dirty, and in the second place, it's extremely precious. (Takes millions of years to concentrate all that solar energy into one gallon of crude.) Not only are the oilmen polluting our communities, they're depriving our progeny of their fair share of petroleum wealth.
BP was drilling off the US coast until...tshtf in the Gulf. What short memories we have.
Drilling is a good idea if it is done with SAFETY as first priority.
Do you believe that the azz hats running BP or those that replaced them have learned a damn thing from their FU?
We did -- we had a gash in the GOM leaking oil to show for it...
India stock is slightly lower due to bad weather!
BTFD!!
As we see the price of oil rising and rising the obvious question is what will happen if such price rises are sustained? I found some analysis which sheds some light on this area and gives estimates for a ten dollar increase in the oil price and its effect on world output, inflation and how much more money would go to OPEC.Here is an excerpt.
The rest can be found at http://t.co/O6MpJ0o for those interested.
This is going to be a real up-the-ass eye opener for all the folks out there who don't understand that there are no alternatives to oil. Can I get me some ethanol? Oh wait, you need lots of oil to grow the ethanol? Never mind.
Too simple. There are lots of alternatives to oil for certain uses. Don't need oil to run a laptop. And we don't need oil to move ourselves from place to place. (Consider how more a car weighs than the driver. Most of the gasoline you buy pays just to move the car from place to place; the driver just goes along for the ride, as it were.) But we do need oil for transporting heavy stuff. The energy-per-unit-mass ratio of oil is better than anything else. Can't run trucks, jets, and tanks on solar.
We'll find alternatives--more quickly than most people appreciate--for many things. But not for all. That's what should worry us. Not everything goes offline, but air travel, UPS, FedEx, etc. are going to be much more expensive.
some remarks by Andrew Lees from UBS London that might shed some light into your question:
A few things worth considering on oil.
1. Saudi's USD37bn bonus to the population equates to USD10.45bbl on its 2009 production of 9.7m bpd. Saudi already needed USD74bbl to balance its budget in 2008. In December last year the talk was that its budget deficit would be 40bn riyals having been 86.5bn riyals the previous year as it spent heavily on salary increases for soldiers. With this increased spending it seems Saudi will need about USD85 - USD95bbl to
balance its budget, or it will need to ramp up production by about 10% (more capital spending) without prices falling.
2. It is worth remembering that in the 1970's it was food prices that initially rose and the Middle East rebalanced its finances with higher oil prices just as they are doing today. The present political situation should not therefore be a surprise particularly when Egypt's production has fallen 20% since 1995 and its net exports have fallen 95%.
3. What is spare capacity? Whilst OPEC indicates on its website that it has several million barrels of spare capacity (about 4m bpd rising to 6m bpd over the medium term)
http://www.energybulletin.net/stories/2010-12-20/will-2011-be-rerun-2008
suggests it is not actually clear that they have any more than 2007/08.
A lot of the spending appears to only be offsetting the natural decline of existing fields. There is probably the ability to meet an extra 1.5mbpd of oil demand; beyond that prices will spike.
4. Saudi's oil production peaked in 2005 at 11.1m bpd. It averaged 10.4m bpd in 2007, briefly recovering for a few months in 2008 before subsequently falling to 9.7m as of 2009. The initial fall came when prices were making new highs in both nominal and real terms, which suggests that if it was a voluntary cut as Saudi intimated, then it was no less political than the "oil sword" of 1973/74. It seems far more likely that with Haradh 3 well productivity thought to be down 60% between 2006 and 2010 that they were struggleing to maintain output.
5. Over the last 10 years OPEC's production has risen by about 2.5m bpd or just over 8% pa since 2000 but rising domestic consumption has meant that exports have been flat. They grew until 2005 but have been falling ever since. Last year Arab growth was expected to account for 11.7% of the global growth in oil consumption.
6. When people talk about higher oil prices acting as a tax on consumption, what they really mean is that the oil producers are consuming a higher proportion of the oil or the work done by that oil as per Saudi's latest USD37bn bonus, leaving less available for the rest of us.
7. http://www.epmag.com/WebOnly2009/item41209.php, published in 2006, highlights that recessions correlate closely to the annualised change in oil prices . Whenever oil prices have increased by more than 50% y/y (trailing 12 month average divided by the previous 12 month average) a recession followed. Brent averaged USD80.34bbl last year. That would need oil to average USD120.51bbl this year. The 12 month moving average is about USD84bbl so if this was just a spike that lasted say 3 months rather than the whole year then it would require prices to rise to about USD228bbl (3/12 *228 +9/12 *84) which is possible, but I would suggest unlikely. It is also worth remembering that in the 1970's oil induced recession there were no strategic reserves. They were brought in as a consequence of that and the IEA has already talked about releasing some of these on to the market if so required, so when people talk about Ben Bernanke printing oil, he can effectively for a few months by opening up the spiggots to domestic stores. Ofcourse this would only be a short term fix and by lowering the above ground reserves would increase the future volatility.
5. The real question to ask is whether high resource prices are a consequence of imbalances in the global economy as most commentators suggest - (ie unproductive and excessive consumption being kept alive by increased debt accumulation) - in which case we are seeing a repeat of the 1970's when resource prices will rise until eventually this imbalance is sorted, or whether as I believe it is a genuine resource constraint story that is playing out. Either way the result is the same in the short term; removing the imbalance or finding new supplies (North Sea and then later Chinese coal) to allow the imbalance to continue further. The difference is that without scientific advancement (nuclear fusion), more and more present consumption will be determined as excessive and have to be destroyed under my geological decline story, raising questions as to which are the next dominoes to fall? First it was a few of the peripheries then US subprime, European austerity and now slower Asian growth as it tries to fight inflation. We also have to consider whether that demand destruction is smooth or whether government's fight it through increased debt and transfer payments until they can fight it no longer. If it is smooth then oil prices don't need to spike hiker to cause demand destruction; the transfer of capital from the rest of the economy can smoothly match the higher oil prices. This goldilocks scenareo is totally unrealistic however as governments can't completely abandon unproductive assets when they are made redundant, and countries will fight each other economically to determine who gets those resources and maintains their standard of living and who dies.
The process we are seeing is just a continuation of a trend; to access the marginal fuel, prices have to rise higher.
Thanks.
Ratscam, great post thanks.
Should have been good for a $200-400/oz move in gold on that alone.
Awesome. Let it all burn. Let the world burn if it's the only way to make the banksters pay.
Thats a incendiary remark.
Cutting off your nose to spite your face is never a good idea........
Turning one's country over to scumbags for the last 100 years wasn't such a good idea either.
What will be interesting to see is how committed the "West" is at "stabilizing" the region, which means "ensuring continued oil production." At some point, there are just too many variables to control. To quote that douchebag Rumsfeld, there are known unknowns and unknown unknowns. We appear to be getting rapidly to the point where it will be obvious that there are too many unknown unknowns to allow control of the oil situation.
Shouldn't all those known unknowns be sorted in Iraq by now ? And all that oil be flowing for US?
Unknown unknowns = a flock of black swans...or a blackness of black swans since someone pointed out that a flock of swans is known as a 'whitness'.
The strategic importance of the Suez has likely been increased. If Saudi Arabia says that they can increase production in a bid to offset demand shortfalls in Europe, then the Saudi Red Sea port of Yanbu will also become a greater strategic asset. Perhaps as much as 10% of global oil supply will soon be transitting Suez.
The spike in oil prices will give the administration cover for the ongoing recession...or double dip if you prefer. TPTB will make the claim that the economy was in strong recovery mode until the Mid East went ballistic. What they will not mention is that excess printing of dollars translated to higher world food costs which led to the Mid East going ballistic.
+1
Don't worry. "Central banks have a lot of experience in managing these things."
What about the flip side?
Pricey oil = pricier imports = less imports = more manufacturing = yay
If the consumer spends a bigger part of his personal budget buying gasoline, and paying for heating, the consumer will have less money for discretionary spending. So, who will buy the manufactured products?
Traders are pushing up prices but it's normal anticipatory Market moves and justified IMHO. Debatable what real fundamental loss is from slowdown in Libyan output and wouldn't amount to much. Other factor is just how damn tight supply / Dmd balance actually Is.... Small hiccups cause earthquakes. We are in a new era of energy that the markets are just beginning to understand. Oil will go up short term and I am hyper bullish on energy but it should correct meaningfully medium term - the seeds of demand destruction 2.0 are being sewn as we speak. Likelihood of double dip grows every day, the longer and stronger crude goes. Crude will be oscillating wildly As we swing between recessions and additional QE's. As for energy security and the non trading world, jefferson preached isolationism way back and in the physical crude markets we have this: our chief sources of crude are from north America. I think we can handle Mexico and Canada. Unfortunately crude is a global commodity given its ability to be transported and arbitraged between markets - so while the middle east goes up in flames we are forced to pay more at the pump. And most likely are back to a world where the middle class gets crushed.
What do you mean by this? Do you mean that we're all friends in NA? Or do you mean tht we can push Canada and Mexico around as we like? Both Mexico and Canada are very large, populous countries, and the borders between them and the US are staggeringly long.
We don't seem to be "handling" Iraq very well, so it may be in our own best interests to stop thinking of ourselves as a countries that "handles" other countries--in any sense of that word.
seems like you found the most important thing in my soap box speech to pick on. bravo.
The only thing happening to Oil prices is that the big speculators and banksters use the events in the Middle East as an excuse to drive up spot oil prices which forced the traders on the other side of the trade i.e. the buyers of put options, the sellers of call options and futures to cover their positions resulting in a sharp spike in the Oil prices.
The only thing driving up commodity prices worldwide are speculators armed with cheap money provided by central bankers and super fast computers. This is causing a havoc in the lives of rest of the population and pushing them towards poverty as they can no longer afford the basic necessities of life.
The prices will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.
Regulators are either hand in glove with the banksters or are too slow to react and take ages to identify and take measures to solve the problems. Total ban on speculation and the reinforcement of Glass Steagall Act is strictly required to bring relief to the rest of the population.
http://www.marketoracle.co.uk/Article24581.html
Good thing Obama saved us by putting all the stimulus money into windmills.
I hate oil...
We need Cold Fusion... Now...
Or zero point energy.
http://www.greenearth4energy.com/zero_point_energy.html
NWO plan is workin out just fine. This is so predictable. Lindsey Williams Exclusive: Nwo to Target Iran & Saudi Arabi Next, Oil to Hit $200 a Barrel.
Oil May Surge to $220 a Barrel If Libya, Algeria Halt Output, Nomura Says, 23 February 2011, by Grant Smith (Bloomberg) http://www.bloomberg.com/news/2011-02-23/oil-may-surge-to-220-a-barrel-if-libya-algeria-halt-output-nomura-says.html
We should all be putting up PV and wind technologies massively in all countries. The age of 120$+ oil is here. As all countries are now at peak production. No slack to meet current demands, let alone dips when a country goes belly up. The belly up scenario will now be a constant signpost in the middle east. So we're there and nowhere else. Green is now not only planet friendly it's STRATEGIC.
Lindsey Williams: China Rising and The Way of Life Here in America Will End!! - Alex Jones Tv 2/4 http://www.youtube.com/watch?v=za_hT6_oMzE
Lindsey Williams: China Rising and The Way of Life Here in America Will End!! - Alex Jones Tv 3/4 http://www.youtube.com/watch?v=K6WF_nEVb9I
Lindsey Williams: China Rising and The Way of Life Here in America Will End!! - Alex Jones Tv 4/4 http://www.youtube.com/watch?v=Bpd2fCjJi0Q