This page has been archived and commenting is disabled.

DOE Announces Details Of Strategic Petroleum Reserve Firesale

Tyler Durden's picture




 

Following the earlier general announcement that the SPR would sell 30 MM barrels of oil a lot of questions were left unanswered, such as what kind of crude will be sold, where will it be sold from, and at what price. The wait for answers is now over: The DOE has just released all the missing data. Per Reuters: "Under the terms of the U.S. sale that were issued by the department, the government does not plan to stagger the sale of the oil and will offer all 30 million barrels in one bid sale. The department will offer "sweet" crude oil from three of the reserve's storage sites: Bryan Mound and Big Hill in Texas and West Hackberry in Louisiana. The oil will have a base price of $112.78 a barrel, a spokeswoman for the SPR said." Which does not however mean that this is the price at which the oil will be sold: "Traders can bid above or below the "Base Reference Price" of $112.78, which is derived from the last five days of trading of Light Louisiana Sweet crude oil, as assessed by energy pricing agency Argus. Companies will submit their bids for the oil through a special department website. Delivery of the oil to the winning companies would take place over the month of August. Winning companies would pay for their oil during the month after the crude is delivered." Which simply means that China will convert quite a bit of America's trade deficit from dollars into oil.

And as a reminder, here is why China, which is now actively filling up its own SPR, couldn't be happier about this development. From Zero Hedge March 7. Paraphrasing from Dow Jones:

China
will start work on building strategic oil reserve tanks at the
north-eastern port of Tianjin by May, China Daily newspaper reported
Saturday.

Work will be completed before the end of China's
2011-2015 five-year economic plan, and filling this reserve will start
when the oil price is "appropriate", Tianjin city official He Shushan
was quoted as saying.

China's efforts to build up oil stocks are
closely watched by energy market analysts, as its demand for oil is a
key driver of global prices and huge amounts of crude are needed for the
project. China imports more than half the oil it uses.

The
reserve site in Tianjin is among eight stockpiling bases being prepared
in the second phase of China's strategic petroleum reserve project.

These
eight sites will have 26.8 million cubic meters of capacity, able to
store the equivalent of 169 million barrels of crude oil.

The
western countries' energy watchdog, the International Energy Agency, has
repeatedly criticized Beijing for not publishing national oil stock
volume figures, which are needed to calculate global oil demand.

Sites
for other second-phase bases include Zhanjiang and Huizhou in Guangdong
province, Lanzhou in Gansu province, and Jintan and Jinzhou in Liaoning
province.

China's petroleum reserve capacity was enough for 39
days of consumption by the end of 2010, with this comprising the SPR oil
and a further 168 million barrels of commercial reserve capacity, state
energy giant China National Petroleum Corp. said in January.

It is not only China: all of Asia is taking the prudent step of preparing for a very long storm. From the FT:

As
oil prices spiral higher amid turmoil in Libya, developing countries
across Asia are taking evasive action, shoring up their strategic
petroleum reserves against the risk of a prolonged supply shock. Their
actions could propel crude even higher.

The Philippines, citing
events in the Middle East, announced on Wednesday that it would require
oil companies in the country to maintain 15 days of reserves, and
refineries to keep enough oil to last for 30 days.

Manila’s move
is the most visible sign yet of how Asian countries are seeking to
improve their oil security amid what is shaping up to be the worst
supply crisis since the invasion of Iraq in 2003. Other big regional oil
importers are likely to follow suit.

China is the world’s
second-largest oil importer after the US. India is the world’s
fifth-largest, ahead of countries such as South Korea, France and the
UK. But the pair lack a strategic petroleum reserve that can be tapped
during a supply crisis similar in size and scope to the ones held by
western countries.

Unlike industrialised countries, which built
up their stockpiles three decades ago in the wake of the 1973 oil
crisis, China only recently began its strategic reserve programme,
starting to fill reserves in 2006 and completing a 102m barrel build-out
in “Phase One” two years later.

The second phase of the programme will build a further 168m barrels of reserves by the beginning of next year.

When
China finishes filling its reserve, which it is expected to do by 2020,
it will hold about 500m barrels, equal to roughly three months of
imports and the second-largest stockpile in the world.

China’s
strategic stockpiling “is likely to be a feature of the global oil
market not only this year but this decade”, says Soozhana Choi, head of
Asia commodities research at Deutsche Bank in Singapore.

Although
purchases are kept secret, analysts and oil traders believe that events
in Libya and the prospect of further supply disruptions in the Middle
East could boost strategic buying of crude.

“With
the expectation that prices are going to rise, they will accelerate the
pace of tank-filling,” says K.F. Yan, director at energy consultants
CERA in Beijing.

In other words, all of Asia thanks America's stupidity yet again, and specifially its service-based, oil hungry economy, which is about to proceed with the first of many fire sales of crude which will merely move from Point A (US) to Point B (somewhere in Asia).

Great work Obama. As always.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 06/23/2011 - 18:53 | 1396853 Mike2756
Mike2756's picture

What entity is "managing" this?

Thu, 06/23/2011 - 19:07 | 1396882 Cleanclog
Cleanclog's picture

Wait a minute!  

 Delivery of the oil to the winning companies would take place over the month of August. Winning companies would pay for their oil during the month after the crude is delivered." Which simply means that China will convert quite a bit of America's trade deficit from dollars into oil.

 

The Strategic Petroleum Reserve is meant to help the USA when there is a catastrophic supply disruption (ie. following Katrina). It was not structured nor intended to be for price manipulation to aid the economy by spurring consumer consumption. If this is to ease a "catastrophic" disruption, why is it not being delivered until August?  And when is the bidding scheduled for? 

It is a misappropriation by the IEA - driven by powers we are not "sure" of yet - but since 50% of the oil released is from the USA's SPR, you can be confident that our gov't/Treas/Fed was made aware of and influenced this decision in advance. 

Does anyone believe the bidding won't be rigged and manipulated too?  Wars start over these kind of things.  As we prepare to exit Afghanistan we have another war heating up.


This will backfire!

Thu, 06/23/2011 - 19:18 | 1396917 scatterbrains
scatterbrains's picture

It's probably just that either GS or JPM got caught on the wrong side of the crude futes market and needed a bail out.

Thu, 06/23/2011 - 20:03 | 1397038 AGuy
AGuy's picture

No it was O'bama caught on the wrong side of a pending election! O'bama needs a voting bailout!

 

Thu, 06/23/2011 - 21:38 | 1397221 treasurefish
treasurefish's picture

While you all are worried about oil, here's what's going on in the rest of the world:

 

Obummer is negotiating with the Taliban, and backing the Libyan rebels.  So what?  You need to see what your tax dollars are paying for yourself!


The Bad Guys


These videos look awfully like Al Qaeda to me. But don’t take my word for it.  Look at the evidence and decide for yourself.
A warning: these videos are graphic and horrific. They’re posted at obamaslibya.com and FederalJack.com, because it’s got hefty security around its site and rock solid courage to speak truth to power.


FederalJack will not back down, and will update the videos on obamaslibya.com as new footage arrives.
The first video shows a Libyan rebel beheading a Libyan soldier. If it looks like Iraq, well golly, the highest percentage of foreign fighters in Iraq (and Chechnya and Afghanistan) came from Eastern Libya. Unhappily for NATO, there’s no avoiding that this video was shot in Libya: The men are speaking a Libyan Ara
b dialect with its own distinct accent.


The second video shows gruesome footage of a Libyan rebel cutting up the rotted flesh of a dead soldier and forcing it into the hands of Libyan Prisoners of War, who are lined up in a row so they must eat it.
Another video shows a group of Rebels sodomizing a civilian with a pistol.
Another  shows a crowd of Rebels hanging and beheading a Libyan soldier.
Another video shows CIA operatives working side by side Rebel forces, driving around in trucks— proof that U.S. forces are already on the ground and active participants in the atrocities.
Another video shows several dead Libyan soldiers with their throats cut, lying in the back of a truck. The killings violate the Geneva Conventions of War, which protect enemy soldiers after capture. In the excitement, NATO Rebels encouraged a frightened on-looker to video the butchery and claim that Gadhaffi’s forces were responsible. Afterward, the man with the video grabbed his family and fled the Rebel stronghold. That’s how the video reached the fact-finding group in Tripoli

Thu, 06/23/2011 - 23:26 | 1397433 Cleanclog
Cleanclog's picture

I wasn't "worried" about oil so much as about the manipulated markets, now further manipulated and additional markets, goverments and entities.

Your post is annoying in its context here.  A worthy post, but you are stretching to put here.  Just saying.

Thu, 06/23/2011 - 21:24 | 1397224 topcallingtroll
topcallingtroll's picture

I bet it is both.

Fri, 06/24/2011 - 01:26 | 1397657 IQ 145
IQ 145's picture

 I think I understand; it's all part of the strategy of "winning the future"; they next thing to do is lower the painter over the rail on his scaffold and paint over the "TITANIC"with, "Hope and Change"; then everything will be fixed.

Thu, 06/23/2011 - 19:23 | 1396929 sabra1
sabra1's picture

am sure this is all covered in the constitution!

Thu, 06/23/2011 - 20:03 | 1397041 Bunga Bunga
Bunga Bunga's picture

Does it mean they admit that USA is in catastrophic condition?

Thu, 06/23/2011 - 20:28 | 1397099 Rusty Shorts
Rusty Shorts's picture

 - not til August, then the USA will be in a catastophic condition.

Fri, 06/24/2011 - 00:05 | 1397519 Newsboy
Newsboy's picture

I agree, catastrophic August appears to be signaled.

Thu, 06/23/2011 - 20:16 | 1397055 e_goldstein
e_goldstein's picture

backfire? this reeks of sabotage.

Thu, 06/23/2011 - 20:35 | 1397112 iNull
iNull's picture

Mad Max bitchez.

TPTB => TPTW => TPTNCR (The powers that nobody can remember).

Thu, 06/23/2011 - 21:29 | 1397228 Mad Max
Mad Max's picture

The two great northern tribes went to war, over the black fuel...

Thu, 06/23/2011 - 21:25 | 1397225 Beatscape
Beatscape's picture

The IEA released a mock Q&A today to address questions re: the SPR release.  In this Q&A was a bit of shocker in that they openly acknowledged that Saudi Arabia does not have the famed spare capacity and spigot they can turn on as needed that every main stream media outlet and WS analyst claims that they do.  In fact, the release is a tacit admission of the fact that Saudi Arabia has little to no spare capacity.  Matthew Simmons was right all along...  This whole manuever is bullish for crude and exposes the tightness in the market.

Has the IEA consulted with OPEC or Saudi Arabia on this decision? Would this IEA action not discourage Saudi Arabia and other willing OPEC members from increasing oil production?

The IEA and its member countries have been in close contact with key oil producing countries, and in particularly with Saudi Arabia, which holds the lion’s share of OPEC’s spare capacity.  The IEA welcomes the announcement made by Saudi Arabia that it intends to make incremental oil available to the market.  However it will take time for these incremental barrels to be produced and shipped to consuming markets; the use of IEA strategic stocks now will help bridge the gap until these new supplies are available. Producers and consumers have a common interest in stabilising oil markets. This point has been highlighted many times before, and is a reason for the IEA’s close liaison with key oil producing countries at all times.

 

http://blogs.forbes.com/christopherhelman/2011/06/23/obama-taps-petroleu...

 

Thu, 06/23/2011 - 18:54 | 1396854 Undecided
Thu, 06/23/2011 - 19:29 | 1396955 Long-John-Silver
Long-John-Silver's picture

The sooner it happens the better off the survivors will be. Beans, Bullets, and Bullion Bitchez!

Thu, 06/23/2011 - 19:37 | 1396964 Gavrikon
Gavrikon's picture

Groceries , Guns, and Gold!

Thu, 06/23/2011 - 21:10 | 1397178 usefuloutput
usefuloutput's picture

Pasta, Pistols, PM's, Putas!

Thu, 06/23/2011 - 21:39 | 1397248 Libertarians fo...
Libertarians for Prosperity's picture

Doomers, goons and rednecks

Saddle up the Camaros, pilgrims.  This redneck done got mad.... 

 

Thu, 06/23/2011 - 21:55 | 1397285 tarsubil
tarsubil's picture

You hurt my feelings. I'm going to stop buying precious metals and guns because I haven't the self esteem to oppose the oligarchs. You're unstoppable like AAPL!

Thu, 06/23/2011 - 22:29 | 1397339 Herbert_guthrie
Herbert_guthrie's picture


Sir Gavrikon: Obviously, whoever junked you is not familiar with your top-notch comments on MW blogs.
You Sir, deserve your due....

Apologize for the idiot who junked you. He knows not what he does.

Fri, 06/24/2011 - 01:27 | 1397669 IQ 145
IQ 145's picture

 200% Silver ! (Margin loans are cheap!)

Thu, 06/23/2011 - 20:46 | 1397127 Caviar Emptor
Caviar Emptor's picture

That's the 12th country with a yuan swap agreement

Thu, 06/23/2011 - 18:50 | 1396855 redpill
redpill's picture

These people are retarded.

Thu, 06/23/2011 - 19:31 | 1396959 Long-John-Silver
Long-John-Silver's picture

No; these 'people' are politicians. Please do not degrade the mentally handicapped.

Thu, 06/23/2011 - 19:34 | 1396971 max2205
max2205's picture

I say FUCKTARDS. Our govt is a bunch of FUCKTARDS

Thu, 06/23/2011 - 19:39 | 1396982 dick cheneys ghost
dick cheneys ghost's picture

Seeing as how it came from the feds.......how believable is the info? Something else is going on.....

Thu, 06/23/2011 - 20:36 | 1397107 iNull
iNull's picture

True. But who elected them? Nothing spells F.U.C.K.T.A.R.D.A.G.E. like:
a) The scientifically illiterate, "we got enough oil in Alaska to last us a thousand years," Lindsey Williams parrots.
b) The psychotic, shaven-head, drum-beating Hare "abiotic oil" Krishnas.

Thu, 06/23/2011 - 18:53 | 1396856 Manthong
Manthong's picture

So how much did GS make trading in front of this "surprise"?

Thu, 06/23/2011 - 18:54 | 1396863 Re-Discovery
Re-Discovery's picture

What a silly frivolous foolish bumbling -- and above all DANGEROUS -- Government we have.

They are worse than a Banana Republic.  Think Kafka or Borges.  Obviously Orwell.

 

Thu, 06/23/2011 - 18:58 | 1396869 alien-IQ
alien-IQ's picture

I think they've stumbled right into Harold Pinter levels of absurdity.

Thu, 06/23/2011 - 19:03 | 1396884 Re-Discovery
Re-Discovery's picture

indeed

Thu, 06/23/2011 - 18:57 | 1396866 alien-IQ
alien-IQ's picture

another little ancillary market benefit that will come from this down the road will be how the market will be 'surprised" to see how the oil inventories have declined and will surely see it as a bullish sign to send the markets ever needlessly higher because....well...just because.

I think if I live long enough to see even one smart decision made in Washington that actually benefits the people of America...I'd probably drop dead of a heart attack on the spot.

Thu, 06/23/2011 - 19:59 | 1397025 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

If SS and Medicare were bad ideas the (D) and (R)'s would make them go away!!!!!!

They must be good ideas or why are they still defended?

 

/s

Thu, 06/23/2011 - 23:39 | 1397452 snowball777
snowball777's picture

Because lobbyists need to drain energy through their dangly filcher pods too?

Thu, 06/23/2011 - 18:54 | 1396868 daneskold
daneskold's picture

Obama is privatizing the strategic petroleum reserve because of the debt ceiling.

 

How desparate for cash!

 

Next up for sale, the Lincoln Memorial.

Thu, 06/23/2011 - 19:17 | 1396922 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

Good analysis, except I wouldn't say "Obama".

Like W before him, he is a rubber-stamper and dancing puppet for decisions made by... a higher power...

By the time you become the leader of a country, someone else makes all the decisions -- you just sign your name.

-William Jefferson Clinton, 1998, here

(a lot of truth is said in jest)

Fri, 06/24/2011 - 01:26 | 1397660 hidingfromhelis
hidingfromhelis's picture

Hillary?

Fri, 06/24/2011 - 04:54 | 1397811 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

One good turn deserves another, hope this gives you a chuckle:

http://i.imgur.com/6JIYy.jpg

Thu, 06/23/2011 - 19:35 | 1396972 Long-John-Silver
Long-John-Silver's picture

Considering the number of persons Lincoln murdered in a civil war simply because some states had had enough of an overbearing central government and wanted to legally leave the union. The Lincolin Memorial should be sold for scrap.

Thu, 06/23/2011 - 21:14 | 1397198 Diogenes
Diogenes's picture

Here we go again. They did legally leave the union. After they left the Union they ganged up on the Union and attacked it at Fort Sumter. The Union then defended itself and the rest is history.

Thu, 06/23/2011 - 18:59 | 1396870 Cdad
Cdad's picture

So let me get this straight, the administration that refuses to approve oil drilling permits all over the US is now selling our Strategic Petroleum Reserves to China.

Let me dwell on this for a bit...

Thu, 06/23/2011 - 20:41 | 1397119 Rusty Shorts
Rusty Shorts's picture

Cdad, I'm glad you you're here on ZH, i like the way you think.

Thu, 06/23/2011 - 21:25 | 1397227 Cdad
Cdad's picture

Well, I have thought about it for awhile now, and I have decided that even a HUGE FAN of Dancin' with the Stars can see how absurd this one is.

As was Rome, so too are we being destroyed from within.

Thu, 06/23/2011 - 18:56 | 1396874 Downtoolong
Downtoolong's picture

the government does not plan to stagger the sale of the oil and will offer all 30 million barrels in one bid sale.

And the winning bid is Walter Himmel, a New Jersey dentist, who says he’s been successfully trading (er investing) in oil on margin for over three years.

There, that’ll show those damn speculators what for.

Thu, 06/23/2011 - 19:01 | 1396878 Spastica Rex
Spastica Rex's picture

I guess I don't get how $113/barrel oil is that helpful, anyway.

Thu, 06/23/2011 - 19:07 | 1396901 CrashisOptimistic
CrashisOptimistic's picture

This is the dirty little secret or oil and reporting WTI as the measure.

We don't burn much WTI.  We burn imports mostly.  They are all priced higher.  The avg was about $113.

Thu, 06/23/2011 - 19:07 | 1396881 bob_dabolina
bob_dabolina's picture

How dumb are we as a civilization?

We drill oil out of the ground, than pump it back into the ground, pump it back out of the ground, and someone else pumps it back into the ground? 

I have no faith in humanity at all. 

On the same note, we have clearly demonstrated our inability to handle nuclear energy responsibly. What are we doing with CERN? They are trying to make black holes and antimatter? Really? 

.....befuddled.

The depravity of the human condition ad infinitum.

Thu, 06/23/2011 - 19:05 | 1396891 CrashisOptimistic
CrashisOptimistic's picture

You have made it over complicated.  The real sequence is:

We pump oil out of the ground, and then we burn it.  And then it's gone.

Forever.

 

Thu, 06/23/2011 - 19:20 | 1396919 bob_dabolina
bob_dabolina's picture

No I haven't over complicated it. 

We pumped oil out of the ground....pumped it into the ground into our reserves....now we are pumping oil out of the reserves.....now China is pumping oil into their reserves.

This seems like unnecessary folly.  

Thu, 06/23/2011 - 21:01 | 1397171 QQQBall
QQQBall's picture

You're right; China is soon to bypass the uselss middleman. China buys assets with sovereign wealth fund and pumps oil out of the ground and transports to China.... Superficial USA is bypassed.

Thu, 06/23/2011 - 21:45 | 1397267 Beatscape
Beatscape's picture

You make an excellent (yet blatantly obvious) point that seems to escape the minds of so many. Crude oil is not a renewable resource and production of it has peaked worldwide. And, once burned is gone forever.  We burn 89 million barrels a day--it's the life blood of our economy.  And, China's per capita use of crude oil is roughly 15% that of modernized countries.  China is marching faster and faster to that higher standard of living that most others in the world take for granted.

 

Thu, 06/23/2011 - 19:08 | 1396888 CrashisOptimistic
CrashisOptimistic's picture

Excuse me, but I thought the problem with oil prices is an array of speculators performing evil deeds that DOJ is going to prosecute, thereby solving the issue, and I thought this was asserted in the same breath that "there is no supply problem and the world is awash in oil" was uttered.

And wait a minute rev 2.0, I thought the Saudis were going to solve this problem.

This looks rather a lot like trying to fix a supply problem.

Thu, 06/23/2011 - 19:11 | 1396909 lizzy36
lizzy36's picture

This is a repost from my comment this morning:

So the EIA is going to release less than 2/3rds of one days world crude demand over time?

Another ridiculous policy response. Fucking politicians trying to get reelected by once again demonstrating the wrong answer to the wrong question.

When the hedge fund community is structurally long over 300m/boe (WTI+brent) which amounts to 30% of OECD stocks, up from a mere 30m/boe at the high in 2006, one can only speculate (pun intended) about what the real issue and correct policy response it.

These numbers are from the CFTC and are as of last week. They are down from the high reached on April 26 which was 445m/boe (WTI+brent), but in absolute terms last weeks number was STILL HIGHER than at anytime before December 2010.

The problem is not SUPPLY. The problem is monetary policy and treating crude oil as an asset class. Alas as long as one doesn't correctly define the problem, the correct solution will never see the light of day.

Thu, 06/23/2011 - 19:25 | 1396945 Cdad
Cdad's picture

The problem is not SUPPLY. The problem is monetary policy and treating crude oil as an asset class. Alas as long as one doesn't correctly define the problem, the correct solution will never see the light of day.

This is profoundly true...and also the point of the exercise.  Whether we are talking about bonds, equities, or commodities, our "markets" have been destroyed.  This is not an accident.  Our markets have been systematically destroyed for many months now, each actor taking his turn upon the stage.

Tell me, how was today's one two punch of SPR oil and "Greece is fixed" supposed to create a basis for investing?  It doesn't.  It brings out guys with charts, computers that can scalp those charts, and funds flowing from the ever benevolent Federal Reserve.  

When you step back and look at the totality of it all, including the fact that Obama has damaged the our ability to produce oil, and the Fed's attack on our currency, the picture of failure is quite plain to see...which again, is the purpose of the exercise.

You should anticipate heavy volume liquidation selling in the very near term.

Thu, 06/23/2011 - 19:45 | 1396987 CrashisOptimistic
CrashisOptimistic's picture

Don't know if you understand why you're right or not.

Oil is indeed not an asset class.  It is a consumable.  Once you pump it out of the ground and burn it, it's gone.  Forever.

That's not an asset class.  That's lifeblood.

Thu, 06/23/2011 - 21:00 | 1397158 DonnieD
DonnieD's picture

Oil is paper or an entry in a computer so yes, it is an asset class. The real world you describe ceased to exist many decades ago.

Thu, 06/23/2011 - 19:32 | 1396953 Blano
Blano's picture

You are becoming one of my favorite posters.

Thu, 06/23/2011 - 19:37 | 1396965 ZeroPower
ZeroPower's picture

When the hedge fund community is structurally long over 300m/boe (WTI+brent) which amounts to 30% of OECD stocks, up from a mere 30m/boe at the high in 2006, one can only speculate (pun intended) about what the real issue and correct policy response it.

Long futures. So due to rolling, they can be basically be perpetually long without seeing a single drip drop of oil.

I have heard of a big non-oil entity (or 3..) being long actual crude stored in a tanker, but i digress.

Thu, 06/23/2011 - 19:45 | 1396996 CrashisOptimistic
CrashisOptimistic's picture

Liz, the first critical lesson to learn about oil is that BOE is not BO.  Oil equivalent is not oil.  You can't put natural gas in a 450 hp John Deere tractor and plow 10,000 acres.

Crude + Condensate, and even condensate is bogus because it doesn't have oil's energy density.

Be very careful of numbers.  Definitions have changed to conceal the crude totals.  You'll see C&C, you'll see boe, you'll see "all liquids".

That's all just methodology to conceal oil getting scarce.

There IS a supply problem.  When you look at numbers, look at Brent.  Not WTI.

Fri, 06/24/2011 - 02:44 | 1397739 XPolemic
XPolemic's picture

There IS a supply problem.  When you look at numbers, look at Brent.  Not WTI.

My understanding of economics 101 is that supply problems are price problems. If supply does not meet demand, the price must be too low. In a free,efficient market, the price cannot be too low, because it rises in concert with the demand/supply ratio.

In WWII, due to shortages/rationing of oil, companies built and sold wood->gas converters for automobiles. They weren't cheap, but they were cheap relative to the price of oil.

So if there really is a supply problem in oil, then it appears that the market for oil is neither free, not efficient (but particularly not free). Even this closed auction of SPR reserves is simply an attempt at price fixing.

 

Fri, 06/24/2011 - 21:29 | 1400293 XPolemic
XPolemic's picture

You junk me??? Seriously??? For a comment about supply and demand???

LOL, made of fail.

Thu, 06/23/2011 - 19:05 | 1396889 East Coast Diablo
East Coast Diablo's picture

Be seeing the White House silverware and serving sets on Craigslist next.

Thu, 06/23/2011 - 19:07 | 1396900 thetrader
thetrader's picture

qe3 light sweet baby....

U.S. Taps Strategic Petroleum Reserve

Thu, 06/23/2011 - 19:14 | 1396906 Mike2756
Mike2756's picture

What's the plan for a hurricane strike on the gulf coast?

Fri, 06/24/2011 - 03:17 | 1397756 Mec-sick-o
Mec-sick-o's picture

I've heard about angels about to play their HAARP.

Thu, 06/23/2011 - 19:14 | 1396907 Canaduh
Canaduh's picture

 

Cash for oil. Err, I mean gold. Gold.

http://fliiby.com/file/558332/uh2zmdswjq.html

 

The gold medallion bit cracks me up.

Thu, 06/23/2011 - 19:16 | 1396911 Mentaliusanything
Mentaliusanything's picture

Question 1/- If a country "A" uses 18 million barrels/ day how long does it take to use 30 million barrels?

Question 2 /- 30 million barrels of oil is.......

a/ a ship load

b/ truck load

c/ a load in ya pants

The usual prizes

Thu, 06/23/2011 - 19:35 | 1396975 ZeroPower
ZeroPower's picture

The usual prizes

A junk? o.0

Thu, 06/23/2011 - 21:27 | 1397223 Diogenes
Diogenes's picture

Here is another question. If the government sells 30 million barrels of oil @ 112.78 per barrel in ONE lot, who are they going to sell it to?

That = $3,383,400,000 or over $3 billion worth of oil to be delivered and paid for in 1 month.

How many buyers are big enough to bid on that? Foreign countries or bid oil companies?

Be interesting to see who buys it, at what price, and what they do with it. I don't think it will go to  China.

Fri, 06/24/2011 - 03:50 | 1397783 Urban Redneck
Urban Redneck's picture

Since there is no shortage of physical oil in the US for consumers, and recovery summer 2 is a a myth - the US is sort of ineligible to consume the increased production.  It will serve to supply "somewhere" with growing GDP (energy consumption). 

Thu, 06/23/2011 - 19:49 | 1396912 mynhair
mynhair's picture

What a nice campaign slush fund Obambi has found.

Has to make up those missing donors from tonite's rubber chicken fest.

(puke)

Thu, 06/23/2011 - 20:56 | 1397149 iNull
iNull's picture

He doesn't need one. He's already got a billion dollars in the slush fund he has now.

Thu, 06/23/2011 - 19:16 | 1396913 user2011
user2011's picture

Hmmm..... outta no where we got this coordinate oil strategy.   Is it possible that they are going to escalate the situation on Lybia openly ?!  

They pre-emptively strike down the oil price before they are going to put boots on the ground in Lybia.   Further escalation in middle east will spike the oil price higher.   They are showing government will do something to suppress oil price.   So, even if more crisis in middle east, the oil price will be suppressed.

 

Thu, 06/23/2011 - 19:23 | 1396938 NotApplicable
NotApplicable's picture

Sounds like as good of a guess as any. Then again, August is when the wheels fall off of the Treasury's game of musical chairs. Could the proceeds of this sale fund fedgov for a couple of days while they make the Tea Party reps twist in the wind for forcing us to sell the SPR to China, instead of getting a higher credit limit?,m

In other news, just yesterday I got gas at the lowest price I can remember in the last year at $3.39.

Thu, 06/23/2011 - 19:24 | 1396941 sabra1
sabra1's picture

where do you think the troop withdrawals in afghanistan will end up?

Thu, 06/23/2011 - 20:50 | 1397142 nmewn
nmewn's picture

Doubtful on Syria.

Have you seen this?...Assad has Hezbollah doing a little "free lance" work for him...again...

"Hezbollah has thrown in its lot with Assad against the Syrian people, supplying gunmen to execute Syrian soldiers who refuse to take part in the killing of Syrian citizens. By siding so unequivocally with the Alawite dictator over his captive, predominantly Sunni population, and in a dispute that has nothing to do with Israel no less, Hezbollah has exploded its carefully constructed image as the standard-bearer for the Muslim common man against the Zionist enemy. Outraged Syrians are now being filmed burning posters of Hezbollah’s chief, Sheikh Hassan Nasrallah."

http://pajamasmedia.com/blog/hezbollahs-miscalculation-in-syria/?singlepage=true

Thu, 06/23/2011 - 23:22 | 1397431 mt paul
mt paul's picture

when the easter bunnie 

snorts a line of coke off 

 paris hiltons butt....

Thu, 06/23/2011 - 19:20 | 1396930 shushup
shushup's picture

Seems I don't understand. Obama is releasing US oil reserves to help lower the price of our gasoline but China can buy the oil? I don't get it.

Thu, 06/23/2011 - 19:47 | 1396998 mynhair
mynhair's picture

It's fungible.

Thu, 06/23/2011 - 22:35 | 1397345 Manthong
Manthong's picture

He'll sell it all if it appears to help his re-election chances.

Thu, 06/23/2011 - 19:28 | 1396936 NumberNone
NumberNone's picture

WTF is this shit?  I want my fucking Iraqi conquest dividend...where is it??

We've got 4,500 dead soldiers in Iraq, thousands more injured, dropped a couple trillion $$ in military expeditures + rebuilding (lost a couple billion $$ along the way but who's counting) and when things get a little tough we have to crack open our salt domes and spend our oil savings...why can't we just ship ourselves a little extra oil from Iraq?  What a shitty fucking investment that's turned out to be.   

Thu, 06/23/2011 - 20:10 | 1397050 crazyjsmith
crazyjsmith's picture

Yeah, I have to agree.  Next time this Country of ours goes to War for oil, how about we actually get oil. 

Thu, 06/23/2011 - 20:36 | 1397108 Yes_Questions
Yes_Questions's picture

++Both of your posts

Thu, 06/23/2011 - 21:23 | 1397209 blunderdog
blunderdog's picture

Our oil companies have plenty of production access.  The idea wasn't that we get free oil.  The idea was that our big businesses get the profits from selling us the oil.

Thu, 06/23/2011 - 19:24 | 1396942 buzzsaw99
buzzsaw99's picture

the entire spr is only worth $70B at today's prices. I'm sure china would love to buy the whole thing. Oil is waaaay underpriced.

Thu, 06/23/2011 - 19:27 | 1396949 slewie the pi-rat
slewie the pi-rat's picture

i'm looking @ WTI @ $91.94/bbl, & brent @ $107.26. LOL...

all at once.  sell 30mm bbl all at once.  that ought to send them cheatin varmints a-scatterin.  just bid away @ no_vaseline/cartel[dot] [com]

the banksters/oil companies will handle this.  timmah will help.   

don't worry.  soon there will be an ETF in US oil reserve tranch options.  very soon.  this will enable the ETF holders to sell the oil reserve back to the goobermint;  after they buy it.  this new ETF will feature different margin requirements for each day of the week.

this is a heluva product, as we always strive to be ready to short to you anything we might have bid on;  or our agents; or family or relatives; or car or insurance agents;  or dentists.

trust us.

Thu, 06/23/2011 - 20:41 | 1397126 lesterbegood
lesterbegood's picture

LMAO!

Thu, 06/23/2011 - 19:30 | 1396957 XRAYD
XRAYD's picture

WWill the be giving out extra food stamps for hot dogs and burgers for the 4th of July weekend too?

 

Why didn't they do this when gas was .50c a gallon higher? Things must be about to get worse if we are now in an energy "emergency"!

Thu, 06/23/2011 - 19:32 | 1396960 fonestar
fonestar's picture

I wonder if they were pressured into auctioning the SPR in order to sell any more junk bonds?

Thu, 06/23/2011 - 19:34 | 1396967 Blano
Blano's picture

So what is stopping, say, a Chinese company from buying it all??  Is it really possible it could all just end up in some ChiCom storage post??  The potential irony of it all seems too astounding to be plausible, but I don't assume anything anymore.

Thu, 06/23/2011 - 19:35 | 1396973 FISD
FISD's picture

"Winning companies would pay for their oil during the month after the crude is delivered." I'll gladly pay you Tuesday for a hamburger today! Why would we sell this on a net 30 basis? It's our strategic reserve! Jarrett is stupid; I hope she doesn't get re-elected.

Thu, 06/23/2011 - 19:40 | 1396978 Pure Evil
Pure Evil's picture

Well, if we're gonna sell the Chinese Communists our oil from the Strategic Petroleum Reserve we might as well start selling of parts of the United States:

http://www.freepressers.com/2011/06/china-wants-to-construct-a-50-square-mile-self-sustaining-city-south-of-boise-idaho/

Thu, 06/23/2011 - 19:47 | 1396991 mynhair
mynhair's picture

Sell them Maryland instead.  Why waste good potato property?

Thu, 06/23/2011 - 20:58 | 1397153 Pure Evil
Pure Evil's picture

Maybe we could jackhammer off parts of California and float those over and be done with it.

Thu, 06/23/2011 - 21:11 | 1397190 Rusty Shorts
Rusty Shorts's picture

China will quarantine the shit and send it back.

Thu, 06/23/2011 - 21:14 | 1397199 penisouraus erecti
penisouraus erecti's picture

Let them have all of DC - could they make it worse?...well, I suppose they could.........

Thu, 06/23/2011 - 20:53 | 1397141 iNull
iNull's picture

Go back to sleep America. Enjoy your slave state*. Watch sports and drink more beer...you fucking morons.

*Economic Zone is one where the local, state, and Federal laws do not apply, e.g., minimum wage, health and safety, etc.

Fri, 06/24/2011 - 03:59 | 1397787 Urban Redneck
Urban Redneck's picture

Perhaps in you world, but in many of the emerging and undeveloped economies, that is where the good jobs are.  

Fri, 06/24/2011 - 04:30 | 1397803 iNull
iNull's picture

Ever been outside the radius of your crackerbox subdivision? Ever been to a 3rd world country where people live in cardboard shacks or beneath a tin leaning against a palm tree, and where suicide rates for young men run to 25% because of despair? No? Didn't think so.

Fri, 06/24/2011 - 05:39 | 1397831 Urban Redneck
Urban Redneck's picture

I've been bringing FDI and materials to those very economic development zones for years.

Since you seem to have a fascination with cracker box subdivisions I am wondering if you don't spend too much time watching aid appeals or ideological propaganda on TV, perhaps in your parents' basement? 

If one isn't a politician or aristocrat, then the domestic income opportunities tend to far more limited once you travel outside the economic development zones and are solely dependent upon local purchasing power for a customer base from which to derive a salary.

Fri, 06/24/2011 - 08:49 | 1398106 iNull
iNull's picture

Is that a fact. Well you should change your pseud to Tropical Redneck.

Thu, 06/23/2011 - 19:47 | 1396992 monopoly
monopoly's picture

Constitution, what the hell is that. Never heard of it. What a crock. Gotta get rid of the 3 stooges.

Thu, 06/23/2011 - 19:44 | 1396994 faustian bargain
faustian bargain's picture

I bet there's tungsten in that oil.

Thu, 06/23/2011 - 19:48 | 1396995 dcb
dcb's picture

the fed does Qe aises the cost of oil, so we release the reserve. once more the tax payers take it up the ass. we have to pay to replace the oil, we pay in low interest rates and decreased returns on savings. All because of fed monetary policy. Why can't those in power (except Ron Paul) name the villian, and the vilian's name is the federal reserve. This is just more wealth tranfer disguised as helping the economy. give real interest rates, make a currency worth something.

 

It is astouning that when official voices determine when they need to do something they always decide the wrong thing. Once more Obama needs to get rid of his economic team. Period. What I really smell is Obama realizing he may loose the election and desperation. Alas, he will always pick the wrong thing to do.

Thu, 06/23/2011 - 19:46 | 1396997 the grateful un...
the grateful unemployed's picture

i question who directed the sale of this oil, as the IAE has authority to order such release, as I understand the vaguely worded directive. This sale is a real WTF, because if America is selling its strategic stockpile of oil to satisfy the demands of an international organization, what's next? Maybe they'll tell us to disarm our military? Sell our gold?And if  Obama is going along with this mini UN just so he can get reelected then I think we should talk impeachment here, and to hell with waiting until November.

They are only selling 30M bbls because that's all the law allows them to sell in a 60 day period, and without emergency. Again Bush released less than than to take care of all the problems with Katrina. If you thought Bush is bad wait until you see the next guy... me, 2008

Thu, 06/23/2011 - 19:53 | 1397008 mynhair
mynhair's picture

Even worse, the "talks" started in April.  Guess the Squirrel knew he was tanking then.

Thu, 06/23/2011 - 19:48 | 1397002 Casandratarian
Casandratarian's picture

QE3 via oil, anyone?

After all, oil does effect the price of everything.

QE4 - US sells copper in electrical grid
QE5 - Yellowstone
...
QE19692 - Lincoln Bedroom Set
...
QE260247856027598725 - Your gold fillings

Fri, 06/24/2011 - 00:43 | 1397590 snowball777
snowball777's picture

$3B and change....or ~1/2 of the amount they've been POMO'ing into the fetid veins of the zombies daily...for months? Uh, no.

Thu, 06/23/2011 - 19:53 | 1397004 bsdetector
bsdetector's picture

Dupe

Thu, 06/23/2011 - 19:52 | 1397006 slewie the pi-rat
slewie the pi-rat's picture

jamie, blythe, & i think we can sell the SPR at least 50-100X.  ez, BiCheZ!

Thu, 06/23/2011 - 19:49 | 1397007 bsdetector
bsdetector's picture

If you were China would you rather hold US dollars or oil? Simple isn't it. 

Thu, 06/23/2011 - 19:55 | 1397014 g
g's picture

It is so stupid to tap the SPR for anything other than an emergency. Is it possible that there is a shortage that we are not aware of.

Thu, 06/23/2011 - 19:55 | 1397023 IMA5U
IMA5U's picture

yeah.  a shortage of jobs which will lead to a shortage of votes for obamanation.

Thu, 06/23/2011 - 19:56 | 1397028 mynhair
mynhair's picture

A shortage of votes for the Statists is apparent.

Thu, 06/23/2011 - 21:12 | 1397193 penisouraus erecti
penisouraus erecti's picture

Hopefully.....but who aren't the statists these days?

Thu, 06/23/2011 - 20:19 | 1397077 iNull
iNull's picture

Nothing new. The SPR has always been an expedient socio-political pacifier.

Thu, 06/23/2011 - 19:52 | 1397017 rittter
rittter's picture

The Treasury needs the cash.  Don't be so hard on them.  It's the same with the Tax holiday for those Corps that have all those dollars overseas.  That should be passed shortly.  Once that money is in this country, it will give the treasury a huge bump in available capital, along with the pension funds, to keep the BANKS from going under.  Stay tuned for the next USA garage sale.          

Thu, 06/23/2011 - 20:25 | 1397018 mynhair
mynhair's picture

Well, time to jump back into the USDHUF pool, I guess.  Show me 188.5!

Why am I seeing -error- on USDCNY?  A sign?

close, but moved to 188.3 - gonna be a busy nite

Thu, 06/23/2011 - 20:09 | 1397042 AUD
AUD's picture

WTI Cushing spot is currently trading at about $91. I don't know what the contango is 2 months out but I bet it's not $20. Why bid for this 'new' oil when you can take delivery for less with futures?

Thu, 06/23/2011 - 20:15 | 1397053 gwar5
gwar5's picture

"Invasion of Earth will be a piece of cake, the humans running the planet are stupider than Jupiter" -- Gwar 26

Thu, 06/23/2011 - 20:21 | 1397070 Xibalba
Xibalba's picture

Thank you Dr. William Levingston

Thu, 06/23/2011 - 20:24 | 1397078 oldmanagain
oldmanagain's picture

RE intro and article

False premise that this operation lets China do something they can't do.  They buy oil now- around the world, storing some and will continue whether USA  sells its stockpile or not. The link to Obama is zero, hedged or not.

World daily consumption is 82 mil barrels PER DAY.  30 million barrels is one million a day for 30 days.  Big deal?  Zero game changer for any realistic time frame. Europe will supply another 30 mil and I am sure Obama has no control on that.

What it might prevent is a possible skyrocket in Brent  crude over the summer months.  At least a few more months of only semi-high prices of gasoline. 

It may be that Brent users will have to store some Brent in the winter for the summers to flattened out the demand curve, lowering the average annual price.

Thu, 06/23/2011 - 20:29 | 1397085 HileTroy
HileTroy's picture

Holy crap!! You cant make this shit up. I think the raod warrior index is up.

Long bullets short politicians

http://www.survivalthinktank.com/2010/07/road-warrior-index-update.html

Now im gona go play some cards at least that is a game of skill.

 

 

Thu, 06/23/2011 - 20:33 | 1397102 Yes_Questions
Yes_Questions's picture

I wonder what the GAO (or similar body) shows as the $price/bbl of the SPR inventory.  Like every other strategic initiative the US Gov has engaged in, it is doubtful to me at least that A.) the volume of crude in the SPR is publicly known and B.) what real intended result comes from the decision to "release" it.

After all, aren't there still Tankers full up with the stuff at sea?  Isn't it possible the SPR is also made up of undelivered crude? (the US did't take physical delivery so to speak)

What about IRAQ? Who controls that stock?

I know its easy to disparage bureaucrats as lazy, dumb, incompetent, whatever: but absent a full disclosure/investigative Matt Taibbi-esque treatment of this, I am not so sure the 30MM bbl release relative to daily use is the math we are looking for.

Thu, 06/23/2011 - 20:35 | 1397105 Dapper Dan
Dapper Dan's picture

5yr chart of BDI, we are so not improving,  I'll take questions after the break. 

http://www.bloomberg.com/apps/quote?ticker=BDIY&exch=IND&x=15&y=11

Thu, 06/23/2011 - 20:33 | 1397111 uno
uno's picture

watch the commodity indexes be rebalanced with 50% S&P 500 future contracts and oil and PM removed ala Goldman changing the GSCI back in 2006.

Thu, 06/23/2011 - 20:36 | 1397116 bankonzhongguo
bankonzhongguo's picture

Its just an excuse for the US to buy oil at $150/bbl by Winter from the Saudis.

Why should anyone here really care?

Its not like its a market anymore.

Its just a 'newz flash.'

Its all about as important or controllable as meteor across the sky.

The oil players knew this was coming a week ago. 

You did not know it and never will.

Just go to the pump and pay and get ready for your family barbeque.

 

 

 

Thu, 06/23/2011 - 20:44 | 1397130 lesterbegood
lesterbegood's picture

The US Federal Corp is broke and desperate. Time to liquidate...

Thu, 06/23/2011 - 20:52 | 1397150 Atomizer
Atomizer's picture

fire sale

1. (Business / Commerce) a sale of goods at reduced prices after a fire at a shop or factory

2. (Business / Commerce) any instance of offering goods or assets at greatly reduced prices to ensure a quick sale <---- Ding, Ding, ding

An old story many should watch. I'm a Paul Kelly fan.

 

From Little Things Big Things Grow

 

Thu, 06/23/2011 - 21:02 | 1397166 vegas
vegas's picture

This is a perfect example of the total dipshits running government. Only these turd types would hold a sale like this.

 

In the real world, it goes down like this:

 

"Hello Exxon, what's your bid for 30 mil of sweet crude?"

"Sold"

Wire the money and you can pick up your oil. WTF is so hard about this?

I swear, some days I just can't take it anymore.

Thu, 06/23/2011 - 21:04 | 1397168 zKeyserSoze
zKeyserSoze's picture
Oil Traders: Tapping Reserve Was 'Genius' Move by Obama http://www.cnbc.com/id/43514254 

With US crude prices already down 16 percent from their April high, pundits and politicians everywhere were asking Thursday: "Why would President Obama tap the Strategic Petroleum Reserve when oil prices were already falling?”


The answer is simple: Obama knew this would have the maximum impact, hitting speculators on the chin, according to traders.

“Arguably the timing of the release is genius,” said Stephen Weiss of Short Hills Capital....

Thu, 06/23/2011 - 21:11 | 1397169 zKeyserSoze
zKeyserSoze's picture

story illudes to tribute to China for US and European debt

Thu, 06/23/2011 - 21:05 | 1397175 penisouraus erecti
penisouraus erecti's picture

So, now we're selling off the SPR to help balance the budget? WTF - this guy is a bigger moron than I thought.......and I thought he was an enourmous one before.

Thu, 06/23/2011 - 21:12 | 1397182 QQQBall
QQQBall's picture

He is not "tapping it", he is selling it. Its a garage sale to cover the the bills. Lets see how big the drawdown is - shhhh! No one knows that they will have to buy it back later - sure everyone will stand aside and let OBumbler buy back cheap.

When the WH China goes on the market, will; he be "tapping the dishware"

Lower commodity prices will be beneficial is they do try QE3 though.

Thu, 06/23/2011 - 21:12 | 1397183 hardcleareye
hardcleareye's picture

Hmm, I wonder if TPTB see a VERY significant event coming in Aug that would restrict oil supply and are preempting a severe oil supply crunch with this move.

My insight into the chatter on TOD and elsewere has been to expect some global production shortages this summer but not significant enough to warrant SPR release. 

Thu, 06/23/2011 - 22:24 | 1397333 wang
wang's picture

heard similar theory floated on Blmbrg (pimm foxes show at 5pm but can't find the clip)  but concensus of the pundits he was interviewing seemed to be total bewilderment  and likely political/some sort of back door stimulus attempt.

 

perhaps forshadows an official  greed default coming soone

Thu, 06/23/2011 - 21:20 | 1397202 penisouraus erecti
penisouraus erecti's picture

I'm not sure we can blame Obama for this - when would he have time to figure something like this out what with his 49 consecutive days of golf, or whatever the number is.

Thu, 06/23/2011 - 21:26 | 1397231 Mad Max
Mad Max's picture

So China said "give us oil or we dump your debt"?

Thu, 06/23/2011 - 21:27 | 1397233 JoeStocks
JoeStocks's picture

JAPAN ECONMIN YOSANO: IEA DECISION TO RELEASE OIL STOCKS IS WARNING AGAINST SPECULATIVE BUYERS

Thu, 06/23/2011 - 21:36 | 1397234 QQQBall
QQQBall's picture

 

The coke vial is empty... this is Obumbler licking the mirror. Just waiting for his peeps in Congress to get some more dope.

 

Obumbler does not have any answers; and when you think of it The Bernank has a worse record than a monkey throwing darts.

Thu, 06/23/2011 - 21:38 | 1397256 topcallingtroll
topcallingtroll's picture

If this desperate move doesnt scream " get back into energy companies now" then i dont know what does. VDE is a reasonable play here. Jump back in with me fellows. Lets see what price we get in the morning.

I had to borrow money from my little sis for this one cause i am 100 percent long the stock market already in my spec funds. She made me put up some collateral. Smart little sis.

Thu, 06/23/2011 - 22:43 | 1397373 the grateful un...
the grateful unemployed's picture

i know its seems unlikely but selling oil at 102$bbl might be smart when the price is half that six months from now. we are in a deflationary crash. be careful.

Thu, 06/23/2011 - 21:46 | 1397270 gookempucky
gookempucky's picture

 First,dont be suprised that the oil never leaves the ground. Oil Companies do not buy open market oil....they produce (at least in 1991 after wellhead-upstream- for about .18 a barrel) and sell period....a good dog and pony show though....methinks obamy has his foot in his mouth.

As for producer nations...one of the most important factors that is always left out is the oil consumption within that nation..Saudi may pump 9 mbpd but they use 3 mbpd in house....great comedy today. 

Do NOT follow this link or you will be banned from the site!