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JPM Sees Brent Spiking As High As $130 Unless OPEC Steps In

Tyler Durden's picture


And some more bullish news for inverse consumption from JPM's Lawrence Engles Daily Note On Oil: 'As long as key economies remain on track, and given the tensions still manifest on the supply side, we remain positive on near-term price outlook and expect 2Q2011 Brent crude to average $118/bbl, prices possibly spiking towards $130/bbl, if OPEC fails act in time and raise production." Basically we are no recreating the "goldilocks" economy from late 2007/early 2008 when everyone thought crude at $150 was sustainable. And back then there wasn't quite as much "speculative actions driven by too much liquidity" as noted earlier by Charles Plosser.

Full JPM note:

WTI futures prices made fresh 2 ½ year today, as positive economic data from China and renewed Middle East tensions bolstered prices. In a pattern that has become all too familiar in recent months, foreign governments called for their nationals to leave Yemen ahead of any potential deterioration in the security situation there. Yet despite this and other challenges that beset the world economy, we see continued economic growth supporting oil prices. India, which we expect to increase oil use by nearly 200 kbd this year, should start its 180kbd Bhatinda refinery imminently. Reassuringly, economic growth is being translated into increased demand for crude.

The outlook for growth is not without risks. Japanese economic activity will be materially weaker in the short run, with the World Bank predicting that the recovery effort will take five years. Arguably, a bigger risk is that the world’s manufacturing supply chain experiences shortages, as affected companies seek to recover production after last month’s earthquake, which affects growth. Elsewhere, Chinese growth remains on track, according to data released overnight. The PMI survey registered an increase to 53.4, having softened over the last three months. But the rebound was weaker than expected, suggesting tighter policy measures aimed at controlling inflation could well be having an impact on growth. Nevertheless, Chinese oil demand remains robust, with 1Q2011 up 1.2 mbd on a year earlier. Reports indicate that diesel exports are again under pressure from healthy domestic demand, reversing the earlier recovery from end-2010 tightness. As long as key economies remain on track, and given the tensions still manifest on the supply side, we remain positive on near-term price outlook and expect 2Q2011 Brent crude to average $118/bbl, prices possibly  spiking towards $130/bbl, if OPEC fails act in time and raise production.

With two of its eight refineries (Sendai and Kashima) severely damaged due to the earthquake, JX’s reduction in imports comes as no surprise and confirms our view about lower refinery runs next month. While it has boosted run rates at its Negishi refinery since restarting it last week, the overall crude throughput will still be lower than originally planned. As we note in our Oil Markets Monthly, the effects of the earthquake on Japan’s ability to process crude will linger until 2012.

In our Oil Markets Monthly, we raised our Oil price forecast for 2Q2011 to $118/bbl on the basis of the issues in Libya looking larger and more protracted than our, and the market’s initial expectations. The March manufacturing PMI of China rose from February’s level confirming that growth of manufacturing has picked up, after falling for the past three months.

Another US unemployment number below 9% was an indication that job growth has been sustained in 2011 so far, and positive minor revisions were issued to the figures released in February. Despite some softer economic figures released over the last month in housing, manufacturing activity and consumer confidence, job growth has been able to build upon the gains made so far in 2011. The ISM Manufacturing figures due out at 10 AM EST will provide another data point in the evaluation of the health of the US economy.



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Fri, 04/01/2011 - 09:47 | 1124842 Dr. Engali
Dr. Engali's picture

Opec can't step in. So it looks like we are going to have to take it.

Fri, 04/01/2011 - 09:49 | 1124860 A Man without Q...
A Man without Qualities's picture

And we won't even be able to afford the Vaseline..

Fri, 04/01/2011 - 12:04 | 1125310 krispkritter
krispkritter's picture

Of course not, it's made from oil...

Fri, 04/01/2011 - 09:52 | 1124868 SheepDog-One
SheepDog-One's picture

OPEC said a week ago $130 oil is fine with them. I dont see what JPM is mumbling about.

Fri, 04/01/2011 - 10:18 | 1124967 asteroids
asteroids's picture

Should the FED tighten and actually remove all that funny money oil will drop like a stone. Food for tummy or food for cars. FED can't have it both ways.

Fri, 04/01/2011 - 10:38 | 1125049 Cash_is_Trash
Cash_is_Trash's picture

It's all good because the ICE and NYMEX will raise the margins - brilliant!

Move the goalpost you bitches, it's all going exponential anyway!

Fri, 04/01/2011 - 10:53 | 1125088 SteveNYC
SteveNYC's picture

Combine this, with the Wal Mart CEO's message yesterday, and you can deduce three things:

1) The poor are pretty much f*cked, and will forever be reliant on Uncle Sam. From this, we can say the currency is baked.

2) It is almost end of days for the middle class, as more and more will drop into 1) above, and those that don't will have less and less of their earned "pie" to eat

3) The corporate and top 1% takeover picks up steam and goes up another gear


Fri, 04/01/2011 - 09:48 | 1124847 digitlman
digitlman's picture

Fuck you, JPM.

Fri, 04/01/2011 - 09:55 | 1124886 writingsonthewall
writingsonthewall's picture

Yeah - fuck you JPM you Dimon cocksuckers.





Fri, 04/01/2011 - 10:21 | 1124977 averagejoe
averagejoe's picture

Been there done that and bought the T shirt.

Fri, 04/01/2011 - 10:29 | 1124999 nope-1004
nope-1004's picture

JPM comments on where crude is going?  Hardy har har.

Crock of shit.  Why comment on something you manipulate?  As a cover, of course.

Cocksuckers manipulate metals so bad, the fraud runs so deep, they stink like the bankster scum that lines my toilet.

Fri, 04/01/2011 - 09:53 | 1124887 Cdad
Cdad's picture

Now now's that kind of talk that really hurts J. Dimon's feelings.  If you continue, he will end up reporting to a camera somehwere and whining about how hard it is ripping off and arbitraging to death the entire globe.

"Computer...Romulan ale for my friend."

Fri, 04/01/2011 - 10:12 | 1124948 digitlman
digitlman's picture

Fuck him too. LOL

Fri, 04/01/2011 - 09:48 | 1124857 speedy
speedy's picture

But Dian L. Chu says with all that inventory in cushing the traders are going to have to take delivery of their futures contracts and oil is going down to $90 bbl.

Hmmmm... who is right?

Fri, 04/01/2011 - 09:51 | 1124873 A Man without Q...
A Man without Qualities's picture

Given the games played at Cushing, it could even go negative (which happened for Nat Gas in Europe a few years ago) as sellers have to pay to get rid of it...

Fri, 04/01/2011 - 09:55 | 1124891 Cdad
Cdad's picture

"Computer...create more tank farms, Cushing."

There.  Done.

Fri, 04/01/2011 - 09:56 | 1124889 SilverBaron
SilverBaron's picture

China will gladly take delivery for their strategic reserves.

Fri, 04/01/2011 - 09:50 | 1124858 LeBalance
LeBalance's picture

Dearest JPM,

The issue as you well know is the overproduction of the valuing mechanism, the dollar.

Have a nice day.

Fri, 04/01/2011 - 13:10 | 1125540 tekhneek
tekhneek's picture

Yeah agreed. Good explanation.

It's prettty safe to say there's no point in considering things a "price" anymore. It's just an exchange rate now... and all that matters is how quickly you exchange a rapidly depreciating (hyperbolic, even) asset into an appreciating asset (silver, gold, oil)


Fri, 04/01/2011 - 09:50 | 1124859 John McCloy
John McCloy's picture

Just for confirmation JPM means stepping in with rhetoric and not actual action?

Fri, 04/01/2011 - 09:51 | 1124864 DonnieD
DonnieD's picture

I thought OPEC already "stepped in"?

Fri, 04/01/2011 - 09:50 | 1124865 tallen
tallen's picture

Feels so earily similar to 2008.

Fri, 04/01/2011 - 09:50 | 1124866 The Count
The Count's picture

Every time crude goes up by $10 CNBC parades an 'expert' that claims that we can live with that price level. Fact is that every $10 over $100 costs us 1 percent of GDP, so that we will probably not have any growth which means that our house of cards will fall real soon. 

Fri, 04/01/2011 - 09:59 | 1124894 Citxmech
Citxmech's picture

Once they remove the debt ceiling, all will be well - you'll see.

"To infinity... and beyond!"

Fri, 04/01/2011 - 13:10 | 1125543 Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

like it or not Saudi plc is one business which can pass on costs to the consumer - we shall shortly see if the same goes for the average company when Q1 earnings hit the wire.

Fri, 04/01/2011 - 09:50 | 1124867 malikai
malikai's picture

That's ok because David Kelly from JPM just said that high oil prices don't affect inflation.

Fri, 04/01/2011 - 09:53 | 1124874 SheepDog-One
SheepDog-One's picture

When JPM talks about inflation theyre only reffering to silver.

Fri, 04/01/2011 - 09:54 | 1124888 writingsonthewall
writingsonthewall's picture

...or their salaries

Fri, 04/01/2011 - 10:28 | 1124899 malikai
malikai's picture

Dom Chiu on in the loop, said buy the dip about 5 times in one clip.

Is it too late to go 9:1 long in NFLX?

Fri, 04/01/2011 - 10:00 | 1124892 FrankIvy
FrankIvy's picture

Crude @ 20 - expansion, "modern life."

Crude @ 50 - expansion, "modern life."

Crude @ 100 - recession, "regression."

Crude @ 150 - long term, deep recession, stagflation, "severe regression."

Crude @ 200 - depression, violent stagflation, "rapid regression."

Crude @ 250 and up - revolution, "neo-neolithic age."  See Olduvai gorge theory.

Fri, 04/01/2011 - 10:03 | 1124914 Citxmech
Citxmech's picture

But didn't Obama just say that all we had to do was increase the U.S.'s oil supply?

Seriously - no speach writer could misapprehend the difference betweenthe words "increase production" and "increase supply" - that was intentional obfuscation of the issue.

Another big Rodan-sized swan is on the way...

Fri, 04/01/2011 - 10:22 | 1124947 Flakmeister
Flakmeister's picture

O is just pandering to the "Drill, baby, Drill" crowd...US oil production is basically stuck where it is. The Bakken can, at best, offset declines from off-shore. There might even be the occasional up-tick, but it is essentially statistical noise.

And it has nothing to do with leases and what not. For all intents and purposes, the US is getting blood from a stone as we speak.

Fri, 04/01/2011 - 10:44 | 1125064 Idiot Savant
Idiot Savant's picture

Off topic question for you Flak. Do you know the status of the Tiber Oil Field since it was capped last year? Is oil being pumped from it? If not, is there concern about pressure build-up behind the BP cap? Any word on if the field is leaking in the gulf?

Fri, 04/01/2011 - 10:43 | 1125069 Flakmeister
Flakmeister's picture

Can't comment on the Tibur...

Fri, 04/01/2011 - 11:22 | 1125168 i-dog
i-dog's picture

"increase the U.S.'s oil supply"

+1. Well spotted!

No need to drill when you can just invade someone else who is already operating a large pool.

Fri, 04/01/2011 - 10:13 | 1124953 tmosley
tmosley's picture

Crude above $100 drives investment in development of alternative energy, as much as some people hate to even entertain the thought that anything other than the status quo could possibly work.

Crude above $200 makes currently available alternative energy economical, and as such ventures scale up, the costs will fall.  Some people can't tell the difference between capital investment (like solar panels), and marginal costs (like oil).  Capital exists in order to decrease marginal costs.  That is the only reason for its existence.  If economics didn't work, humans wouldn't exist.  Those who argue for the death of human civilization as a result of peak oil believe they can overturn reality with their questionable logic.  Lucky for the rest of us, that ain't so.

Fri, 04/01/2011 - 10:23 | 1124984 Flakmeister
Flakmeister's picture

You also neglect that the cost of alternatives usually scales with the price of oil. It is called the Law of Receding Horizons. Most of the time, when something is economical at oil equals X, the hucksters, probably deliberately, forget to mention that the cost of inputs will also rise thereby making the process borderline economical..

I have been hearing for years that the Green River "oil shales" will be profitable at 35, 45, 55, 65.... Here we are at ~$110 and they still can't turn it into oil profitably...

And there is that old bugaboo of yours, EROEI. You cannot cheat thermodynamics with printed money...

Fri, 04/01/2011 - 10:32 | 1125017 Hansel
Hansel's picture


Fri, 04/01/2011 - 10:30 | 1125019 Flakmeister
Flakmeister's picture

 I'll lay a gedanken on you:

Imagine you are on some reasonably large island, you have all the technical manuals you need, a large enough workforce, ability to produce food at ~2 x subsistence levels and the a priori knowledge that resources exist in the ground but you dont know where. There are also a few common ores, Fe, Cu, some met. coal. etc... that can be exploited by hand labor. You have some but limited wood; i.e. enough to provide implements, housing materials. The replenishment rate for the wood is such that you are in steady state at current consumption.

What do you do? You know how to drill for oil, mine for coal, build windmills, solar panels, whatever. But you must create the infrastructure with the available excess energy you have.

You could say, we burn all the wood to smelt metals and dig for coal or drill for oil. You had better find it before the wood runs out. Because when the wood is gone, you are fucked.

That my friend is the parable of EROEI. 

Actually, you are fucked before the wood is gone. You are fucked earlier than that. Just like Easter Island

Fri, 04/01/2011 - 10:41 | 1125054 Hansel
Hansel's picture

+1 again, I love a good gedanken.

Extrapolating, what happens if you contaminate the food supply in your effort to extract more energy?  :headassplode:

Fri, 04/01/2011 - 11:20 | 1125162 snowball777
snowball777's picture

You use all three so that the wood remains sustainable, the useless stuff from the ground is fully utilized, and your future of sustainable WWS power is guaranteed, of course.

Fri, 04/01/2011 - 12:11 | 1125341 tmosley
tmosley's picture

Once again, you don't understand the difference between capital and marginal costs.  

Solar panels last for a very, VERY long time.  Over their lifetime, which is unknown since the first ones still work, they produce "free" energy that can be used to produce more solar panels.  This is called "capital accumulation".  Once enough capital is available, it can and will be used to produce anything and everything.

Hell, you can build a solar forge out of a parabola and a bunch of mirror pieces that gets hot enough to melt tungsten.  That fact by itself renders your argument meaningless, unless you are going to try to tell me that it takes a trillion megawatt hours to make a MIRROR.  If you want something more practical, you can build a large lens to do the same thing.  Take a fairly wimpy tech like that and heat some water and turn a turbine.  Simple.  

You guys keep comparing the Earth to Easter Island, but you continually fail to understand that it was the governments, not the economies that ate up all of the wood there.  The chieftains all wanted the biggest and best statue.  Hell, we don't even know if those people recognized property rights.  Without property rights, all resources are consumed until there is nothing left.  You can compare our fisheries to Easter Island for that reason, but not our power generating system.

Fri, 04/01/2011 - 12:32 | 1125428 Flakmeister
Flakmeister's picture

I understand the differences very well about costs, you do not understand the thermodynamics as you have amply demonstrated many times..

At the base of any economy the energy production/extraction must produce a surplus. It is this surplus that all economic activity is based on.

In the parable, sure you can build CSP but that will require an unsustainable rate of wood usuge. If you can you manage your wood supply such that the net extra energy you get from CSP will allow you curtail your wood consumption you are home free.

I never said the Island parable was a no-win situation. The parable relates to the fact that we must use our energy endowment in a way that becomes self-sustaining and significantly net energy positive.

And don't play that crap with "governments and economies" on Easter Island. You are being disingenuous.

Fri, 04/01/2011 - 10:54 | 1125091 Long-John-Silver
Long-John-Silver's picture

There are no true alternatives to oil and coal. You can't replace the laws of thermodynamics no matter how many politicians attempt to do so. Oil and Coal are energy dense elements. So called alternative energy sources contain a fraction of energy as Oil and Coal. The fractional difference is so great that they become irrelevant as replacements. Right now waste wood produces a larger amount of electric power for the grid than all Wind and Solar power combined.

Fri, 04/01/2011 - 11:29 | 1125161 snowball777
snowball777's picture

Link? Or just empty aspersions?

And is a fraction of the energy content better than 0 energy from a no-longer-existent resource?

Fri, 04/01/2011 - 12:25 | 1125408 tmosley
tmosley's picture

Again, you don't understand the difference between capital and marginal costs.  Capital is used to gather energy--it doesn't go away.  Fuel is marginal--it CONTAINS energy.  Unless you are producing it at a rate greater than or equal to its use, you are in for hurt.  But CAPITAL produces energy that can be used to generate MORE CAPITAL.  Once you have "enough" capital, you can make whatever you like, while continuing to expand your capital base.

Upcoming technologies need VERY LITTLE energy input to produce powerful, longlasting nigh indestructible solar cells.

Fri, 04/01/2011 - 12:31 | 1125433 Flakmeister
Flakmeister's picture economy is more than solar panels on your roof to run the microwave to make popcorn...

Fri, 04/01/2011 - 11:11 | 1125141 snowball777
snowball777's picture

I completely agree about increased cost of current energy sources driving support for new sources, but humans managed to exist for quite awhile before economics went past the "leave the weak behind" (demand-side economics?) stage.

As for peak oil wiping out civilization, it won't, but during the gap between when oil is no longer able to keep pace with the growth of civilization and when other sources come online in sufficient capacity to handle our current standard of living that standard will decline  rather precipitously. While alternative energy is the only real sustainable path, it will take decades for it to reach a point where it can support society as we know it, but we don't have decades left to do that preparation anymore.

The key will be spurring investment in the alternatives before we lose the cushy life provided by black stuff from the ground. Sadly, there are many vested interests working as hard as they can to prevent a smooth transition in the name of short-term profits from their dying revenue streams.


Fri, 04/01/2011 - 11:14 | 1125152 Flakmeister
Flakmeister's picture

Yep... well said. We have about 1.25 trillion barrels of goo or stuff that can be made into goo that 95% of transportation infrastructure is designed for. We have to figure out how to phase in a new infrastructure out of this endowment...

Fri, 04/01/2011 - 12:26 | 1125401 samsara
samsara's picture

" it will take decades for it to reach a point where it can support society as we know it"

Wake me up when you can run a plant to make D10 Caterpillars et al (Start to finish) using solar panels.

And while you're at it, have that wind turbine crank out a few hundred tons of some of that long chain Polyethylene while you're at it.


Fri, 04/01/2011 - 12:34 | 1125434 Flakmeister
Flakmeister's picture


Someone here gets it!

Fri, 04/01/2011 - 15:29 | 1126185 FrankIvy
FrankIvy's picture

Snowball777 wrote: but during the gap between when oil is no longer able to keep pace with the growth of civilization and when other sources come online


What other sources?  You don't get that part.  There are no other sources.  Gasoline is 4 bucks a gallon and rising.  At what price of gasoline, with no alternative, cheaper mode of travel available, do you think you'll understand that there are no alternatives? 15 a gallon?  20 a gallon?  You're the Baghdad Bob of this forum.

Fri, 04/01/2011 - 15:23 | 1126154 FrankIvy
FrankIvy's picture

TMosley's thoughts, above, are the kind of thinking produced by analyzing something through the lenses of modern economics, without applying basic science and common sense.  They come up with silly comments like, "if economics didn't work, humans wouldn't exist."  That babble makes sense only to folks who have a narrow view of the world.

It's really very, very simple.  And when you see shills resorting to hoakum like "marginal costs blah blah," what they are doing is attempting to distract you from the nose on your face.

There are no "alternatives" to oil.  Solar is not an alternative.  Solar panels are made using the stored energy in oil (and coal and NG, etcetera).  Without that concentrated, stored energy, you could only make solar panels by using thousands of man-hours.

Do this without oil and coal and NG - dig up the silicon.  Isolate the silicon.  Make it into a pure ingot.  Power the plant that takes that ingot and makes it into nano-sized chips.  Dig up and ionize the boron and other doping agents.  Dig up the copper than is going to be used in the lines.  Dig up the battery materials.

And so on.

If you can imagine all this being done by hand - with no oil, coal, or NG being used - then you can imagine that only kings will be able to afford PV panels.

Tmos throws out that "solar panels last a long time."  Maybe 25 years.  Heck, let's give him 50.  So then what happens in 50 years?

No worries.  The blind, like TMos, will soon be forced to see.  Go buy some tomatoes at Sprawlmart.  You'll see that they are extremely expensive.  TMos will tell you to eat the "marginally encouraged capital replacement fruit," but those words won't fill your belly.



Fri, 04/01/2011 - 18:06 | 1126743 malikai
malikai's picture

Alternatives to conventional light oil: In-situ bitumen extraction powered by small 50-250MWt solid state reactors and large nuclear upgraders. This is after fracking fails to achieve the desired glut of NG, that is. Alternative: Solvent extraction methods using some percentage of the bitumen itself to power the upgraders with a large loss of OREI (Oil Returned on Energy Invested). Perhaps EROEI is less relevant when you have nuclear power.
Food: You're right, you can't eat bullshit.

Fri, 04/01/2011 - 10:01 | 1124903 johny2
johny2's picture

JPM are almost always wrong in their forecasts and make money every day of the year trading. 

Fri, 04/01/2011 - 10:01 | 1124905 samsara
samsara's picture

Ya OPEC,  Saudi  Kick up production by 3-5 million barrels per day.


Can ya piss lemonade and shit skittles too?

Get one of those local guys to turn water into sweet crude maybe?

(hold the sulphur and Vanadium please).


Fri, 04/01/2011 - 10:14 | 1124949 Flakmeister
Flakmeister's picture

 Yep... the Nickel is not your friend either...

Fri, 04/01/2011 - 10:02 | 1124908 equity_momo
equity_momo's picture

What are OPEC meant to step into?  Magicians robes ?

Funny how OPEC announced last month they were now comfortable with 100 dollar oil and believed the global economy could deal with that for a prolonged period.  previously their comfort zone was 75.   Expect that comfort zone to push up and up and up.

Fri, 04/01/2011 - 10:04 | 1124918 Cdad
Cdad's picture

What are OPEC meant to step into?  Magicians robes ?

Ease up, man.  Just ask Duncan Niederauer for it.  

Never mind!  I'll get it.

"Computer...more crude oil production."


Fri, 04/01/2011 - 10:05 | 1124915 Quinvarius
Quinvarius's picture

JPM probably just top ticked oil.  I don't like their commodity traders.  They are always wrong.  Literally, always wrong.

Fri, 04/01/2011 - 10:05 | 1124917 antidisestablis...
antidisestablishmentarianismishness's picture

Don't sell oil until "T-Bone" Pickens comes on TV and tells you it's going up another $100.

Fri, 04/01/2011 - 10:08 | 1124925 kito
kito's picture

why are we quoting clueless analysts/fortune tellers from large banks again?

Fri, 04/01/2011 - 10:07 | 1124928 TexDenim
TexDenim's picture

JPM is full of crap. They are obviously long oil and are pissing their pants that oil is going to fall to $90/bbl or below, so they're trying to find some greater fools to take their contracts off their hands at a profit. I don't buy it.

Fri, 04/01/2011 - 10:16 | 1124957 Flakmeister
Flakmeister's picture

Don't buy it then... but please explain net exports down 10% since 2005. Libya may be only ~1.5 mmbd of net export production, but that is ~4% of the oil that is freely on the market... 

Fri, 04/01/2011 - 10:21 | 1124975 ivana
ivana's picture

That means its agreed to hike oil to 150USD and than OPEC will "step in" ... bringing it to 130USD.

Spin to thin :-D

Fri, 04/01/2011 - 10:35 | 1125035 CrashisOptimistic
CrashisOptimistic's picture

Suppose OPEC is maxed out right now? 

Then what?

Fri, 04/01/2011 - 10:22 | 1124986 averagejoe
averagejoe's picture

All I see is corruption, everywhere. Its all rotten to the core. The insurrection is long over due.

Fri, 04/01/2011 - 10:28 | 1124993 curbyourrisk
curbyourrisk's picture

Back then it was the JOM's and GS's of the world coming out and spiking prices high just by raising expected prices.  They were doing this because EVERYONE knew SemGroup had a massive SHORT position in OIL.  They forced the price higher forcing them to keep covering positions.  Well...eventually SemGroup just filed....and the price of OIL tanked. 


Speculation.....speculation......short squeeze.  It works everytime.  This time is NO DIFFERENT.  Someone is gonna have to go bust for the price to correct to where it should be.....  SOME 40% lower....  Peak Oil theory kooks please do not comment....

Fri, 04/01/2011 - 10:28 | 1125003 Flakmeister
Flakmeister's picture

Are you ready to rumble? Surprise me with one real fact about oil or just STFU.

Fri, 04/01/2011 - 10:33 | 1125024 curbyourrisk
curbyourrisk's picture

fact:   THERE IS NO PEAK OIL.......


now you shut the fuck up.

Fri, 04/01/2011 - 10:35 | 1125040 Flakmeister
Flakmeister's picture

Oh, then why has oil (C+C) production been flat for 5 years?

Why has the net exports on the market down 10% since 2005?

Why has the energy content of what is called oil, (NGL etc...) been flat for 5 years?

Explain this to me or you shut the fuck up. You are in way over your head here.

Fri, 04/01/2011 - 10:40 | 1125056 averagejoe
averagejoe's picture

Thats right, the planets resources are limitless. There is a man down there making it using magic.

Fri, 04/01/2011 - 11:30 | 1125192 Idiot Savant
Idiot Savant's picture

It helps to point out to these people that the issue is peak cheap oil. It doesn't matter how much oil exists if it costs $250.00 per barrel.

Fri, 04/01/2011 - 12:16 | 1125367 Flakmeister
Flakmeister's picture

No... "peak cheap oil" is a semantics play by those that are aware but want to sugar coat the peak oil issue. We are at peak oil regardless of price.

Fri, 04/01/2011 - 14:41 | 1125958 averagejoe
averagejoe's picture

The issue is not cost or price, its net energy (energy out versus energy put in to extract the oil)  The first discoveries had a net energy gain of 1:100+.  I believe that once its down to 1:3, its simply not worth it, and is less than wind or tidal.  Ethanol is worse only 1:1.6.

Fri, 04/01/2011 - 14:44 | 1125972 Bicycle Repairman
Bicycle Repairman's picture

Should have brought some gnat spray.  Those peak oil gnats are persistent.  They must be well paid.

Fri, 04/01/2011 - 12:18 | 1125366 samsara
samsara's picture


Don't bother.  He majored in finance and secretly hated his Earth Science and Physics teachers.

'You can lead a man to Knowledge, But you Can't Make Him Think"


"Some Minds are Like Cement,  All Mixed Up and Permently Set".

What's the Daily Flow Rate Captain?

Captain ain't talkin. 

Fri, 04/01/2011 - 12:21 | 1125390 Flakmeister
Flakmeister's picture

Re: cement... nice, gonna file that one...

I am not wasting my time with deniers, my desire is only to educate and inform. If I can stop the spread of disinformation I am one step closer.

There is the parable of the "100th monkey", it relates to the fact that groups will suddenly shift their mindset once a critical mass is reached. We must change our mindset before the problem can be addressed.

Fri, 04/01/2011 - 12:37 | 1125446 samsara
samsara's picture

I understand.  I agree with the Monkey thing too.  Phase Shift.

We write for those seeking, not for the 'Bozos' 

Fri, 04/01/2011 - 10:29 | 1125005 CrashisOptimistic
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Oil has been over $90/barrel in 3 of the last 4 years.  It has been north of $100 in 2 of those 4 years.

This ain't speculation, sports fans, and it did its initial spike before the Bernanke money printing explosion.

There is only one measure of supply.  It's not the content of obsolete tanks in Oklahoma.  It's the flow rate in the pipes coming out of the ground.  It's not anything other than that -- and THAT number is insufficient.

Nothing good will come of this.

Fri, 04/01/2011 - 10:36 | 1125047 Long-John-Silver
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There is actually a glut of oil. Loaded Tankers are sitting around full of oil with no place to put it. It's called Demand Destruction.

Fri, 04/01/2011 - 10:43 | 1125070 CrashisOptimistic
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The dirty little secret of "supply" is that most of those tankers in late 2009 were holding Iranian oil.  They made the choice to load them up.

Over the past 6 mos, they have gone to port and emptied.  

Floating storage is near zero now.

Fri, 04/01/2011 - 10:50 | 1125079 Flakmeister
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At the peak of the off-shore storage there was about 40-60 mmb sitting in tankers, sounds like a lot until you realize it is about 18 hrs of world demand. The tankers are/were a red-herring....

Fri, 04/01/2011 - 11:33 | 1125195 snowball777
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Never you mind that forest...look at this tree!

Fri, 04/01/2011 - 10:35 | 1125034 vast-dom
vast-dom's picture

why is silver down so much this AM?

Fri, 04/01/2011 - 10:34 | 1125037 CrashisOptimistic
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No idea, why would you think it is oil related, given this is an oil thread?

Fri, 04/01/2011 - 10:42 | 1125058 Long-John-Silver
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It's Friday. Counterfeit Silver contracts are always dumped on the market on Fridays. Friday is always "Load up on Silver day". I made $20,000 in paper Silver this week. I'll be ordering Physical Silver will every penny of it this afternoon after London closes when Blythe dumps it all.

Fri, 04/01/2011 - 10:36 | 1125036 Long-John-Silver
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Oil will be $30 by October. How can I say this and expect anyone to think I'm not Mathman with shinny new handle? It's simple. The second dip has started and the results will be worse than the first dip. Simply put we are in a full blown economic depression that will last at least a decade. Jobs will again be lost as business shuts down. Demand Destruction for oil has already started. I have a friend that is in the tourist industry and travels to the Emerald Coast for the tourist season. The BP spill destroyed him last year. He told me that high gasoline prices have already killed any chances of having a good season this year. He's not loading up and going south. He took a job driving a truck route servicing Porta Potties. He gave me a bumper sticker he made on his machine before he put it up for storage that says. Shitty times require shitty jobs. He plastered them on all the trucks.

Fri, 04/01/2011 - 10:36 | 1125044 CrashisOptimistic
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You are correct.  The way oil's price falls is via economic destruction on a global scale.  And yes, that's enroute.

Fri, 04/01/2011 - 10:38 | 1125050 Flakmeister
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I don't know about $30, but the rising price will shut down the economy, oil will drop and the process starts all over again. I call it the saw-tooth economy.

Fri, 04/01/2011 - 10:56 | 1125090 CrashisOptimistic
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The deep sawtooth is my analogy too, with a downward average slope more or less forever now.  The one disruption to it would be the tooth that goes so steep that food can't get delivered.  Then the saw becomes an avalanche.

Fri, 04/01/2011 - 11:00 | 1125115 Flakmeister
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No one can can ever accuse you of being an optimist....

That being said, I would not bet against your scenario of civil disorder.

Fri, 04/01/2011 - 11:33 | 1125203 snowball777
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All the King's horses, and all the King's men...

Fri, 04/01/2011 - 12:01 | 1125294 PulauHantu29
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I agree w the March 30, 2011 Bloomberg interview with Marc Faber.

The massive global printing + war is very inflationary. I expect food prices to rise substantially as well as all commodities---gld, uso, pall, and so on.

Fri, 04/01/2011 - 12:16 | 1125358 Idiot Savant
Idiot Savant's picture

This just in; water is wet.

Fri, 04/01/2011 - 12:09 | 1125330 nah
nah's picture

women, fast cars, cheap gas, sexy

Fri, 04/01/2011 - 12:33 | 1125436 ivars
ivars's picture

It seems this feb 13 prediction of oil price  patterns I have been posting from time to time holds pretty well.

We could expect Brent higher then in previous peak, by 5-10 USD ( 125-130 USD).

Than it goes down in mid April just to shoot to new highs in approaching May (135-140 USD).

That should stop QE3 in its tracks-which will cause another temporary downturn in oil price.

All things are let loose in July 2011. Must be some supply disruption, serious this time.

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