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Obama and the IEA - Egg on the face
On June 23 I wrote
about the Obama/IEA decision to intervene in the global crude market. I
hated the plan. One of the points I made against it was this:
Is (the IEA intervention) about
teaching a lesson to OPEC? I am concerned that this is a factor. The US
wanted OPEC to up production. That didn’t happen. So the bad boys who
produce oil just got a shot across the bow.
Watch
if this angle on the story gets “play”. It would piss off those bad
boys and they will retaliate. Does O really think he can take on the
world oil market?
-OPEC will respond. “We” will pay a price for this.
Bloomberg has a story out just now that Saudi Arabia is not so happy
about this and some cut backs in production just might be in order. From
the article:
Oil rose in New York, extending the biggest gain in six weeks, amid concern OPEC may reduce output in response to the International Energy Agency’s move to release oil stockpiles.
“If IEA countries are releasing stockpiles Saudi Arabia won’t increase production as much as expected,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna.
“There are concerns Saudi Arabia will cut production” in response to the IEA move, said Roland Stenzel, an oil trader at E&T Energie Handelsgesellschaft mbH, said from Vienna.
Oil is on a tear as a result of this (and other factors). If the end result is that OPEC cuts off production by a percent or two the ultimate cost to global consumers will be measured in the hundreds of billions.
I also said this last week. I’m now certain that I was right:
-Obama will get some egg on his face with this one.
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Half-assed demagogue. Next!
All about the money - Intentional move to drive up the price of oil so those "green investments" his pals have made will look better.
Bruce, I think you are dead right. Obama thinks he' powerful but the boys with the oil are going to show him how it works.
(Sigh) I'm getting tired of explaining. Listen kids. Prices are high because the rate of oil consumption is growing faster than the rate of production. We're a lot better at using than finding.
Isn't that simple? If you can understand a leaky bucket you grasp peak oil.
The production peak for conventional crude was in 2005. The peak on a dollar- for- dollar (or S&P 500) basis was in 1998. Since then: finance run amok and two busted bubbles.
The world uses 85 million barrels of oil a day. The rate of use increases about 2% a year ... or it would if the oil was available. The 60 million barrels out of reserve is about 20 hour's worth of consumption.
Saudia can be pissed or not pissed but Saudia has to pump. Why? Because their 'above ground' costs can only be met w/ $80 oil. They've promised billion$ to their kids to keep them off the streets. The accounts that cannot be filled by price will be filled by volume. Saudia is pumping as much oil as it can. The likelihood is that Saudia is past peak and in secular decline.
You dudes and dudettes have absolutely no idea what is going to happen to you. It will be beyond your worse nightmare. Our world runs on oil, money is irrelevant. Every economic agent -- including Saudia -- is dependent upon the status quo.
What ya might wanna consider is the jalopy in yr garage. This bus is your enemy, it has guzzled without returning one dime to your pocket. Whether you have money in the bank or gold in the back yard, you are bankrupt.
Bankrupt. All the rest is details.
hey idiot
###
(Sigh) I'm getting tired of explaining. Listen kids. Prices are high because the rate of oil consumption is growing faster than the rate of production. We're a lot better at using than finding.
###
where exactly ' rate of oil consumption is growing '?
in China ..all right..
but yet USA is buggest oil consumer and importer, so do you know that USA imports are 10 yy low , do you remember what oil cost back 10 years ago?
do you comprehend fact that there're 10% more pooulation here ?
so where exactly excl China demand is growing ? IN europe ??? no kidding. 7-8 $ per barrel is sure good thing for consumer
in Japan ?? dont get me started
so. summing up for YOU KID.. know things before blubbering
alx
I also think that oil prices are likely to go up in the long term.
But in the short term (next few months), I am not so sure. If Gadaffi capitulates, that might result in increased oil output from Libya. Or if there is European bank crisis, that might decrease oil demand for a while. Or if the US economy weakens and possibly goes back into recession due to expiration of QE2 or US debt default, that might also decrease demand.
Obama has basically made a bet that oil prices are going to decrease in the near term. And perhaps he may win that bet. We shall see in the next few months. If prices do go down, he will certainly claim credit for this, even though the amount of oil he released was totally insignificant.
The fact that Obama is betting that oil prices will decrease may indicate that there is no QE3 planned in the next few months.
Another ridiculous article by Krasting. The first was non-factual, this one builds on the first.
Red print?
The Saudi's are going to invade? Starve their people. Bankrupt their country? And all the rest of OPEC will join in?
There is a shortage of Brent, even in Saudi. Their excess oil is heavier. They have a hard time selling it. But a shortage of Brent helps them. But Europe, and East USA are more wedded to Brent. Our storage is Brent, and we did a favor to Euro land.
The oil went up today as Brent roared up, pulling our market, which is not Brent, up also.
Hey Bruce and Reggie,
Just a heads up, since you are a highly-respected and public figure here at ZH, you should know that post-Glenn-Beck-shoutout the SPLC is in the comment section trying to paint with some broad brushes dipped in "racism".
This could get interesting.
How will they deal with the ZeroHedge Question?
Not much to say when people post that kind of propaganda.
Can't help them much if they have their head up their ass saying things like that.
Their Keynesian indoctrination is complete.
Give us cheap thorium energy and cheap gasoline from it, or give us death!
The big winner here may be Russia. OPEC get pissy and cuts production. Team Obama plays in the sand box with "speculators", meanwhile thwarting exploration in the US. When oil retests its highs, Russia will be there pumping crude balls to the wall.
so, do we have confirmation that OPEC still exists?
Obama not knowing what the fuck he is doing??....Does a bear shit on the White House lawn?
Oh no Bruce, you are mistaken.
Just think how high gas prices would be if the administration did nothing. Hhmmm?
You have to consider gasoline dollar buying power saved or created.
Exactly how it will be spun. Bruce, we are dealing with the teflon man here - all Bush's fault - always has been always will be.
put $2000 on war for oil
and the GOP will hammer him, when it becomes obvious the SPR release was a request by IEA, (an international org) and not the Presidents idea. if only selling oil had worked. (surprise, it will) the GOP would also like to get Obama in a shooting war in Libya, but in the long run we're like an old dog rolling around on the carcass of a dead skunk. the new leadership in OPEC is going to be inclined to sell oil for food. sure it all stinks, but we always come out fat and happy, and this time more so. $5 gas by election time, you better have your tickets out, prepurchased. $25bbl oil is a real possiblity. the world is hungry, and they will sell what they have.
"the GOP would also like to get Obama in a shooting war in Libya"
Hmmm.. Is that what happened? Seems I remember Obama went in at the behest of the UN & Arab league without any congressional consultation. I didn't know the GOP had taken over the UN, but I'm glad to hear it!
wow are you slow. anything the President does due to international pressure is considered anti-AMERICAN. of course we went into Iraq, UNILATERALLY, okay, but went into Bosnia as part of a UN group, (boo hiss).
Releasing the reserves doesn't make any sense unless you expect oil prices to decrease. So the Obama's plan was probably to release the reserves and buy them back later at a lower price. And this would also allow him to claim credit for the price reduction (e.g. "We broke the backs of the oil speculators!"). So basically Obama is using the strategic oil reserves to speculate in the commodities market. So far, the market doesn't seem to be cooperating.
we just buy our own oil back, no harm no foul (he learned that from BB and his bond trading surrogates)
It is so like Obama to start a fight he can't finish. Always the victim. How's our Arab-league sponsored humanitarian interdiction in Libya going? What a cretin.
The American people have no idea of the damage he is doing to us abroad.
They have no idea the damage he is doing here as well.
They have no idea the damage he is doing here as well.
You're assuming most Americans know that there is (an) "abroad" besides a slang term for a woman.
Exactly correct Bruce. I bought more oil last week on this absurd policy. But then again, all his policies are absurd.
Great posts as usual Bruce
Another view
http://www.minyanville.com/businessmarkets/articles/International-Energy-Agency-Strategic-Petroleum-Reserve/6/24/2011/id/35359
Q-daffy is prepared to increase but nobody now listens to him...
What if it is not about Saudi's inability to increase?
What if Saudi production is actually falling due to geologic depletion?
What if TPTB are worried about the truth becoming known?
SPR would provide good cover.
The Saudi's inability to increase production is because of geologic depletion.
See Matt Simmons' "Twilight in the Desert."
All the more reason to covet Iraq, Iran and Libya's oil. All three have not been pumping a lot versus what they have. Iran's equipment has to be pretty old. Libya had an embargo and only recently started pumping lots post Lockerbie "resolution." My guess is BP/Mi6//Rothschild realized Libya has a lot more oil.
What happens when Opec nations opt to start hoarding oil- why sell it for cheap?
What if oil is just plain...too expensive for global growth to continue? What if the price HAS to be $50 a BBL but they won't take a penny less than $100?
I think the "Arab Spring" is a cover for government change...the old puppets were charging too much...we someone new at half the price! If we can't get them all to topple "peacefully" via revolution, then they help out with airstrikes and aid al la Libya. If that doesn't work,,,a reason to invade. Obama and others are setting the stage for the war for $50 oil. Iran my give us a reason for war also.
Barry's move just made it alot cheaper for China to load up on millions of barrels of very cheap oil.
just like they loaded up on UST. PT Barnum had the Chinese in mind.
Saudi can't increase production. That's the reason for the reserves ploy, from IEA. Now, Saudi just uses the excuse of the IEA ploy to cover the fact that they can't increase production. Perfect.
And worse for the Euro's.
The IEA nuked the refining industry in Europe.
Half of the release in EUROPE from the IEA is in distillates. Where stores in Euroland are at record highs and over a 1/5 of euro refining capacity is idle due to waning demand & Asia competition.
This was one of the stupidest things Obama has done (and that benchmark is high)
Gee, releasing 80 million barrels of SR oil that was snatched up in a heartbeat didnt have long lasting price suppression effect? Whodathunkit? Oh wait, all of us here who were saying it was a stupid move 2 weeks ago.
So, what I've read here is this:
+ 18.7 million barrels per day. (US oil consumption 2009 figure) This was so slick you would almost think it was choreographed by the top-secret American delegation that visited Saudi the week before the SPR release. O gets a little poll tick, sets himself up as the opponent of the eeevul ay-rabs, and gives the Saudis a way out of having to prove they have nonexistent reserve capacity.
And does anyone else remember the Saudi prince who said a couple weeks ago that SA was going to open the oil floodgates and bankrupt Iran by driving the price into the basement? And where are prices now?
Very insightful post.
If the Saudis do cut production - it may give us an idea on how much strain their infrastructure is under right now trying to maintain their current flow-rate.
Ahhh finally an explanation that sits well with my guts. Whatever that's worth.
Thanks
Yup, we're watching a soap opera. A very poorly acted one at that. I guess when you get to be that rich, you forget how to prevent people from gleaming your plans from your statements and/or actions.
they don't care if 1% or less of the population gets it. look at american government, the whole right vs left thing. obvious joke used to keep the masses in line, and it never fails.
Egg? It's election season, and the narrative 'Obama vs. The House of Saud' plays well with the herd.
NotApplicable
So Barry is gonna wrestle this guy?
http://allknowingforce.com/wonderful/wp-content/uploads/2009/10/sheik.gif
Not if gas is $5 in a year.
My rule: Never pick a fight you can't win.
Since KSA hasn't exactly been able to up production in the past, what makes you think this is anything other than cover for the fact that KSA can't up production?
+1
Thanks for good stuff Bruce. It sure beats the Leo and GW posts.