Oil Set to Rocket

Pivotfarm's picture

Some of us stopped believing in fairytales long ago and then there were those that never thought that Goldilocks ate anybody’s porridge. So, there are two types of believers. Those that did and now don’t anymore because they have grown up and those that never ever did have the wool pulled over their eyes. It’s the same with the economy these days. Either you believed that it was getting better and listened to the propaganda emanating from the once-hallowed portals of the statist politik bureau of the government or you never believed a word of what got spun by the spinners and the media-controlling decision-makers that are there to eat your porridge and sit in your chairs (even lie in your beds). The latter have always thought it was all just a load of old Tom Cobbley from the start.

So is the economy getting better or is it a fairytale dream?

Who knows the answer to that question today? Well, if we believe the International Energy Agency (IEA), then the economy is getting better around the world since oil consumption is increasing. It has been forecast to increase and will outstrip even shale oil production which is most certainly taking off in the USA today and is set to do the same elsewhere (in the UK, for example). Whether we believe the IEA is another matter entirely, but it is the organization that advises the largest energy-consuming countries in the world on their policies regarding energy consumption and production.

• The IEA has just increased it forecast of demand for oil from OPEC countries by 200k barrels per day, now standing at a total of 29.4m barrels per day.
• It has also stated that this year oil consumption should increase by 1.3m barrels per day. 
• The US is forecast to increase oil production by 780, 000 barrels per day by the end of 2014. 
• This increase offset the drops due to civil unrest in Libya (sometimes falls in production of up to 10% were being experienced).
• There were also drops in production from Iran as sanctions were still being imposed (a drop of 320, 000 barrels per day; although the drop was largely reversed towards the end of the year with the warming of relations with Iran). 
• The US mainly benefited from that fall in production by upping their own levels. 
• Not only has there been a rise in the projected level of production for 2014, but this will consolidate last year’s increase of 990, 000 extra barrels per day being produced in the USA in 2013. 
• That was one of the largest annual growth rates for the country.

Demand for oil has increased so much over the past few months in the world that the reserves have been almost depleted and OPEC will have to pump more in order to keep up with the growing rate of demand. Oil stocks in the Western world are reported as having plummeted by 53.6 million barrels last November. That is the highest level of depletion since 2011.

Brent crude oil is trading at $107 today. That’s just lower than the $108.70 it was trading at in 2013. In 2012, it was at the $111 mark. Are we in for another increase in oil this year? If we are to believe the IEA, we are. Oil is set to rise.

Whatever happens in the future and whether the economy takes a turn for the better (finally, some might hasten to add), we might just well read behind the lines and see the true meaning of the fairytale that is being spun. Fairytales are intended to teach us something. This one tells us that when the closing lines are called, the same old people will be reaping the benefits. The oil companies will be raking it in as the price of all goes sky-high. Once upon a time, we were surprised when good old Texas Tea hit $100 a barrel. Now, it doesn’t even wake Goldilocks up from her sleep.

And they lived happily ever after?

Originally posted: Oil Set to Rocket

You might also enjoy:Working for the Few | USA:The Land of the Not-So-Free 


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geno-econ's picture

One constant no matter technological innovation, substitute or renewable sources, new discoveries or supply/demand fluctuations is that the marginal cost of each barrel of crude oil produced increases every year. Therefore future prices will rise! Only other scenario is complete global economic collapse--- has not happened yet, but a possibility considering our political/economic experiment into debt fantasy !

litemine's picture

The emergency Oil in storage, was a great idea.....then the markets used it as a tool to profit.

Now the Bankers require this money flow, as the reserve oil supply is part of a profit formula.

Why didn't the USA and backed by their Military tell the third world that the Oil in the world was spoken for, How dare they use it.

kurt's picture

Bla Bla SET TO my balls.

orangegeek's picture

Up or down, one could say you have  a 50/50 chance of being correct.


That being said, WTI Oil weekly shows current price near channel support - intraday having broken support




Upside?  Unlikely.  Not mentioned are the US/Euro effect which also have a bearish effect on oil prices

dunce's picture

The OPEC cartel has administered high prices for many years making high cost recovery resources profitable and rapid industrial expansions have increased demand. The laws of economics always balance supply and demand. What really moderated OPEC during the seventies was the rapid expansion of nuclear power changing the energy supply and easing our dependence on their oil in the long term. Fukashima was the result of bad management not any intrinsic flaw in nuclear power generation. New plants are being built and more are planned around the world. Natural disasters can be anticipated and planned for. At the very least they could have installed the diesel back up emergency generators and fuel 60 feet higher and back from the sea. This would not have been a budget breaker.

Canoe Driver's picture

You are right that the Fukushima site was grossly mismanaged. However, the intrinsic flaw in nuclear power generation is that it doesn't allow for mismanagement. If the costs of inevitable human error were included in the design calculations, these reactors could not be built. Therefore, they should not be built.

obelisks's picture

it may be not so much that they deliberately tell porkies but it seems they don't have a particularly good track record regarding forecasting?

Will the International Energy Agency's oil forecast be wrong again?


MagicMoney's picture

Oil consumption is increasing else where in the world such as Asia such as China, SouthEast Asia. If you recall China is in the middle of inflationary episode right now where huge amount of money creation, and excess credit. Not so much in the US.

CheapBastard's picture

Baltic Index is plunging ...  world recession  ... discretionary spending is sinking fast ..  the only people moving are foreigners moving to America, Americans are too poor to move .. and so on ...I don't see oil rising for awhile but it's a good long term play if you can grab something like USO (and etf) for under 30 and look at holding it for a year or two o r longer. My target buy is 28.

Same with HAL and SLB, etc..they are overpriced but when they fall back 30% or so, then will be a buying time.

Here's some  info:

Economists have been puzzled about why the latest recession produced such a feeble recovery, but here’s one important new clue: The portion of Americans moving from place to place has fallen close to record lows, inhibiting people’s ability to go where the good jobs are or remake themselves in one place after flaming out in another.



Cloud9.5's picture

Most everything I have read indicates that the shale oil boom is a surge not a solution.  The depletion rates in these fields look like they are going to push peak production out to 2016 or 2017.  Then the relentless decline begins again.  The decline rates in mature fields are sobering.  The status quo may be able to hold on for another three to five years but every time we get a peak in production things begin to unravel pretty quickly.  Debt cannot be repaid in a contracting system. Everybody knows that. The nervous are eyeing the exit.  Greed is keeping people in the game but in a flash it will turn into a mad rush for the door.

rsnoble's picture

Oil has fluctuated in this range since 2009.  Nothing more than the criminals wanting their fair share.  Just ask the cokehead brothers.

max2205's picture

Makes cents.... Miles driven at 20 year lows.....makes cents

Canoe Driver's picture

Miles driven IN THE USA are at lows, not everywhere else. Oil bears suffer from a mistaken Amero-centric viewpoint.

Its_the_economy_stupid's picture

Price Discovery, er, margin requirement adjustments, will solve everything.


AGuy's picture

One Important issue that may impact all this: Global Recession.

The US is likely going to double/triple dip this year because of Obamacare, and CRE, and terrible Retail sales. China is getting topsy as people are now taking out loans with 30% to 40% interest rates in a vain attempt to postpone the day or reckoning. Growth in the developing world has stalled and unemployment in the EU continues to rise. If we have a global recession than its likely to send energy prices lower.


rsnoble's picture

Unless we have a 2008 event.

HardlyZero's picture

What if its so bad the governments nationalize all the oil production, and then like Venezuela, all the hi-tech producers quit and leave ?  Then its all stuck in the ground and supply dwindles.   Demand remains.   Then POO skyrockets, and we all ride our bikes to work and wear sweaters.

If things collapse then it all stays in the ground.

Unless there are hi-tech slaves....

maskone909's picture

Do you guys factor in margin debt and qe into your analysis? Cheap debt doesnt equate improving economy. Imo this is a desperate attempt at keeping the world on life support. Home ownership in the usa is at levels not seen since the 70's while living costs are rising for core goods.