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There Will Be Offerless Crude Markets

Tyler Durden's picture




 

Meanwhile in the always efficient crude oil markets... another asset class joins the inverse-Baumgartner crowd... Daniel Day-Lewis would be proud of this gusher...

WTI Jan13s

WTI Mar13s

 

Chart: Bloomberg

 

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Wed, 12/19/2012 - 12:06 | 3078812 slaughterer
slaughterer's picture

Any "logical" explanation for this spike? Crude inventories actually beat consensus.  WTi should be down a little.  

Wed, 12/19/2012 - 12:13 | 3078820 LawsofPhysics
LawsofPhysics's picture

Yes, I too often wonder what the price is for something I have but won't sell.  Interesting times.  You are correct, excess reserves and fewer buyers should mean a lower price in a real market that allows for true price discovery.  Let's be opptumistic, the price jumped, there must have been a buyer.  Remind me, what entity is the largest consumer of crude on the planet again?

Wed, 12/19/2012 - 12:18 | 3078865 forwardho
forwardho's picture

Yes, I too often wonder what the price is for something I have but won't sell.

A very pretty twist of phrase.

Bravo!

Wed, 12/19/2012 - 12:27 | 3078901 malikai
malikai's picture

WTI model is pooched but Brent explains it all. Full closure.

http://blog.quantsig.net/2012/12/19/brent-closure/

Wed, 12/19/2012 - 12:44 | 3078973 TruthInSunshine
TruthInSunshine's picture

The paper fiat printers at the Fed, ECB, BOJ, BOE & PBOC will drink all of the peoples' milkshakes, bitchez.

Keep printing thusly with thrustly, fractional reserve fiat alchemists. I'm sure the inflation that you're so desperately seeking will spur "animal spirits."

Wed, 12/19/2012 - 12:56 | 3079030 Thomas
Thomas's picture

this is what happens when the economy and markets become untethered to fundamentals and everything just becomes money movements. It is metastable.

Wed, 12/19/2012 - 14:22 | 3079489 strannick
strannick's picture

Yeah, Crude's a little tougher than gold/silver for Blythe and Jamie to bludgeon into submission in illiquid not-for-profit trades. And when you have nincompoops like Bart Chilton, Jill Sommers, Scott OMalia at the CFTC winking at it all, it makes it all the easier.

Wed, 12/19/2012 - 13:38 | 3079267 ToNYC
ToNYC's picture

Priceless is the word.

 

I too often wonder what the price is for something I have but won't sell.

 

Wed, 12/19/2012 - 14:29 | 3079524 AmCockerSpaniel
AmCockerSpaniel's picture

How about those GOLD coins you have?

Wed, 12/19/2012 - 14:42 | 3079604 Theosebes Goodfellow
Theosebes Goodfellow's picture

Nonsense. I lost them in a boating accident.

Wed, 12/19/2012 - 12:23 | 3078877 vast-dom
vast-dom's picture

Popeye aka DDLewis chews spinach and scenery in b-movies while z-grade markets float. Where's that bad atonal soundtrack with all of this?

Wed, 12/19/2012 - 12:53 | 3079022 Smiddywesson
Smiddywesson's picture

Fundamentals matter, they just don't matter all the time to those with the volume to move the price.

Great liquidity, low commissions, no uptick rules, no transparency, no law enforcement, and a world full of derivatives with enough leverage to wag the dog, means there's price discovery, but only after they Boyz get what they want.

Wed, 12/19/2012 - 12:55 | 3079035 Rainman
Rainman's picture

Let's hear a round of applause for CFMA 2000....the gift that silently keeps on screwing the muppets.

http://www.dailykos.com/story/2011/03/08/953945/-Wall-Street-Deregulation-and-the-Price-of-Gas

Wed, 12/19/2012 - 12:14 | 3078848 Quinvarius
Quinvarius's picture

This is why:

http://www.forexlive.com/blog/2012/11/01/lacker-fomc-actions-designed-in-part-to-depreciate-dollar/

Turn off CNBC.  It is not possible to have deflation in this monetary system.  Printing to avoid debt default and juice the economy= inflation.  Debt default = hyperinflation.

 

Wed, 12/19/2012 - 12:20 | 3078869 LawsofPhysics
LawsofPhysics's picture

Correct, but I always try to look and see if someone also took delivery in cases such as this.  The only thing that keeps a fiat or faith-based monetary system in check is real consequences for bad behavior.  We haven't had that for quite some time now.

Wed, 12/19/2012 - 12:27 | 3078902 Quinvarius
Quinvarius's picture

This is true.  But I think there is also the idea of what the paper markets are used for.  There is a price at which no one will hedge because it locks in a loss.  Beyond this point is where excessive shorting of futures by central planners begins to destroy production.  You can see the effects of intervention in an advanced state with the PM miners.  They are dying from it.

Wed, 12/19/2012 - 12:39 | 3078962 Popo
Popo's picture

No.  Debt default absolutely does not equal hyperinflation.

Wed, 12/19/2012 - 12:49 | 3078989 LawsofPhysics
LawsofPhysics's picture

LMFAO!!!!  You need to go speak to people who have survived the collapse of a currency.  Better still, tell me, what will the price be for something of real value that I possess but won't sell.  Pull your head out of your ass and go talk to those who lived through the collapse of the soviet union.  That is as close as it gets since most of the people from the weimar republic are now dead.

Wed, 12/19/2012 - 13:43 | 3079297 economics9698
economics9698's picture

Popo, when producers are put out of business by economic collapse, deflation if you will, there is less supply of goods and services.

Meanwhile the central bank is in panic mode pumping out money to government to spend, to banks trying to re-inflate the bubble, and who know where?

Supply and demand.

Less real production, more money, inflation.

Wed, 12/19/2012 - 12:48 | 3079002 AGuy
AGuy's picture

"Debt default absolutely does not equal hyperinflation."

If the US Federal Gov't defaults, the value of the dollar goes to Zero. Money printing delays the crisis but does not prevent it.

Wed, 12/19/2012 - 18:32 | 3080527 michael_engineer
Wed, 12/19/2012 - 12:18 | 3078862 CPL
CPL's picture

Something happened.  

 

A physical something, a salt dome collapsed on an unnamed large resevoir of Oil that has ruined the "soup" with sodium and cannot ever be drawn or refined again.  Not posting anything until MSM confesses on the accident.  If it's as bad as I've been reading in engineering RFI's, gas should be 400 a barrel pretty soon.

Wed, 12/19/2012 - 12:21 | 3078875 fuu
fuu's picture

Is that one by the Gulf?

Wed, 12/19/2012 - 12:30 | 3078903 Miss Expectations
Miss Expectations's picture

Bayou Corne, La

The collapsing area, filled with salt water and hydrocarbons with traces of hydrogen sulfide and radioactivity, once hidden by swamp oaks and other sub-tropical flora, can now be viewed from Hwy. 70, as this author observed and reported from the area in November.

The center of the Napoleonville Salt Dome is south of La. 70 and east of Grand Bayou, the collapsing slurry area, the "sinkhole," and Bayou Corne.

Grand Bayou and Bayou Corne communities are both on top of the dome that stores pressurized oil- and gas-related chemicals.

Read more:

La. salt dome collapse 'sinkhole' lake might be 30 football fields large

http://www.examiner.com/article/la-salt-dome-collapse-sinkhole-lake-migh...

Wed, 12/19/2012 - 12:52 | 3079017 CPL
CPL's picture

When you suck the oil out of a big hole in the ground, the liquid disappears and will form a salt dome eventually.  With a very thin, thin crust of sand, clay and salt, very thin.  Slightest tremor, from whatever, can cause them to rip open and swallow whatever is sitting on them whole.  They are usually pretty thin and can be hundreds of meters deep.

 

 

 

Wed, 12/19/2012 - 13:15 | 3079141 Matt
Matt's picture

I think that dome was solid originally, then they (the corporation) mined the brine for the last few decades, resulting in the hollow dome that has collapsed.

Wed, 12/19/2012 - 13:34 | 3079235 CPL
CPL's picture

Eventually the vaccum in the dome cracks and it all goes under.  Lightbulbs do it.  Balloons do it.  Giant hollow caverns the size of mexico do it with cities, military and people on top of them.

Wed, 12/19/2012 - 12:53 | 3079023 hannah
hannah's picture

i thought there was only butane and propane at bayou corne...? didnt think they stored crude...?

Wed, 12/19/2012 - 13:08 | 3079096 CPL
CPL's picture

No they use the salt domes to store nuclear waste now.  There used to be oil 90 years ago.  Most of DC is sitting on an old oil well or poorly documented coal mine or fifty.  Entire tristate area is built on top of the past energy concerns of the US.

 

I'm often surprised that it's isn't being fracked, it was a good energy resource at one time.

Wed, 12/19/2012 - 13:09 | 3079110 hannah
hannah's picture

the nuclear waste they 'store' isnt from reactors. it is material used by drilling companies.

Wed, 12/19/2012 - 13:31 | 3079219 CPL
CPL's picture

Dunno, it's how Canada stores ours.  There are places around Quebec city in QC you never want to buy a house near, around or by.  

Wed, 12/19/2012 - 14:09 | 3079436 ParkAveFlasher
ParkAveFlasher's picture

Nice "tristate area" quip, CPL.  I live not far from Newtown Creek.  I believe that's a clay dome, and there are still a handful of refineries and pump terminals sitting by the side of the terrible waters.  Lukoil has a big facility, and it's relatively new.

Wed, 12/19/2012 - 15:08 | 3079714 hannah
hannah's picture

CPL...i call bullshit. canada does not store reactor waste in salt caverns like those at bayou corne. no one does. you lack even a rudementary understanding of the physics of spent fuel......what is the name of this canadian salt cavern watse facility where they just pump nuc waste into an open cavern like corne...?

Wed, 12/19/2012 - 12:39 | 3078959 CPL
CPL's picture

Not saying anything until someone in the media brings it to public forum, until then the engineers need room to breathe and figure out options hence the RFI's.  Nothing worse that trying to fix something with 7 billion people looking over your shoulder wondering if the lights are going to go back on.

Wed, 12/19/2012 - 12:45 | 3078983 fuu
fuu's picture

It's been a very slow developing story over at ENENEWS for months now.

Wed, 12/19/2012 - 13:28 | 3079202 CPL
CPL's picture

Well, considering that nobody seems particularly concerned with allowing markets to react to any of the news but just not offering it.  What should get people moving away from the LA sinkhole collapse is the Hydrogen Sulfide.  Which is as about as healthy as living next to an open uranium mining operation and anyone with a tap has been drinking it in the 500 mile radius around it since it's had enough time to travel through the water systems in the region.

 

That's "good" drinking and completely unalterable.  Even with reverse osmosis it alters the Ph of the water enough that it stays still water, aka poison.  Means any stockpiled water in underground fortresses going through an inventory rotation is poison waiting to be drunk in an emergency situation and from that point forward.

 

Hydrogen Sulfide is used in geological time to mark extinction events incidentally.  Once discovered on a geological time table the clock counts down 15 years and a geologist can reasonably assume that everything in the area died until mother nature pushed the tectonic plates around enough to erase and bury the problem under millenia of dust and rock compressed over time.  

 

http://www.ehow.com/how_5958411_remove-hydrogen-sulfide.html

 

That's just for drinking water, it's incredibly complex for something as simple as getting a glass of water that won't fill a body with tumours from toes to tits...doesn't help plants, animals, local wildlife, industry or farming practices.

Wed, 12/19/2012 - 12:23 | 3078881 knukles
knukles's picture

Dooes that mean it won't be able to testify at the congressional hearings?

Wed, 12/19/2012 - 12:29 | 3078911 ParkAveFlasher
ParkAveFlasher's picture

Does this mean Ann Margaret isn't coming?

Wed, 12/19/2012 - 12:29 | 3078916 CPL
CPL's picture

Not unless it's in Arabic

Wed, 12/19/2012 - 12:50 | 3079007 LongSoupLine
LongSoupLine's picture

Maybe it's as simple as someone realizing how many GM Volts were really sold...

Wed, 12/19/2012 - 15:13 | 3079734 ZeroAvatar
ZeroAvatar's picture

Somebody got news WWIII is ready for ignition, so they're doing the usual frontrunning. Nothing to see here.

 

Most any day now.

Wed, 12/19/2012 - 17:20 | 3080194 sessinpo
sessinpo's picture

Perhaps you should not spend such time on a short term spike (unless you are a DAY TRADER in commodities), and focus on the longer trend.

I ask you and others as I have asked many times in different forms: With all the massive printing, with all the various monetary easing programs, with all the hidden monetary projects withing various departments, why isn't oil much higher? Why isn't gold much higher. Why isn't the dollar gone already? Gold should be over $3k by now. Oil should be over $200/barrel. But it isn't. The market is telling you something and very few are listening. The message between the lines.

Wed, 12/19/2012 - 12:15 | 3078817 buzzsaw99
buzzsaw99's picture

the gold to oil ratio will be restored one way or another bitchez

Wed, 12/19/2012 - 12:21 | 3078821 ShrNfr
ShrNfr's picture

Inventories decrease 964K barrels, the expectation was for a decrease of 1.75 MM barrels. Makes sense (not).

 

DoE crude oil implied demand rose to 15.4M barrels per day from last week's figure of 15.2M.

Wed, 12/19/2012 - 12:08 | 3078822 ekm
ekm's picture

What have I been telling you?

 

It's an insect trap. The traders got sucked in, now they can't get out. They are forced to buy.

 

They take advantage of useless news hoping that they could lure suckers.

Wed, 12/19/2012 - 12:08 | 3078823 GMadScientist
GMadScientist's picture

Somebody fire a missile in the Hormuz?!

Wed, 12/19/2012 - 12:42 | 3078967 Flakmeister
Flakmeister's picture

That would be Brent....

Wed, 12/19/2012 - 12:09 | 3078825 Anne Ominous
Anne Ominous's picture

I can see the straw in the milkshake...

Wed, 12/19/2012 - 12:09 | 3078828 francis_sawyer
francis_sawyer's picture

I'd chalk that move up to some 'market moving' TD Ameritrade daytraders who are applying their 'pattern recognition' software to their skillset...

Wed, 12/19/2012 - 12:10 | 3078833 Orwell was right
Orwell was right's picture

I traded the break up on WTI...not because it made any fundamental sense, but because the lemmings were going that way.    I have almost given up on trying to follow the non-logic and just trade the charts, scalping my $$$ and then getting some caffiene.  

Wed, 12/19/2012 - 16:29 | 3080048 GoinFawr
GoinFawr's picture

That's the spirit!

"Give me the blood, Eli, and let me get out of here. "-Plainview

Wed, 12/19/2012 - 12:16 | 3078853 tooriskytoinvest
tooriskytoinvest's picture
The Picture Is Unmistakably Bearish: America's Triple A Rating At Risk, Housing Starts Fall In November, FedEx Earnings Fall, And Guidance Is Weak, And Insiders Are Selling... http://investmentwatchblog.com/the-picture-is-unmistakably-bearish-americas-triple-a-rating-at-risk-housing-starts-fall-in-november-fedex-earnings-fall-and-guidance-is-weak-and-insiders-are-selling/

 

Wed, 12/19/2012 - 12:23 | 3078879 Ivanovich
Ivanovich's picture

Insiders have been selling for a long, long time.  Hasn't done really anything.

Wed, 12/19/2012 - 12:15 | 3078854 CrashisOptimistic
CrashisOptimistic's picture

The day the Bakken production curve rolls over and starts down will be the day there is no ceiling on oil.

Wed, 12/19/2012 - 12:43 | 3078975 Flakmeister
Flakmeister's picture

I'll quibble, it may be that when the House of Saud goes Romanov that you will see no ceiling on dollar denominated oil...

Wed, 12/19/2012 - 13:37 | 3079263 cougar_w
cougar_w's picture

Have you read this one?

http://www.newcolonist.com/dim_ages.html

Someone wrote it a while back, but it stays relevant. You mentioning the House of Saud triggered my memory. Things always happen in the least expected way, and then very quickly.

Wed, 12/19/2012 - 14:01 | 3079302 Flakmeister
Flakmeister's picture

Hadn't seen it...

Here is a more recent offering in the same vein, a tad less flippant....

http://thearchdruidreport.blogspot.com/2012/10/how-it-could-happen-part-one-hubris.html

 

Wed, 12/19/2012 - 12:16 | 3078856 gasandoil
gasandoil's picture

You are all just now seeing WTI price starting to close spread with Brent for spring 2013... Part of the move is explained by nearly 1 million bpd of new capacity starting to move stranded oil at Cushing to gulf coast. Read a lot more for yourself at www.gasandoilinvestment.com

Wed, 12/19/2012 - 12:16 | 3078858 Dr. Engali
Dr. Engali's picture

Illiquid markets....literally.

Wed, 12/19/2012 - 12:17 | 3078859 scatterbrains
scatterbrains's picture

Looks to me like BNO/UGA  is about to break out of a huge consolidation on it's way to new highs into the new year (catching up to dollar weakness).  Mean while is /ES stalling out at it's 75% retrace off the top..  clearing out some stops with this little bump above the Dec. 11th highs ?

Wed, 12/19/2012 - 12:17 | 3078860 slaughterer
slaughterer's picture

I just checked the futures book: looks like a large number of people laid in shorts in the $88-89 region today, and are now stuck dancing around in this video:

http://www.youtube.com/watch?v=-CI3Su7yPkA

Wed, 12/19/2012 - 12:20 | 3078868 QQQBall
QQQBall's picture

Fat Finger - move along, nothing to see here

Wed, 12/19/2012 - 12:20 | 3078871 gasandoil
gasandoil's picture

Also somewhat interesting to see WCS at all time high discount to WTI last week. Poor western Alberta producers feeling "bidless" market in a big way this year... The last I saw was WCS at $42 below WTI - ouch!

Wed, 12/19/2012 - 18:00 | 3080163 GoinFawr
GoinFawr's picture

Don't forget NAFTA's proportionality clause or royalty rates that are the laughingstock of the oil producing world: the gifts that keep on giving. Harperlanders sure are thick.

 

Wed, 12/19/2012 - 12:20 | 3078873 jmeyer
jmeyer's picture

HFT momentum spike

Wed, 12/19/2012 - 12:22 | 3078878 slaughterer
slaughterer's picture

Like I said yesterday, I will not start to worry about ES until  1465.  

Wed, 12/19/2012 - 12:27 | 3078900 fuu
fuu's picture

Nice Nessie formations in both charts.

Wed, 12/19/2012 - 12:29 | 3078913 orangegeek
orangegeek's picture

I guess oil demand is going up because everyone is driving to work again.

 

So we don't lose perspective - oil is correcting before its next move down.

 

http://bullandbearmash.com/chart/wti-oil-daily-breaks-consolidation-clos...

 

 

Wed, 12/19/2012 - 12:30 | 3078919 Squid Vicious
Squid Vicious's picture

yet the airlines keep marching higher along with other assorted garbage like netflix and lululemon... what a joke

Wed, 12/19/2012 - 12:32 | 3078926 LongBalls
LongBalls's picture

Anyone trading these markets is a gambler. Not a trader. Fundamentals have left the building a long time ago. Maybe Elvis took them. In this case I would make a gambling bet that it was a banker. Of course I would never get the payout because his bankster buddy would hold a gun to my head claiming Marshall Law. Get the picture.....you never win over the long haul. The house has the odds! Why? Because they make the rules.

Wed, 12/19/2012 - 12:57 | 3079040 MsCreant
MsCreant's picture

Obama has been reelected. No need to keep the fuel price down any more. Time to make up for lost revenues.

Engage price thrusters. Prepare for takeoff, bitchez.

Wed, 12/19/2012 - 12:59 | 3079055 Cojock
Cojock's picture

I think you'll find Jan 2013 WTI expired today, and my take is that the shorts got squeezed (almost certainly by by JPM) whose muppet funds have pre-paid for crude oil still nominally owned in tank by the Saudis.

ie the muppets lend dollars to the Saudis and the Saudis have lent oil to the muppets, and this has been going on since early 2009, but I think we are coming to the end of the unwinding.

Under the 'prepay' assumption, the weird changes in inventory are accounted for by crude oil changing title in tank.

It's similar to what happens on the LME when metal moves backwards and forwards in warehouses 'across the line' from being 'on warrant' to 'off warrant'.

When the Iran risk premium evaporates, we should see the Brent bubble finally burst. 

Canada shows us what the lower level clearing price for oil now is.   

 

 

Wed, 12/19/2012 - 13:29 | 3079207 Squid Vicious
Squid Vicious's picture

and the Iran risk premium will evaporate when DC stops taking its marching orders from Israel - which is to say, never... they are already throwing Chuck Hagel under the bus and he hasn't even been nominated yet...

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