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Crude Carnage Continues Amid Saudi Production & Storage Limits
Crude oil prices are once again following the path of least deja vu resistance this morning. Having spiked into NYMEX close on Friday (exactly as they did following the rig count data the previous week), WTI is back to a $48 handle this morning following news that Saudi Arabia has increased production to its higest level since 2013. Iraq (another OPEC nation) stirred the pot further by forecasting increased supplies in the next month. This comes as US production hits record highs and vital Oklahoma storage tanks will fill up even sooner than expected, driving the "JK" spread above $2.50 (April delivery drastically cheaper than May). As on analysts noted, as "Cushing continues to fill massively, we could see a '3' handle on WTI."
As Ransquawk notes, the latest survey data showed that Saudi Arabia’s output had increased to its highest level since Sep. 2013. Furthermore, OPEC production output was at 30.6mln bpd in February as OPEC leader Saudi Arabia increased production by 130,000bpd to 9.5mln bpd. Iraq exported more than 2.5mln bpd in February and expects to export more than 3mln bpd this month.
As Reuters reports, the market is flashing warning signs that vital Oklahoma storage tanks will fill up even sooner than expected...
While benchmark U.S. crude oil futures CLc1 still appear to be holding firm after trading at around $50 a barrel for the past month or so, the spread between first- and second-month oil futures collapsed last week, with prompt prices diving by more than $1 to their deepest discount in four years.
Shorthanded as "JK" in market jargon, U.S. West Texas Intermediate for April delivery (known as "J") were $2.38 a barrel cheaper than those for May ("K") on Friday, a gap that likely signals the early onset of another milestone in the great oil supply glut, running out of space in Cushing, Oklahoma, delivery point for the New York Mercantile Exchange contract.
"Cushing is filling faster than we had expected back in January," said Michael Cohen, head of energy commodities research at Barclays.
"We feel that we may break the $44 level, we might even see a $3 handle," said Tariq Zahir, an analyst at Tyche Capital Advisors. "Maybe not next week, but Cushing continues to fill massively."
But as traders know, timing is everything, and it's unclear whether fundamentals will change quickly or significantly enough to prevent another lurch lower.
* * *
Perhaps this sums the situation up best...
"What happens to a barrel of crude oil if no one wants it and no one can even store it?" asked Walter Zimmerman, chief technical strategist for United-ICAP. "How do you even value that crude?"
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They'll probably raise gas prices to pay for the extra storage.
"What happens to a barrel of crude oil if no one wants it and no one can even store it?" asked Walter Zimmerman,
Pay me, and I will take it off your hands.
Bet I could buy a used Tesla for under $20,000 by the end of Summer..
http://www.autotrader.com/cars-for-sale/used+cars/Tesla/Model+S/San+Fran...
And bet the Feds will suspend any further MPG requirements.
Quite a few low mileage Teslas for sale.
They will tax the hell out of it. No soup for you!
No link to the Reuters source.
The retards that were playing that meme on NG at exactly this point in 2012 were destroyed in late September and the fools that listened to them were the suckers for those that went long NG in Fe/Mar 2012. Cushing is only filling up because the refineries are switching to the spring blend setups and are at lower utilizaiton. Look at last week's report. East and West coast refineries were running in the 70s and everywhere else was in the 80s. As soon as they are turned around the supply at Cushing will start draining. The tanks with refined product have been getting drained while the crude tanks were filling up. In case no one noticed, demand for refined products was way up in Dec, about 2mbpd higher than expected which means the refined product inventory is falling which means when the refiners start running in the 90s again, Cushing willl start dropping.
Interesting point about demand. The analysis I can find says that demand in no way has fallen as much as most people seem to parrot that it has.
In terms of the Saudis expanding production, that pretty much shows who the driver of this shit storm is. They apparently are happy to watch their bank account dwindle for 6 months or a year - because they can. They are in a position to be able to do this short term, whereas most countries aren't. I look forward to the day that they say enough is enough after their efforts to punk Russia fail. What I really mean is I hope Russia bombs them.
LOL, or does something equally nasty but more surreptitious..........
Saudi Arabia isn't losing a dime:
'How could trillions of dollars be laundered from the Wash DC regime to Saudi Arabia? Why, through Citigroup, of course.'http://www.barnhardt.biz/2015/01/09/how-could-trillions-of-dollars-be-la...
They will use this "carnage" to recalibrate gas prices. When oil goes back to 80 gas at the pump will be at 4.50 and 130 will get you 7 bucks a gallon.
It is unwise to start a world war without SPR full. Enjoy while it lasts.
NOBODY DRIVES WHEN THEY AIN"T GOT A JOB YOU IDIOTS!
I've noticed Saturdays and Sundays getting less and less crowded, Saturdays are nearly empty in my area, but people do seem to make it to church the following day.
My morning commutes are getting lighter and lighter too. Not enough to notice day by day, but looking back month to month and year to year it's a whole lot less traffic.
I hope thats something to look foward and hope to because down here in Htown nothing short of a nuclear bomb will thin out traffic.
That comment didn't strike the right nerve, so I'll ask the question:
Under what sort of economic law understood by humans do production rates increase as prices plummet?
Oh, God, of course there is no reasonable answer. I suppose I might as well ask the following questions as well:
How can the Fed balance sheet increase exponentially, while money supply (M3) barely moves?
How can people buy physical gold like mad, and the price remain essentally unchanged?
How can commodities prices for food go up, while all other commodities go down?
How can peaks in asset prices occur while the rest of the economy prints officially deflationary numbers?
OK, so maybe the oil glut isn't for the purpose of building inventory preparatory to a descent into WW3.
Maybe we should look for an economy that in the past sufferred from bizarre dislocations, gluts and shortages that made no sense, and that were not reflected in consumer prices- an economy where the money supply was not connected to debt or asset prices, and where all statistics were lies that did not communicate reality.
I think that economy was called the Soviet Union.
Our economy is now centrally planned, and those central planners are not party apparatchiks driven by a messianic ideology, but rather they are central bankers driven by the desperate need not to lose their jobs. But planning at any level (been to your local planning commission meeting lately?) is an exercise in unintended consequences.
"Under what sort of economic law understood by humans do production rates increase as prices plummet?"
The assumption that anyone's operating within the parameters of any economic laws at this point has long been disproved.
They print more fiat. I jes keep stackin'. That's the only creed I know these days.
Thats the Law of Debt Service i.e. You will make those payments even if you operate at a loss until we have bled you dry
Already started.
http://www.kusi.com/story/28233652/most-aggressive-gas-price-hike-ever-r...
Radio, this morning, said it was as high as 4.89/gal.
Costs nothing to store it underground, just no turnover. Not much turnover in a giant on-going overproduction glut either though.
Storage cost are heavy. Infrastructure, monitoring systems, safety Personel, not to mention the EPA oversight. Pumping in, pumping out, volume calibration equipment etc.
Storage cost in some cases can run as high as 10% on a 3 year termed development.
There are property taxes and lease rights that have to be paid for....
Do not expect them to leave it in the ground where they could lose ownership of the oil.
Exactly. And as long as companies have their production hedged, they will keep pumping. Alot of companies are pretty well covered through 2015. After that things get interesting.
Any explanation why gasoliine jumped $0.15 in one day here in Commiefornia? Looks like this morning it's up by at least another nickel.
HOPE, HOPE and CHANGE !!!!!!!!!
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CARB’s New Hidden Gas Tax Could Add Up to 76 Cents per Gallon to Fuel Costs
The cap-and-trade for fuels is a regulation already adopted by the California Air Resources Board that will increase the cost of gasoline and diesel fuels by up to 76 a cents a gallon, according to the agency’s own analysis!
And those costs won’t stop at the pump – they’ll increase the cost of everything that uses gasoline and diesel to transport products to market, including everyday essentials like food and medicine.
- See more at: http://cafuelfacts.com/cap-and-trade-for-fuels/#sthash.QjVe3xtH.dpuf
http://cafuelfacts.com/cap-and-trade-for-fuels/
you start filling all those unwanted container ships and parking them off the coast of Lousyanna
Worlds largest oil spill in 3..2...1
Ill have the shrimp Gumbo with a side of crab corexit please..
Cancer rates spike, healthcare spending and GDP goes up. WINNING
Pump prices back up someone's making some profit.
If the Saudi's want to destroy US production they'll have to keep the prices low for a while. They realize this.
from a Saudi perspective, Wall Street bankrolled an idiot business thanks to near-unlimited FED credit, and they are just giving them a dose of their own medicine
further, their finances can allow even two years of under-cost production. I would not wonder if they will, at the end, own this US Production, wherever they can, officially or unofficially
behold the power of the market maker, pardon me, the market crasher
why people support "free markets" regardless and unthinkingly, even when there are clearly oligopolists (or monopolists) around is beyond me. must be a kind of political religion, I guess
^ thank your for comment.
It's called red white and blue underwear.
But it started only white!
Gas prices are totally disconnected from oil prices atm so this won't affect the consumer.
Pump prices will continue to climb for sure, what on earth do supply and demand matter anymore? That reasoning was left behind years ago.....
Crude dropping, refined rising. Hmmmm.
They can always burn it :D
And my neighbors were laughing at me after I completed my 15th above ground swimming pool... who's laughing now?
Your contractor.
OIL DOES NOT GROW ON TREES....
ALL KABUKI....ARTIFICIALLY FUCKED UP...
The cheap oil is helping seaborne shippers like Maresk Line save a few bucks on transportation costs. But according to the company's CEO, the collapsing global economies are trumping any benefits from the decline in crude prices. Trede volumes are shrinking which means global GDP is shrinking... full-blown deflation.
http://www.globaldeflationnews.com/deflationary-forces-creating-global-s...
Shipping containers can be used as new homes.
Or section 8.
Nope, HUD's rules are too strict. Only the best for freeloaders.
We just put 2 40 footers on the farm, instead of new construction.
The cheap oil is also being bought up by the pentagram so they can get their wars started.
Go long fuel storage tanks.
The unemployed need to drive less.
Can somebody please explain those weird gold-rountrips? :-/
Saudi Arabia exports 6.6 million barrels a day. US imports more than 7 million barrels a day. China is importing more than 7.2 million barrels a day. World oil production and consumption is about 92 million barrels a day.
All these headlines of record Saudi production mean nothing as Saudi exporst are just a few percent of world oil consumption. Here is a chart of Saudi oil production out of which 3 million barrels a day are used for domestic consumption for a domestic population of under 29 million. If the world used oil like Saudi Arabia, world consumption would be 730 million barrels a day instead of 92 million barrels a day:
http://ycharts.com/indicators/saudi_arabia_crude_oil_production
If the world burnt oil like Saudi Arabia would I still be able to breath?
One aspect of sustainability that many people overlook is proper recycling of cars. If you have a junk or scrap car, it’s much better for the environment to let the experts have it- the metal will be crushed down and recycled to make new products. www.selltotaledcar.com sell totaled car This place helped me sell my car super easily, I was left with some more money in my pocket, and I felt great knowing I had chosen the eco-friendly route.
There is a limit to how much oil (or any commodity for that matter) allegedly “evil” speculators can mop up.
So anyone know about how much storage capacity is left in Cushing, Oklahoma? Find it weird I still have no facts on that.... And I pretty much read as much as I can about oil price
Cushing can hold 85m bbl of oil but there is what they call operational storage (about 65m bbl) which allows for empty tanks that are used to blend what is stored there and then ship it to the refiners. There is about 20m bbl in capacity under maintenance and used for blending and the most recent report from the EIA says that there are 48m bbl in storage at Cushing. It's a long way from filling up and moreover, it's at this level that Cushing always gets drained.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPC0_SAX_YCU...
Here is the capacity report for all tank farms
http://www.eia.gov/petroleum/storagecapacity/table3.pdf
Notice how much storage there is for refined products and how small Cushing is in relation to that total. All of this concern over the storage at Cushing is played up to bring suckers into the short position so they can be stung. Oil is already back over $50 this morning.
Thx
https://www.youtube.com/watch?v=dEGrmd67LEw
Historically, oil is very high. WTI ranges between 15 and 30. Central bank nuisances have created these bubbles.
WTI weekly is heading lower
http://bullandbearmash.com/chart/wti-oil-daily-closes-50-barrel-momentum...
But magically, gasoline is rocketing recently - central bank nuisances strike again
"How do you even value that crude?"
Isn't this why we have a futures market? LOL
Worry not, those tanks will need fuel soon enough.
Wrong again. Crude is surging. Durrrrrrden is one of the worst in the business.
Oh yeah, QQQ, new 52 week highs. Durrrrrrden?????
The question I keep trying to answer is this intentional or not? Obama eluded to the idea that it might be intentional economic warefare with Russia last December with an interview with NPR. He didn't seem swayed by the economic impact of a crashing price of oil at home (and make no mistake, a 50% decline is a crash).
The rational part of me says this is not intentional, and is a sign of both a deflating market and the desparation of energy companies to stay afloat.
I'll stick with the latter until I see evidence (facts) to support the idea that this is an international conspiracy to bankrupt Russia. There are very strong deflationary indicators out there (velocity of money, median average income, forecasted global GDP, labor participation rate). But it does beg the question why Obama would suggest it is intentional.
https://www.youtube.com/watch?v=X3rOUquIhtM
Evgeny Federov thinks so, too;
http://www.youtube.com/watch?v=VT085isnyB0
We have reached the tipping point in the use of oil. We will soon use only a fraction of the oil we are presently using.
Let’s look at some examples of what is happening to demand and learn why demand will not return to its former level nor increase again. Here are some examples of what has occurred, what is occurring, and what will occur in the world of oil:
1.
Every year Boeing and Airbus each build 700 aircraft. These new aircraft are 20% more efficient than the airplanes they replace. The airplanes being replaced were designed in the 1960s and the 1070s. No airline can afford to fly them any longer as they are severely inefficient by today’s standards.
In addition, airlines are switching from petroleum fuel to a 50/50 blend of bio fuel and petroleum fuel. This results in a fuel reduction of an additional 10%.
2.
A similar thing is occurring in the shipping industry. Today, ships are being fitted with what is called an AIR LUBRICATION system. Cruise lines are currently testing air lubrication systems on their ships with outstanding, almost unbelievable results in terms of fuel consumption. RCCL has the system installed on several of their cruise ships and they anticipate that when the system is installed on all their ships they will reduce their fleet fuel consumption by 10%. This will reduce their fuel bill by 10 million dollars per year.
The reduction of fuel consumption for other large ships such as fuel carriers and cargo ships is expected to be as much as 20%.
It takes about two weeks to install an air lubrication system on a ship. Shipyards will soon be filled with ships undergoing system installs.
3.
The automobile industry is continually improving the fuel consumption of vehicles. I recently traded in a 10 year old auto for a new vehicle. The old car got 24 mpg. The new car is larger and gets 34 mpg. A total fill up of my new car is now 10 gallons.
Around the world 30 million inefficient cars are replaced each year. That’s a huge ongoing decrease in worldwide vehicle fuel consumption.
4.
The trucking industry is doing its part. Look at the 18 wheelers you pass on the highway and take note of the air deflectors attached to the bottom of the trailers. Those air deflectors reduce drag and result in fuel savings of 10%.
How big is this you ask? There are 300,000 18 wheel trucks in the US and Canada. They each drive 250,000 miles per year. They typically get six miles per gallon at highway speed. Do the math and this is a potential fuel use reduction of 125,000,000 gallons per year.
It is truly astounding that a simple and inexpensive wind deflector installed on 18 wheeler trailers will result in a fuel savings of more than $3,750,000,000 each year for the North American trucking industry. When the avoided production and distribution costs of this much fuel is included in the equation the potential annual savings come to $4,000,000,000.
5.
The future of oil just became immensely bleaker.
The Lockheed Martin Skunk Works has an unrivaled reputation of producing cutting edge technology on time and under budget. Recently Lockheed Martin Skunk Works announced they will produce a working prototype fusion reactor in less than five years.
See:
http://www.forbes.com/sites/williampentland/2014/10/15/lockhe
ed-martin-claims-fusion-breakthrough-that-could-change-world-forever/
The Skunk Works fusion reactor will eliminate the need for 90% of the petroleum products being produced today. The oil based world economy is coming to an end.
http://www.globalresearch.ca/netanyahu-a-danger-to-israel-say-200-israel...