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Could Oil Prices Plummet A Second Time?

Tyler Durden's picture




 

Submitted by Nick Cunningham via OilPrice.com,

Are oil prices heading for a double dip?

The surge in shale production has produced a temporary glut in supplies causing oil prices to experience a massive bust. After tanking to a low of $44 per barrel in January, falling rig counts and enormous reductions in exploration budgets have fueled speculation that the market will correct sometime later this year.

However, there is a possibility that the recent rise to $51 for WTI and $60 for Brent may only be temporary. In fact, several trends are conspiring to force prices down for a second time.

Drillers are consciously deciding to delay the completion of their wells, holding off in hopes that oil prices will rebound, according to E&E’s EnergyWire. The decision to put well completions on hold could provide a critical boost to the ultimate profitability of many projects. Higher oil prices in the months ahead will provide companies with more money for each barrel sold. But also, with the bulk of a given shale well’s lifetime production coming within the first year or two, it becomes all the more important to bring a well online when oil prices are favorable. With prices still depressed – WTI is hovering just above $50 per barrel – drillers are waiting for sunnier days.

Yet another reason to wait is the possibility that costs for well completions will decline. Oil and gas companies often contract out well completions to third parties, and those companies will face pressure to cut their fees in order to keep business. That works in favor of producers who put their projects on hold for the time being. Well completions can make up as much as three-quarters of the total project cost.

Several prominent shale drillers have confirmed they are undertaking such a wait-and-see strategy. EOG Resources, one of the biggest Texas shale drillers, announced its plans in late February to hold off on completions. Chesapeake Energy and Continental Resources have now followed suit.

"We're intentionally holding production back in 2015, because we believe it's the prudent thing to do," Doug Lawler, Chesapeake's CEO, said in a conference call. Chesapeake has said it may delay completing as many as 100 wells. EOG has 200 wells awaiting completion, a backlog that will intentionally rise to about 350 this year.

As the industry clears out that queue of wells awaiting completion, a rush of new supplies could come online, pushing WTI prices down once again.

Even with well completions being suspended, supplies continue to build. The latest EIA data shows that oil stocks in the United States climbed to 434 million barrels, the highest levels in storage in over 80 years. “My gut feeling is that the oil price could see a double bottom,” Jason Kenney, an analyst with Banco Santaander SA said in a Bloomberg interview. “We’ve got too much inventory.” Bloomberg noted that Kenney has a good track record of predicting price swings in the past. Even though rig counts have declined significantly, output has so far proved resilient.

Finally, there is some evidence that the ability to move excess oil into storage may run into trouble if production does not decline. Storage tanks are starting to fill, raising the possibility that a glut could worsen. There is a great deal of uncertainty around how quickly this might happen. The EIA sought to clarify, noting that the markets have confused some of its storage figures – some oil supplies in the EIA’s weekly inventory data is actually sitting in pipelines and at well sites, meaning there is more storage capacity available than many news outlets had originally thought. An EIA analyst recently told Bloomberg that overall storage capacity is only at about 60 percent, and “[w]e still have a way to go before we can consider ourselves to be full,” Rob Merriam, EIA’s head of petroleum statistics said. It would take a few months of strong inventory builds to fill up the remaining storage, perhaps an unlikely scenario, especially if production starts to take a hit. But if storage tanks did start to fill up, prices would dive once again and companies would have to shut in wells and cut back on production.

Rig counts are at six year lows, forcing oil prices up on speculation that supply reductions will soon relieve the oil glut. But a double dip cannot be ruled out.

*  *  *

And then there's this...

  • LIBYAN OIL PRODUCTION NOW STANDS AT 500,000 BARRELS A DAY PRODUCTION STOOD AT 325,000 B/D IN JANUARY
 

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Tue, 03/03/2015 - 14:25 | 5850411 So Close
So Close's picture

1.)  Production is still climbing.   2.)  1800+++  DUC wells in Texas alone.  (Drilled but uncompleted)   3.)  Amount in storage still climbing.     Answer:   Very possibly if not likely.

Tue, 03/03/2015 - 14:30 | 5850453 Beam Me Up Scotty
Beam Me Up Scotty's picture

Why has gas gone up so much then?  Was as low as $1.89 where i live, for about a week, now its back to $2.49.  Hmmmm......

Tue, 03/03/2015 - 14:32 | 5850471 madcows
madcows's picture

no shit, right?!

Tue, 03/03/2015 - 14:39 | 5850514 flacon
flacon's picture

Christine Hughes: 

Fear the strength of the US dollar - Christine Hughes

https://www.youtube.com/watch?v=6LKgVSR3M5I

 

 

Tue, 03/03/2015 - 15:51 | 5850925 Publicus
Publicus's picture

We are entering the era of abundance. Wealth for everyone.

Tue, 03/03/2015 - 14:44 | 5850554 quasimodo
quasimodo's picture

Here in IA they ass rammed a 10 cent state tax hike thru faster than anyone could say "Grab the KY!"

Granted, it's for IDOT and it's been some time since our last hike, but what pisses me off is all the high fiving about how this was a bi partisan effort.

Of course it was you dumb fucks! 

Tue, 03/03/2015 - 14:57 | 5850570 Ham-bone
Ham-bone's picture

For those that want to put this all in a broader perspective...record production and who's demand is collapsing, production growing...

http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-9-oil.html

 

Tue, 03/03/2015 - 15:04 | 5850670 chubbyjjfong
chubbyjjfong's picture

+1, nice info, thanks!

Tue, 03/03/2015 - 16:08 | 5850807 Ham-bone
Ham-bone's picture

Amazing I don't seem to hear much about the fact that since '05 nearly all global production gains are due to US / Canadian tight oil production gains...and no other region (except Russia) increased production while the price of oil rose 5 fold.  No other region was incented by 5x's higher prices?!?!  And US did it via a mass of low interest lending and tax loopholes to allow a huge # of rigs w/ relatively low output...4x more rigs in the US than all the middle east which produces 3x's as much oil?!?

Tue, 03/03/2015 - 14:32 | 5850472 So Close
So Close's picture

Gasoline like oil is priced on the margin of over/under supply.   Refineries being taken off line for mainentance now while margins are low. <----   = Lower supply.

Tue, 03/03/2015 - 14:34 | 5850485 Beam Me Up Scotty
Beam Me Up Scotty's picture

Oh, you mean "conveniently" taken offline??  There is always some excuse, isn't there.  Its all bullshit.

Tue, 03/03/2015 - 14:47 | 5850551 So Close
So Close's picture

No. I mean they are in business to make a profit.  They are 365/24/7 operations.  So now is an ideal time to make capex expenditures/shut down when interest rates are low and opex is suffering due to low margins.

Tue, 03/03/2015 - 14:59 | 5850631 Beam Me Up Scotty
Beam Me Up Scotty's picture

Sure, and its easy to manipulate your profit margins by controlling your output.  Refinery utilization is usually in the high 80's to low 90's %.  Refineries are big machines, there is ALWAYS some sort of maintenence happening.  The price is more likely affected by ALGO's seeing "refinery fire" or "refinery maintenence" in the headlines, and BUY BUY BUYING and bidding the price of gasoline, even though it has absolutely no impact on gasoline inventories.  There hasn't been a shortage of oil OR gas since the early 1980's.

It would be like going to your local Applebees restaurant, and its half full, but they jack up the price on the menu because they are 2 servers short.

Tue, 03/03/2015 - 15:27 | 5850778 So Close
So Close's picture

You nailed it.  A single Applebees is a good metaphor for the whole petroleum industry.

Tue, 03/03/2015 - 15:00 | 5850648 devo
devo's picture

Rational explanations aren't welcome on ZH. We need a theory about how the jews or rothchilds are behind the rising oil price.

Tue, 03/03/2015 - 15:11 | 5850688 LawsofPhysics
LawsofPhysics's picture

Rationally speaking, the western economies still run on oil, period.  Just remember, some countries are net importers, whle others are net exporters.  In addition, not all oil is extracted with the same ease...

Go ahead, le the prices fall, there will be companies standing in line to lock in future delivery at those prices...

life goes on...

same as it ever was...

Tue, 03/03/2015 - 15:40 | 5850868 disabledvet
disabledvet's picture

Can run on oil but in fact run on refined product.

 

Oil backs up because refineries shut down....well...that oil then needs to be refined which come spring when energy prices will collapse the refining will commence.

 

That's a lot of product looks to be coming to market.

 

"Prices so low you get a black market" actually.

Tue, 03/03/2015 - 15:53 | 5850937 devo
devo's picture

I do think prices are going lower. At the end of the day there is too much supply. Barring a war we're going back down, but the hedge funds pilled in in the $45 range. It's funny how hedge funds have become the dumb money.

Wed, 03/04/2015 - 01:41 | 5852937 daveO
daveO's picture

Seasonal switchover. An excuse to screw the consumer with summer time blends. Their margins go up as prices drop. 711 used to say this is when they make their most money.

Tue, 03/03/2015 - 14:38 | 5850511 JRobby
JRobby's picture

Almost time to switch over to "summer" formulation

A seasonal factor

Tue, 03/03/2015 - 14:37 | 5850502 JRobby
JRobby's picture

Seasonal factors:

It is sheeple ass fucking season

Tue, 03/03/2015 - 14:38 | 5850508 Beam Me Up Scotty
Beam Me Up Scotty's picture

It seems like thats a never ending season.....

Tue, 03/03/2015 - 14:40 | 5850518 JRobby
JRobby's picture

365 days for every year of the next 10 decades

Tue, 03/03/2015 - 14:38 | 5850512 KnuckleDragger-X
KnuckleDragger-X's picture

Scotty there is a refinery strike by the workers going on. It migh be from having gas being shipped in for the price spike, Cali is really screwed on this one.

Tue, 03/03/2015 - 15:46 | 5850903 disabledvet
disabledvet's picture

488 BILLION barrels of oil is the estimate for reserves in SoCal.

Used to produce 60% of the entire WORLD'S supply their.

California is still a very large oil producer even today.

Tue, 03/03/2015 - 16:28 | 5851138 KnuckleDragger-X
KnuckleDragger-X's picture

In this case resrves don't matter and neither does pumped oil. The refinery's In Cali are running at very limited capacity due to the strike and just to make it really special CARB requires blends unique to only Cali.

Tue, 03/03/2015 - 15:12 | 5850692 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Gubernment taxes, here in France they've added 4 cents on diesel fuel...

With the gubernement you don't feel the drop in the price (then blaming evil capitalist oil industries that they don't drop their price to the consumer...)

Only heating fuel have dropped substantially since it's not over taxed (just the VAT).

The collapse of the Euro neutered the price drop since we buy oil in Dollars...

Tue, 03/03/2015 - 15:17 | 5850723 thamnosma
thamnosma's picture

Amazing isn't it?  The gas prices dropped to as low as 2.29 here in Southern California.  The price of oil has barely recovered and now the best I can find is $3.59.   It rose very quickly.  Of course, I read the usual blather about "summer driving season" last week and it was still February.

Tue, 03/03/2015 - 16:51 | 5851232 Yao
Yao's picture

I believe that exploding refinery in Long Beach had an awful lot to do with the CA spike (along with seasonal change to higher cost blends, the refinery strikes, etc.).  It used to be true that no one else refined CA blends so when an indigenous supply problem arose there you guys got screwed harder than anyone.

Tue, 03/03/2015 - 16:15 | 5851065 post turtle saver
post turtle saver's picture

just because there's a bunch of oil doesn't mean it can all be refined...

Tue, 03/03/2015 - 14:31 | 5850458 MarketAnarchist
MarketAnarchist's picture

4) nobody needs oil any more because there is barely any real economic activity

Tue, 03/03/2015 - 14:53 | 5850598 Uber Vandal
Uber Vandal's picture

No, it's all the electric cars.

I have a friend of mine that keeps insisting that, even if one shows him that miles driven are down, he will say that more people are thus using bicycles thanks to expanded bicycle trails and utilizing light rail.

Even if light rail does not exist in our area since the days of the trolley ca. 1930.

Tue, 03/03/2015 - 14:34 | 5850490 j0nx
j0nx's picture

Oil prices mean shit to the consumer since gas prices are totally disconnected from reality now. Refineries out for strikes and maintenance my ass. Very convenient timing if you ask me...

Tue, 03/03/2015 - 14:42 | 5850531 KnuckleDragger-X
KnuckleDragger-X's picture

The entire market is living in their own reality nowadays. I've been expecting a slow roll down to $40 or there about but the the market is being twisted. I expect a collapse when the market players suck up all available money.

Wed, 03/04/2015 - 16:57 | 5855144 Zero guest
Zero guest's picture

jOnx,

From an investors viewpoint the timming of these wage disagrements is perfectly logical.

You see, as oil prices drop the refineries raw material costs are reduced allowing for higher earnnings.

The employees and unions are well aware of this. So now justifies higher wages because of the increased profitability. Now also puts pressure on management because they are missing the opportunity while they negotiate.

If I were advising the unions thats what I would be putting forward.

Now that I think about it, I belive it is right that the employees get to share in the fat margins currently availible to the refiners. Of course the problem comes when the fat margin goes away again.

 

Zero Guest

Tue, 03/03/2015 - 14:35 | 5850494 SethDealer
SethDealer's picture

going to $30 bbl

Tue, 03/03/2015 - 17:14 | 5851325 Ruffmuff
Ruffmuff's picture

It does not look like it. The trading is tighter than a teenager and the players are trying to keep at 50 bucks.   Right now it is a rangy shitty trading the CL. Starts to go a little then stalls with no followthru.  Sucky shit.

Tue, 03/03/2015 - 14:26 | 5850421 Quinvarius
Quinvarius's picture

If prices were actually set by fundamentals, we could make a lot of predictions.  Bush was filling the SPR at 140 and dumping out of it in the 30's.  The level of interference from governments and printing presses calling themselves banks in these markets is legendary.  

Tue, 03/03/2015 - 14:32 | 5850446 LawsofPhysics
LawsofPhysics's picture

In many ways that makes sense as real demand for something like oil goes up when the price goes down.

 

The western economies still run on oil bitchez. Go ahead, knock the price of oil and distillates down, numerous companies will be standing in line to lock in delivery at those prices.

Tue, 03/03/2015 - 14:33 | 5850482 glenlloyd
glenlloyd's picture

Sounds very similar to the .gov propping up wheat prices in the 30's due to oversupply and then giving it away because prices kept going lower and lower.

Nothing like a little interference to wreak havoc on a free market...yet people never learn.

Tue, 03/03/2015 - 14:26 | 5850430 847328_3527
847328_3527's picture
Anadarko reveals spending cuts for 2015

 

Anadarko Petroleum Corp. (NYSE: APC) plans to cut spending in 2015 by 33 percent compared to last year's capital expenditures, President and CEO Al Walker said in a March 3 statement.

 

http://www.bizjournals.com/houston/news/2015/03/03/anadarko-reveals-spen...

 

33% ....................... OUCH!

Tue, 03/03/2015 - 14:26 | 5850431 Nafets93
Nafets93's picture

Didn't those guys ever hear anything about Nashs Equilibrium?!

Tue, 03/03/2015 - 14:29 | 5850449 redd_green
redd_green's picture

Who?

Tue, 03/03/2015 - 14:31 | 5850460 Nafets93
Nafets93's picture

Google it. The guy from a beautiful mind, great movie btw.

Tue, 03/03/2015 - 14:28 | 5850441 redd_green
redd_green's picture

Wahoo!  10 cents a gallon gasoline!  1965 all over again!  Yeee haww,  Buy those cadillac escallades, folks!

Tue, 03/03/2015 - 14:30 | 5850454 SheepDog-One
SheepDog-One's picture

If oil price rises- GOOD NEWS!
If oil price falls- GOOD NEWS!

Tue, 03/03/2015 - 14:31 | 5850461 Slurm
Slurm's picture

I hear we're running out of places to put all the oil here in the States.

 

All I know, this change over to 'summer' blend in Cali, explosions at refineries, AND labor strife is really putting the squeeze at the pump.

 

When it's cheap again, I'm stocking up in fuel stabilizer and large storage tanks.

Tue, 03/03/2015 - 14:32 | 5850469 redd_green
redd_green's picture

Winner, winner, chicken shoes!

Tue, 03/03/2015 - 14:32 | 5850474 Michael66
Michael66's picture

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.
2.
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%.

3. 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.

4. 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.

5 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.

6. 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.

Tue, 03/03/2015 - 14:46 | 5850562 JRobby
JRobby's picture

Don't forget TPMS on all new vehicles!

Seems that only old cars that belch smoke have visibly low tires anymore. And they are quickly swept off the roads and the drivers incarcerated.

So the plan is working!!!!!

Tue, 03/03/2015 - 15:03 | 5850638 froze25
froze25's picture

If this Fusion reactor works, and I believe that it is possible we will never see it on the market.  Technologies like this get boxed up and selfed for National Security reasons.  Unless of coarse they have been very open about the tech upfront to protect it from the Gov hiding it on behalf of the House of Saud.  Your link didn't work but this one will.  http://www.forbes.com/sites/williampentland/2014/10/15/lockheed-martin-claims-fusion-breakthrough-that-could-change-world-forever/

Tue, 03/03/2015 - 15:04 | 5850669 froze25
froze25's picture

Honestly I am more interested in the open source research that people are doing like this man. https://www.youtube.com/user/RobertMurraySmith

Tue, 03/03/2015 - 15:13 | 5850699 LawsofPhysics
LawsofPhysics's picture

Interesting, now if only deuterium was "cheap", as claimed by the project leader.

Thermodynamics is a bitch.  Thorium a much cheaper fuel.

Tue, 03/03/2015 - 16:40 | 5851181 Yao
Yao's picture

The House of Saud is now an inconvenience which differs significantly from its utility to the US a few decades ago.  Thus I wouldn't expect much assistance from US Administrations going forward.  More likely scientifically illiterate lefties, greens and other assorted luddites of their ilk will litigate it out of existence. 

Tue, 03/03/2015 - 16:37 | 5851171 Yao
Yao's picture

With the exception of #6, your multiple anecdotes don't support your conclusion and even there it's questionable.  

#1 through #5 describe activities which will continue to utilize oil for likley the rest of the lives of everyone here, what you've described is a series of marginal savings which, while significant, do not in any way imply the end of oil as an underlying input for those products and activities.  

If you read Lockheed's information and watch the interviews with their engineers their fusion product, if it works, will be targeted towards gas turbine power plants.  That is to say: it will be a drop-in replacement for the "gas" portion of the plant.  Thus we'd expect natural gas prices to crater which would depress production of natural gas (and the natural gas liquids found along with it).  But if the availability of NGLs craters refiners will replace them with, drum roll please, oil.  Thus an initial , perhaps for a decade or two, effect of the success of Lockheed's fusion reactor might well be *increased* demand for oil.

Further, there are an awful lot of second order (and beyond) effects you're not even beginning to consider.  Suppose, for example, that Locheed fusion is a success and craters the nat gas market.  Certain chemical fertilizers use natural gas as a feedstock thus in this case we'd expect those prices to crater.  So would farmers utilize: 1) more; 2) less or 3) the same amount of now much cheaper fertilizers?

Similarly, the trend of decreasing oil consumption in the developed world isn't new.  But neither is the trend of modernization and industrialization in the undeveloped world.  Guess what the primary fuel source will be as those last few billion inhabitants of the Earth claw their way towards living conditions common today in, say, rural Mississippi?  Yep: oil, at least primarily.  

And there are an infinite variety of other considerations that tend to show that we're nowhere near the end of hydrocarbon fuels.  Besides, if Lockheed fusion is cheap enough it's the key to a carbon-neutral liquid hydrocarbon fuel cycle.  Now *that* will drive the greens into a panic.  

Wed, 03/04/2015 - 17:09 | 5855182 Zero guest
Zero guest's picture

Michael66,

This fusion reactor could remove any legitimate interest that the Iranians have in enriching Uranium.

Zero Guest

Tue, 03/03/2015 - 14:37 | 5850503 asophocles
asophocles's picture

Vlad the master chess player didn't foresee the current plunge in oil prices, so he's likely to be behind the curve when oil prices drift even lower on account of slowing demand.

Tue, 03/03/2015 - 14:42 | 5850532 GFORCE
GFORCE's picture

Oil is heading to $40. We may rally as high as $65 - 70 first.

http://market-guru.co.uk/

Tue, 03/03/2015 - 14:43 | 5850546 bluskyes
bluskyes's picture

it's looking like it will be a good year to pick up a deal on a pickup truck.

Tue, 03/03/2015 - 14:56 | 5850549 teslaberry
teslaberry's picture

the irony is that if stockpiling crude is part of the financial warfare strategy to use lower oil prices to 'break' russia, -------then it is also convenient that stockpiling crude is great preparation for REAL WARFARE. unfortunately. 400 million barrels is NOTHING. and in a real war of protracted length the only thing that counts for shit is how much DOMESTIC AND EASILY SECURED OIL YOU CAN PRODUCE.

why? because 'real' means protracted high consumptive war with massive confiscation and rationing. this means existing pre-war reserves are almost ALL going to be consumed very very quickly and WARTIME PRODUCTION is what determines the scope of who wins a real war. those with accesss to high quantities of wartime production either by making it themselves, or through secure effective trade alliances. (explaining how the british have won ww1 and ww2.

consider in a real war, NO PETROLEUM WOULD REACH THE U.S. FROM EURASIA WHATSOVER AND THE ONLY SAFE PRODUCTION WOULD BE FROM SOUTH AMERICA AND NORTH AMERICA. MEANWHILE THE ENTIRE MIDDLE EAST WOULD SIMPLY BE NUKED BY RUSSIA/USSA/CHINA IN A BID TO TAKE THE MIDDLE EAST OIL CENTERS OUT OF COMMISSION.

'the chinese and russians know this. and are busy building out massive rail capacity. a huge submarine force means the sino-ruso plans for ww3 include a complete destruction of all world wide ports and exclusive use of RAIL for oil transport.

this means the british get FUCKED. the AMERICANS GET FUCKED. and eurasia remains intact so long as the rail roads and stations can be defended and rebuilt if destroyed.

Tue, 03/03/2015 - 14:57 | 5850624 forputin
forputin's picture
Russian oil products are under embargo in Kazakhstan

http://www.rusmininfo.com/news/03-03-2015/russian-oil-products-are-under...

 

So much for:

 

The Eurasian Economic Union (EAEU or EEU)[note 2] is an economic union of states located primarily in northern Eurasia. A treaty aiming for the establishment of the EEU was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan and Russia, and came into force on 1 January 2015.

Tue, 03/03/2015 - 15:36 | 5850837 czarangelus
czarangelus's picture

Oh no, not Kazakhstan!

Tue, 03/03/2015 - 16:18 | 5851074 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Kazakhstan have NATO base and still controlled by the Western Kabal. Have US corporation and so on. So it's in more or less a Western puppet.

Tue, 03/03/2015 - 16:29 | 5851140 Max Steel
Max Steel's picture

nope they don't . earlier 4 years back they suggested usa to have TRANSIT  base in order to carry their afghan invasion conveniently . 

Tue, 03/03/2015 - 15:11 | 5850689 Bemused Observer
Bemused Observer's picture

The supply issue will only result in some short-term fluctuations...some up, some down...fun times for day traders. The real issue is demand, which shows no sign of heating up anytime soon. So, the overall trend will be to the downside.

Finding a 'bottom' for prices doesn't mean they'd be poised to take off on the upside. A low-demand environment can just mean they'll continue to scrape along that bottom for quite awhile.

Tue, 03/03/2015 - 15:16 | 5850715 LawsofPhysics
LawsofPhysics's picture

Oil and oil distillates are a big part of the higher standard of living enjoyed by modern society.

I see 7+ billion people, and growing, all competing for a better standard of living, looks like plenty of demand to me.

Tue, 03/03/2015 - 15:18 | 5850729 thamnosma
thamnosma's picture

Governments and oil companies will be happy to provide unending free fuel to the planet.  Price heading down to zero.

Tue, 03/03/2015 - 15:41 | 5850871 LawsofPhysics
LawsofPhysics's picture

Right, because people/corporations just love to work for free, good luck with that.

Tue, 03/03/2015 - 17:59 | 5851503 Bemused Observer
Bemused Observer's picture

A higher and better standard of living doesn't necessarily involve more "stuff". A lot of oil goes towards the making of "stuff". If that gets cut back, oil consumption will decline, despite a growing population.
The biggest population increases are in regions that don't have heavy home-heating needs, so they will have a bit more flexibility with their consumption.

I believe the world's population may be at the end of the consumption boom. Many have gotten hopelessly in debt in the pursuit of ever more "stuff", and we may see things swing the opposite way for awhile. It did after the Depression, and that generation never resumed their previous spending levels. Their parsimony and thrift became a hallmark of their generation, and it took decades to get spending back up again.

The idea about what a 'higher standard of living' means can and does change significantly, and doesn't always involve buying manufactured trinkets. In fact, often the 'busts' that follow 'booms' have an element of disdain for the previous mindset, which is seen as a reason for all the misery.

Just some things to consider...

Tue, 03/03/2015 - 15:14 | 5850708 thamnosma
thamnosma's picture

Oil will soon be free and we can return to driving around everywhere with abandon.  I'm looking forward to never-ending road trips.  As soon as housing and food plummet to zero, I'll be set.

Tue, 03/03/2015 - 15:17 | 5850721 Augustus
Augustus's picture

I believe that the "double dip" is a certainty. 

 

They Did it Seaway - Canadian Heavy Crude Starts to Compete At Gulf Coast Refineries

 

Last week (February 19, 2015) Enterprise Product Partners announced the start of line fill on their 780 Mb/d ECHO to Beaumont/Port Arthur pipeline. The new route will open access for Canadian heavy crude shippers on the recently completed Seaway Twin pipeline from Cushing to Houston to 1.5 MMb/d of refining capacity in Beaumont/Port Arthur including 0.3 MMb/d of heavy crude coker processing.

 

https://rbnenergy.com/they-did-it-seaway-canadian-heavy-crude-starts-to-compete-at-gulf-coast-refineries

Tue, 03/03/2015 - 15:37 | 5850843 SelfGov
SelfGov's picture

"The surge in shale production has produced a temporary glut in supplies causing oil prices to experience a massive bust."

 

Bullshit.

The end of money printing killed demand. There never was a glut. Global oil production (the stuff that can be traded as crude oil in a futures contract) has been flat for decades. No glut. Ever.

Tue, 03/03/2015 - 15:42 | 5850875 In.Sip.ient
In.Sip.ient's picture

Well, 434Million BBls is about 5 days of world wide consumption.

 

So this justifies a fall in crude oil prices???

 

Not likely. And certainly not when US gov't figures put world wide

production below world wide consumption for months.

 

Tue, 03/03/2015 - 15:43 | 5850887 Goldbugger
Goldbugger's picture

OIL will continue to drop . The global economy is collapsing right before our eyes and now one will admit the truth.

Tue, 03/03/2015 - 15:57 | 5850954 brushhog
brushhog's picture

Surge in shale had nothing at all to do with the drop in prices. The whole premise of the article is faulty.

Tue, 03/03/2015 - 16:48 | 5851216 PeeramidIdeologies
PeeramidIdeologies's picture

Might double dip?! This move has been setting up for a. Long. Time. I remember a couple years ago everyone was talking about the Saudi's breaking even @ 90 uh huh...
Who hasn't bought into the North American energy sector? Cheap money on a solid investment. Now everyone and their dog is supplying oil to a global market place that is seeing pockets of growth and severe malinvestment at best.
This really falls into place nicely you see as refineries need a boost at the margins but gas can only go so high...

It does have a happy ending mind you. As the poorly positioned producers are starved out they will be restructured and revived with more manageable overhead by your friendly neighbourhood oligarch. The cycle of death continues.

The only way this bitch touches 70 is with direct US/Russia conflict

Tue, 03/03/2015 - 18:14 | 5851574 optionwriter
optionwriter's picture

So the fed will print US dollars,and sell them until the dxy is driven lower problem solved....next!

O.W.

Tue, 03/03/2015 - 19:22 | 5851787 kelley805
Tue, 03/03/2015 - 19:44 | 5851852 bid the soldier...
bid the soldiers shoot's picture

Thanks for elucidating the supply problem viz a viz the price of oil.

When can we expect a similar explanation of the demand problem?

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