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Oil Slides As Inventories Trump Iran-Yemen Push-Pull
Crude oil prices have rallied sharply this week on headlines that a coalition of Sunni-ruled nations initiated airstrikes on Yemen against Shiite Houthi rebels. Goldman's Damian Courvalin notes that this rally reversed the sell-off that occurred in part on the rising odds of a deal with Iran being reached. Courvalin expects both events to have negligible near-term supply impacts, with the build in crude inventories set to continue in 2Q15. Longer term, a deal with Iran could lead to greater OPEC supplies although the timing of the sanction relief remains uncertain. It appears today's weakness indicates a dawning realization that there's still too much...
Big roundtrip in crude but supply will build...
YEMEN: While Yemen is a small producer (145 kb/d in 2014), the price rally is driven by fears of potential escalation and the proximity of the Bab el-Mandeb strait. While the conflict points to worsening Shiite-Sunni relations in the region, the near-term potential impact on oil production is limited, with the conflict far from Saudi’s oil fields and limited to targeting the Houthi rebels. While closure of the strait could impact 3.8 mb/d of crude and product flows (2013 EIA estimate), the strait is a transit point rather than a chokepoint. Its closure would keep tankers departing the Persian Gulf from reaching the Suez Canal and the SUMED Pipeline, diverting them around Africa, for an additional 10 to 15 days transit time.
IRAN: Reports of progress in the negotiations to lift the Iran sanctions increase the odds that a deal may be reached by month end. The pace of relief from US sanctions seems to remain the key unresolved issue given the need for US Congress to vote to permanently lift them. If a deal is reached, a tentative timeline for it to be finalized would be the end-of-June deadline and the lift of sanctions would likely be progressive, contingent on observed progress in implementing the deal. As a result, the impact of any sanctions relief on Iran’s production could potentially not occur until 2H15 or later and could initially be limited to Iran drawing down its floating storage of c. 30 mb if the EU crude import ban and shipping insurance restriction get lifted.
While sanctions relief could lead Iran production to increase by a few thousand barrels per day initially, a sustainable increase in Iranian production would however only occur gradually given (1) the required investment to reverse the field output restrictions and decline rates, (2) the need for more favorable contracts and signs that sanctions relief are sustainable to attract foreign investment. As a result, we don’t see a deal as dramatically impacting the global oil cost curve but instead contributing to our expectation for gradually rising OPEC production in the New Oil Order. Independently of the sanctions, we expect Iran exports to ramp up in April once India starts its new fiscal year, contributing to the 2Q stock build.
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It appears the reality of accelerating production and static storage capacity is starting to overhwelm geopolitical events.
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They discovered a new oil source from Victoria Noodleman's hair.
Watch the spread between WTI and Brent. If there was a real panic Brent would be pricing much higher, yet WTI has been narrowing the price gap. This is mostly speculator pump and dump. Of course things could REALLY hit the fan but you'll see real panic then and the Brent price will instantly shoot well above $100....
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Crazy stuff going on in the middle east...it appears the U.S. is switching sides...again...
Greg Hunter's Weekly Wrap-up on USA Watchdog does a pretty good job at trying to untangle this mess...
This Wrap-Up will try to make sense of the nonsensical, crazy U.S. Middle East policy:
WNW 183-War in Yemen, Crazy Middle East US Policy, Iran Nuke Deal
http://usawatchdog.com/wnw-183-war-in-yemen-crazy-middle-east-us-policy-iran-nuke-deal/
You can't switch sides when you are on all sides.
http://abcnews.go.com/Politics/senator-harry-reid-seek-election-2016/sto...
THANK GAWD!
Well having the power go out and then see him jump in the lead after it comes back on and finding another few thousand pre-punched ballots again would be too fishy.
One of the better articles with Good News.
Yep, one of the turds most foul is leaving the cesspool. He screwed the country and stole/filled his pockets as much as possible, as they all do.
Good riddance to the old asshole, now go away and decompose!
Saudi Arabia is rapidly losing money from it's so-called war chest. Their stock market is leaking like a tire with a big nail in it and their currency reserves are flying out the door. The only currency they have that is worth anything is oil and they will soon have to stop giving it away for free. Iran would rather see $100 oil than $50 oil and the Saudi's need $90 oil to pay their miiltary and all he imams. If they don't have the money to pay for all of that, they will collapse and what will become of their production if there is political unrest in Saudi Arabia?
Most of their SWF is invested in the US stock and RE markets, so they're doing fine....for now
sometimes I think the only reason they come up with all this bullshit reasons is just so the big institutional players can "event-drive" their positions some more
oh, and maybe offer some half-assed patchwork explanation to the plebs who can then pretend to know something about global stuff of importance and not feel like complete dupes
Penny stock oil.
So where are the regulators? Isn't this market a little too important to be completely manipulated by headline scanning algos? Over the past few months we've had what, a few thousand dollars in price swings between $40 and $50.
I think the million man march against the HFT tower needs to happen immediately.
Again...the right price for oil is one dollar a barrel.
Giberish.
Has anyone bought a Quant yet.
The car powered by Sea Salt.
German manufacturing.
Story is a year old already.
Maybe it's time for ZH to do a piece on it?
Maybe you should do a bit more research on it. The car has to be charged, just like any car with a battery. The sea water only stores the energy in place of a battery. The car carries 2 x 200 liter tanks of sea water. If what they say about it is true, it could be a game changer and the end of Tesla and eventually the end of oil being a major source of energy in transportation.
Short shale to zero
Go long sea salt.
“It appears today's weakness indicates a dawning realization that there's still too much...” Or maybe it is just paper oil algo traders using zero interest leverage mindlessly moving around oil prices to suit their purposes. Impossible to have true price discovery with the current rigged system.