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A Plot To Hold Down Oil Prices Or Just A Happy Coincidence?
Submitted by Leonard Brecken via OilPrice.com,
The recent unprecedented surge in oil imports has again prompted a review of things here. In a prior story, we wrote that the lack of capacity to process light sweet crude at refineries produced via shale plays could be playing a role in the stock build. As mentioned previously, refineries over the next 24 months are expected to add 700,000 B/D in capacity to handle this type of crude. In the meantime, we have noticed an unusual amount of crude being imported, possibly as a result of this imbalance in refinery capacity. Or could it be that a more sinister plot is afoot?
To quantify the scale of the issue, we turn to Cornerstone Analytics’ work in uncovering the magnitude of the impact of imports on the rise in oil inventory stocks. We haven’t seen this level of import imbalance period since 2013, as the chart below demonstrates via Cornerstone. In the past 6 months, the level of imports relative to the requirement or need by refineries has jumped not once but twice. The 1M B/D “gap” goes a long way in explaining the oil inventory stock build which has been 5MB-10MB per week.
If adjusted, the builds over the past 6 months without such imports would not exist at all or at the very least be greatly reduced. So is this occurring as part of the inability of refineries to handle the mix of output domestically or is this part of some plot to build inventories to crash the prices of oil? Quite frankly we can’t say for sure but anomalies such as this must be exposed so that they can be debated given that there has been ample debate on Saudi motivations for holding down oil prices and the ongoing media cheerleading on lower oil prices.
Regardless, it is very clear that the source of the inventory build is not tied to US production but tied to actual imports, whatever the reason. Further investigation into this should be pursued and only the refineries themselves have the real answer. What is clear is that the level of imports will normalize and, when combined with lower US production, the oil imbalance seems very likely to correct in the near future.
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Crude is too high and you guys complain. Crude is at long term lows and you still complain.
No, I complain because it was held artificially high for so long for no other reason than to squeeze us for more shekels.
What is the difference between piracy and capitalism? Buehler?
Yep, refineries can not process shale or canadian tar sands oil without blending it with better oil from the mid-east.
Saudi's hold on the world is two fold. Not just the amount of reserves they have but the quality of the oil as well.
Um, that's not "better oil" the refiniries are just geared to process it. Sweet vs. sour refers to the level of sulfur in the oil and sweet is actually easier to refine if you are set up to do so, the problem is our refiners are not, they geared to heavy crude in the last major crash and it isn't an insignificant capital cost to retool those refiniries. See below for your reading pleasure:
http://www.petroleum.co.uk/sweet-vs-sour
There is no plot, the cause for low prices is simple:
http://debtcrash.report/entry/oil-price-drop-root-cause-analysis
not one word about demand? who are the enities actually storing the oil in places like cushing. is it futures traders looking for the ever popular spike in price? if i am a refiner would i store oil at this price or only buy as needed for fear of a price collapse? does the refiner care if the price of oil is x regardless of stored or not stored and the refined price is what it is...period. oil"PRICE.com continues to sumitt articles with facts and figures to the power of ten. it's a plot, no it's not a plot to the power of ten. do any of the nimrods at oil"PRICE".com have the simple figures of supply and demand? is our economy expanding and need more oil? is the economy of china expanding and need more oil? i believe most zerohedgers think the worlds economies are slowly slip sliding away.....tick tock down. rant over
Point well taken. Demand deserves a seat at the head of the table. But, it's fair to say that demand didn't just fall off a cliff as did prices. Whether an outright decline, or a decline in the rate of increase -- it hadn't been reflected in prices due to price manipulation. Now, the manipulation has gone the other direction for some very specific reasons having more to do with propping up global stock "markets" than anything else.
One of my clients in the oil business told me this was coming well over a year ago. He said oil was going below $40 bbl when at the time it was over $100.
We have yet to see sub $40 Funny that storage capacity is almost fully utilized yet the price is rising. I would hazard a guess that the current spike up in oil prices is not sustainable.
There is a plot, to crush Russia.
Michael Reagan, the eldest son of Ronald Reagan:
http://townhall.com/columnists/michaelreagan/2014/03/06/putin-petroleum-...
“I suggest that President Obama might want to study how Ronald Reagan defeated the Soviet Union. He did it without firing a shot, as we know, but he had a super weapon - oil. Oil was the only thing the Soviets had in the 1980s that anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren't for sale. Since selling oil was the source of the Kremlin's wealth, my father got the Saudis to flood the market with cheap oil. Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire.”
The difference is that Goyim are allowed to partake of high piracy from time to time?
Let me summarize this douchenozzle from "oilprice.com" : We are'sell-side oil traders. Peak oil! Prices are only low because of a mastermind conspiracy.
Bet on oil quickly rebounding! We need some commish!
lack of capacity to process light crude?
Woar.
The same reason why China was stacking crude oil.
Just a way to keep the Saudis as aircraft and defense good customers, 'tis all.
Quid pro quo.
Conspiracy theorists? Call of Duty previews Black Ops 3 featuring bionic humans, robot warfare
Of course the oil imbalance will correct. ALL imbalances correct at some point. What a pointless fucking article
when is the imbalance of crooked bankers going to correct?
the oil has to go somewhere now that china is done stock piling. when the US runs out of space, everyone will have to pump less......at receive much lower prices. the depression is taking its toll on actual demand for actual products.
Royal Dutch Shell must have known the oil price would drop, as they divested a significant part of their shale assets -just- before it happened (after significant investments and with a loss).
so we buy too much on the world market and that is what is driving the price down? LOL. Our productions is increasing 15% a years and demand is dropping...we are exporting record amounts of gasoline....so we are producing more and demand falling. Yep...surely a reason for prices to increase....only in a world of manipulation. The Law of Supply and Demand was purchased by a couple of large banks located on an island in NY on the Hudson River and their middle men...many located in opaque places like Switerland(read about Vitol & Glencore & Mercuia...pretty much all Goldman trained crooks)
50% of shale producers will go out of business we're told. Does this mean the bigger players will take over their wells at a huge discount OR the wells will be closed and in this scenario the need for higher imports?
Ask Goldman.
Exactly. It'll be interesting to see how little damage the decline does to Big Oil -- which was no doubt well-hedged in advance and is playing Henry Potter to the small and mid-size operations that it helped bankrupt, scooping up reserves for pennies on the dollar.
Actually I have been pointing this out the entire time all the shilling on the increase in storage has been taking place.
Conspiracy you say? Finally you woke up
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ExxonMobil Boosts Drilling Rights in Russia Giving It More Holdings There Than in U.S.
German Utility RWE AG to Sell Oil and Gas Fields in Britain, Norway, Denmark, and Germany To Russian Mikhail Fridman
Its good to see the US is firmly committed to supporting the Bin Laden family, and wishes to continue buying the bulk of its heavy crude from the Saudi's. Canadian heavy crude being a perfect match for the US coastal refineries is, of course, just convenient ungoodness. Cause, you know, Canada supports terrorist organization, works to undermine US interests both domestically and across the globe...and of course, Canada supplied most of the terrorist for 9/11. The Saudi's, alternatively, share the longest unprotected border on the planet with the US, share common culture, and has been a steadfast ally for decades, as well as the largest trading partner. And then there is of course the fact that the Candian oil patch doesn't provide massive support for US manufactures like Cat, GE, etc, whereas the arabs are all about supporting US companies like Boeing over Airbus.....
....er, wait, nm.
Go go 'merica!
light sweet is easier to refine (with less pollution in the process too) than ksa heavy sour or canadian bitumen. if there is a conspiracy afoot look at the usa (et al) refiners. most refineries are held together with bubblegum and bailing wire. capital investment is a dirty word to the maggots.
So this is the kind of stuff the bots read on their coffee break...
Glad to see others exploring what's happened...
IMO, lower oil prices were engineered in order to accomplish three primary goals that revolve around the euro, yen and USD:
Big Oil — which probably helped engineer oil's crash and was well hedged in advance - is no doubt licking its chops at the cheap reserves that will come available as more highly leveraged and less stable companies go belly up.
One outcome I didn't see coming was the birth of the higher oil price (CL futures) algo that has been very effective in driving SPX higher whenever USDJPY algos falter.
I explored this theory in some detail about six weeks ago in: Those Wacky Central Bankers
These past years have seen an unprecedented number of projects that would have never seen the light of day in a fair market environment.
With interest rates at all time lows and everyone in the financial space literally looking for the next best opportunity to malinvest, it is with almost 100% certainty that the storage capacity increased as well. I've seen a couple of tank farm deals over the past few years and I'm sure that someone, somewhere had the funds to build.
Storage tanks are useless unless they're being filled and someone gets charged for storage.
There are ripple effects and unforeseen consequences all across the world from this era of cheap credit. It will not and cannot last forever.
Just as the Chinese overbuilt by a few hundred miles, the entire world has gorged on the credit boom and expanded with infrastructure projects, residential and commercial buildings that nobody has any real use for.
Not only that, the resources that were wasted during the production have completely distorted the demand picture and led to increased exploration or increased mining and drilling.
The entire world has been running on the fumes of cheap credit and we all got high off it.
That high is ending and we all need to come down from it.
Good luck to all!
Tank Storage Magazine.The economics of storing when prices are low could pay off big IF you have deep pockets and expect a U.S. turn-up in economic activity.There's so much of it though,I think everyone is being forced to build.
http://www.tankstoragemag.com/industry_news.php
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Herdee,
Thank you for the hyperlink to "Storage Tank magazine." Didn't even know that it existed. I could have used it a few years ago.
-- Paul D. Bain
PaulBain@PObox.com
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Alex Jones vs The Mainstream Media https://www.youtube.com/watch?v=bc4V0thnpqE
Refiners juicing their stocks to the overall detriment of Murica' ?? No way !! Buying discounts below WTI prices as if including free shipping ? No Way !
Torpedoing the cost of localized feedstock, No WAY ! Not directly tying margin to the actual cost of crude in consumer pricing ?
Partial Saudi ( & overseas) ownerships of a refinery or most along the TX Gulf Coast ??
Oh, OK. Sorry Canada ..... STILL no pipeline for you !
Is Golden Dawn running any candidates here for 2016 ?
Hey, great deals on electric cars today at Electron Motors.... ALL tragic comedy for the plebs.
it's the contangotade
They said at the beginning that oil prices went down to bring a recession in Russia. Here's
The truth about the conflict with Russia >> http://wp.me/p4OZ4v-1Gm