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Crude Soars Despite Record Saudi Production, Lowest China Demand Growth Since 1998
If Inventories down, then buy oil at the fastest pace in 2 months. That appears to be the algo logic as talking heads additionally blame Saudi airstrikes on Yemen for the over 6% surge in WTI in the last 2 days. However, as crude nears $62 (6 month highs) once again, we note that not only Saudi oil production just hit a new record high, but US production hit a new cycle high last week (DOE data today), and this is happening as China's energy demand grows at the slowest pace since 1998.
So slowing demand growth and soaring production... means prices are ripping.
This is happening as Saudi Oil Production hits a record high:
Saudi Arabia increased its oil production to a fresh record in May as the kingdom stepped up its attempt to win back more customers and as Opec forecasts supply outside the group to fall in the second half of this year.
The Kingdom's output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to Opec, confirming the widely held view that Saudi Arabia's production is heading higher, Anjli Raval, FT oil and gas correspondent writes.
Saudi's oil output was 10.31m b/d in April, Riyadh told Opec.
While on the demand front, BP reports that demand growth was the lowest of the 21st century aside from the 2008 financial crisis:
Global energy consumption growth slowed markedly last year to the lowest level since the late 1990s, apart from around the time of the financial crisis in 2008, BP said on Wednesday.
Significant growth in shale oil and gas output put the US ahead of Saudi Arabia as the world’s largest oil producer and ahead of Russia as the world’s biggest producer of oil and gas, the energy giant said on release of its annual Statistical Review of World Energy.
Global primary energy demand growth slowed to 0.9% with Chinese growth at its lowest level since 1998 as its economy was rebalanced away from energy intensive sectors, BP said. China remained, however, the world’s largest market for energy.
Global oil consumption growth was slower last year at 0.8m bbl/day compared with 1.4m bbl/day in 2013. BP said that countries outside the OECD accounted for all oil consumption growth even though China consumption growth was below average.
Natural gas consumption growth was just 0.4%, well below the 10-year average of 2.4%, the review shows. EU natural gas consumption was down 11.6% mainly due, it is thought, to mild winter weather.
Global natural gas production growth was 1.6% in 2014, below the 10-year average of 2.5%. US natural gas production was up 6.1% while production in Russia was down 4.3% and in the Netherlands down 18.7%.
China’s slowdown and the rebalancing of its economy meant that its coal consumption growth stalled in 2014 compared to 2% in 2013 and an average of 6% over the past 10 years. The BP data are based on the energy content of coal. Global coal consumption growth was 0.4% compared with a 10-year average of 2.9%.
BP’s data show that China’s slower economic growth helped reduce the growth in global carbon dioxide (CO2) emissions by 0.5%, to the lowest level since 1998 apart from at the time of the global financial crisis.

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The spice must flow...
Despite all the propaganda, some people will have access to all the consumable calories required to maintain a high standard of living, most will not...
And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
http://trueslant.com/justingardner/2009/07/03/matt-taibbi-blows-the-lid-off-oilgas-speculation-by-goldman-sachs/
blah, blah, blah... the fact is physical oil is a very useful commodity...
disscusing "prices" in the absence of price discovery is fucking pointless. The real price could be $10,000 per barrel just as easily as it could be $5 per barrel.
The perceived supply and demand for current and future dollars is as important as the supply and demand for crude.
I percieve that I need gas in my car today otherwise I don't get anywhere.
Yes, what part of all fiat will die don't people understand?
It seems like you missed the point though.
No doubt games are being played in the oil market. When you consider how many indebted nations export oil and owe US dollars, failure of those nations to service their debts would lead to serious problems in the financial sector. Even though demand is falling and storage almost saturated, the price of oil rises !?!?
Seems like manipulation of interest rates (LIBOR) and precious metal prices were just a warm up.
Who told you storage was almost saturated? ZH, financial news media? Who else?
** ALERT **
Watch out ZeroHedge commenters. The DOJ could be coming for you.
http://motherboard.vice.com/read/the-government-wants-names-of-online-co...
Ha ha the writer thinks supply and demand matter. Commodity traders are no longer bound by silly notions like intent to consume. Hell, an average guys 401k can be leveraged against his current consumption and he won't even make the connection.
Inflation - everything is green.
There is a lot soaring right now. Says little about oil and more about health of rest of economy.
I think much of the buying in crude oil is related to the weaker U.S. dollar.
It doesn't always have to make sense.
Keeping the spring compressed against the tide. Suppressing the normal .
"We're losing control of the information"
"The dollar is too strong"
"So slowing demand growth and soaring production... means prices are ripping."
Huh? Sorry, but could someone explain what I'm (and the article's) missing?
the fact that there simply is no price discovery!!!
oil could be $10,000 per barrel just as easily as it could be $5 per barrel.
And every barrel of oil settled in a currency other than $ makes the price of oil in $ that much more meaningless.
exactly. trade is everything. People can use oil to make and do real shit, period.
but its not priced according to use, or utility, or supply.
It is priced according to the aggregate speculation and manipulation of people buying contractual representations of oil still in the ground - right?
I don't think anyone contests fossil fuels' utility, so it seems strange to reiterate it. But the "trade" that generates price is several steps removed from that utility, or from supply and demand, and the result of speculation and manipulation by holders of contracts of future production.
Its a strange way to price anything, and the furthest thing from the best way to gauge something's 'value' at any given time or place.
Because supply and demand are no longer as relevant in pricing of commodities? People buy because it's going higher, and people sell because it's going lower, i.e. tunnel vision investing.
I'll 'splain it.
It's vacation time in New York.
The banksters and their ilk require some coin to splash around the riviera and the tahiti gated resorts.
So, they be spoofin the oil bidness in collusion with their squeezes over at the regulatory houses too bankroll
the good times.
RICO all banksters, their political ho's and maybe 73k to 84k lawyers that are aiding and abbetting the theft of the worlds treasure.
just intentionally forgot the /s tag is all.
and gas prices moving up fast! watch the DOE report slam this market down hard.
Everyone in the oil industry knows that the big dogs manipulate the price to get rid of the little puppies that are trying to get a piece of the American Dream.
Are you suggesting that the government should bailout or help those little puppies with taxpayer money?
Make up you fucking mind already, do you people want a free market or not?
The government should allow price fixing for corporations, like Exxon-Mobil. I mean, they are the government, anyhow, so whateva.
US believes it is where OPEC once was, the dictator of oil prices, and has decided it behooves them to jack up oil
Demand be damned
I think the explaination is much simpler. There is no price discovery, period. No one can say what the real price of oil is. Considering that all my tractors still run on diesel, all I can say with great certainty is that oil is still an extremely useful substance.
Although, has there ever been or will there ever be a "real" price of anything, actually? The price of something is as much as someone is willing to trade for it, and as little as someone is willing to accept for it. I think maybe what you mean is what the price of the *physical* oil itself upon delivery, rather than the price of what it *might be* at some future point in time.
So how are things at Goldman Sachs?
Awesome. Join us. The Borg squid is hungry.
This.
I would pay $500/gallon if the alternative is digging fence post holes by hand.
The Big Oil Companies should be subsidizing the endless wars Amerika is waging in the Mid-east,on their behalf..Oil would be trading at $200 a barrel,then.Why the fuck should I be paying to send troops to Iraq,when all the profits are going to Haliburton,and Chevron?
Knowing this, I am sure that you, like many of us, have held these stocks since 1980 right?
or the irony of the american 401k...
Just read some information from a Chinese investment site. Chinese storage is nearly full so the demand growth slowed in the last couple of months. China requested Saudi to secure further supply for the future and got declined. Now they have just completed four more storage facilities and ready to load up again. For that country, building something is piece of cake.
It also unusual for Saudi to decline the request from their largest client. Obviously, they do not intend to over floor the market for long .
Trying to make another buck before it all goes to heck......spoof the market in the absence of price discovery. ..a banker's wet dream
Priced in fiat currency everything is expensive. We're trying to discover price - P* - using currency with no value. It's like asking Charles Manson to decide parliamentary procedure.
Priced in fiat currency oil will be very expensive from here on out.
Oil should be cheap, as the dollar will continue its rise eventually. Most will not feel that "cheapness" due to a lack of dollars in pocket.
War could as well disrupt the natural flow.
Supply and demand has absolutly nothing to do with the energy marketplace.
Record Saudi production is only a few barrels a day more than it ever produced 30 years ago. So what. There is no real growth in Saudi production and yet here in the US, production has grown by 1mmbbl/day for three years in a row, that has never happened anywhere else in the world.
http://finance.yahoo.com/news/u-ousts-russia-worlds-top-090118951.html
Oil, the dollar, treasuries.
Rates are not rising soon...the Government (state, local and federal) are massive consumers of it.
I think this consumption is what is pushing the global economy and certainly the US into a midcycle correction.
The move in Netflix stock has been truly amazing.
There goes the "Putin demotion due to russian poverty" theory
U.S. monthly crude-oil output highest in more than 40 years
9 June 2015, by Myra P. Saefong (MarketWatch)
http://www.marketwatch.com/story/us-crude-oil-monthly-output-was-highest-in-more-than-40-years-2015-06-09
OPEC sees no further rise in crude demand in 2015
10 June 2015, by Summer Said - Dubai (MarketWatch)
http://www.marketwatch.com/story/opec-sees-no-further-rise-in-crude-demand-in-2015-2015-06-10