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Why Crude Oil's Carnage Has Only Just Begun
"Summer is when refineries are all running hard, so actual demand for crude is as good as it gets,” notes Citi's Seth Kleinman, London-based head of energy strategy, but U.S. crude futures have lost 30 percent since the start of June, set for the biggest drop since the West Texas Intermediate crude contract started trading in 1983.
That beats the summer plunges during the global financial crisis of 2008, the Asian economic slump in 1998 and the global supply glut of 1986.
As Bloomberg reports, if crude’s slump back to a six-year low looks bad, it’s even worse when you reflect that summer is supposed to be peak season for oil.
OPEC’s biggest members are pumping near record levels to defend their market share and U.S. production is withstanding the collapse in prices and drilling.
The oil market is still clearly oversupplied and “it will get more so as refiners go into maintenance,” Kleinman said.
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Perhaps last night's flash crash is a sign of things to come...
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Because Russia hasn't invaded Ukraine yet?
I believe acording to our media they did at least 20 times already.
ZH is too busy pushing Chinese fear porn.
There's a volcano in Ecuador. Also, the Clintons are pathogens.
I can get that on Drudge.
dare anyone to short Canadian banks ie Calgary house prices....
~"I can get that on Drudge."~
Better news porn:
http://badblue.bitnamiapp.com/trendr8.htm
Best Canada News porn:
http://www.nationalpost.com/index.html
The Azov Youth repelled 1000 Russian tanks last week. Just using spitballs!
The promises of liars learns of price discovery....say it aint so son.
Long physical
RIPS
LOL! Let's be clear, the value of all paper assets in a "mark to fantasy" world is fucking zero.
Nonsense, there's the cost of paper and ink, plus bits and bytes if your digital. And let me just note that fantasy is official FED policy, so things are going just swimmingly and don't worry about the alligators.....
If Goldman comes out with a $30-ish price target, that could signal the bottom of the trade.
FUBAR.
I am thinking Goldman just formed a bottom. Maybe temporary, but this may be it. Still need more evidence before we shift our sentiment.
cause they wanna sell you some oil longs.
The sell-side analysis cited in this post is worthy of a first-year MBA candidate's write-up.
Seasonality in crude and refined product demand isn't exactly something out of the blue.
And yes.. markets may not be efficient, but they're efficient enough to have baked in this data point. Forward curves reflect seasonality.
Yaaaaaaaaaaaaaaaaaaaaaaaaaaaaaawn. </scratch nuts> </scratch nuts again> </begin nap>
all the sudden, and despite that oil extraction keeps getting more expensive, we have too much of a finite resource on an ever growing human population...
We have too little - that is available anywhere near a price that enables continued "growth," as customers have completely exhausted their ability to gain the incremental credit needed to bid oil prices. As ZH has been covering, tight oil's (the world's marginal producer's) ability to finance with debt is coming to a dramatic end, they are now pumping to stay alive. There's the so-called "glut." When the pie shrinks, everyone is cannibalizing everyone else.
Twenty Dollar Oil by November...
Bring on the Shemitah collapse.
I am with you on Shemitah. I am hoping by November we have no markets.
"Officially" yes. Good luck taking delivery. Many things will have "officially" low prices. Reminds me of hanging out in Leningrad in the 80's,(i.e. St. Petersburg in the 90's).
LOL! Soviet Union 2.0.
Fuck em.
$10 oil, I said it first.
But gas prices will stay artificially high because all of the bankrupt states need their gas tax revenue.
Bingo.
Nice theory, unfortunately false. Gas tax is a fixed amount- it matters not what the overall price is. The Feds and the state get their cut regardless of the overall price.
Oddly enough, the oil producers who own all the refineries, have a big say in how the price is fixed. I am currently still paying 2.95 a gallon and e will all pay these artifically high prices at least thru Labor Day weekend.
I suggest you read this PDF. Sales tax is applied on top of the excise tax. The sales tax is based on cost per gallon.
Adding insult to injury, Californians are double taxed for gas. Sales tax is calculated after excise taxes have already been added. That means we pay a tax on a tax, which is just plain wrong .Californias_Gas_Tax_Nightmare.pdf
The argument is moot for me. California, I could care less about. I pay the Feds .18 and change per gal. and the state .43. We do not pay sales tax on top of this. It doesn't matter whether the price is 2 bucks or 4 bucks. It doesn't change anything.
I read your link. I am forever in awe at the ridiculous lengths California goes to tax the living shit out of it's citizens and offer nothing in return. Their highways are shit. I don't know of any other state which piles sales tax on top of excise taxes. There's a reason people flee California.
If California didn't have an ocean, Id give it back to the Mexicans- who may seize it anyway.
Refiner Maintenance? Chicago Area gas wnet up .80 in one day due to "manitenance" and over 3.40/gal but that's good, very good, right?
That plant turned out to have leaks in it so they shut down half it's capacity. Same shit going on in California where they are paying $4.29 for premium in some places. Anyway, the Whiting plant shutdown is killing Canadian oil sands sludge for the time being. There is no where to put the stuff and it's not going to Cushing because no one needs it. They are going to have to quit puttting it in the pipeline because the price is already down to $23/bbl. They keep trying to sell it and it will go to $10/bbl. No one really needs that sludge except refineries that have been set up for it and the ones on the gulf coast have all they need from Venezuela and don't need this excess. No one in their right mind will buy it at any price.
And yet Calgary house prices stay at bubble levels. So far anyway
Yes and $ .80 in one day in central IL as well. FUCKING BASTARDS!
Gotta have something to deflect the gold pump and dump..............
Yeah, oil is going to zero, cushing is going to fill up and blah, blah, blah. SSDD.
Of course what this article fails to note is that while gasoline demand continues to be high, the inventories will drop which means more production later to make up for it, i.e. in the "off season". Midwest was at 99% capacity prior to this outage anyway so something was bound to blow a gasket, that has to be some kind of record for capacity utilization. The whole US was at 96.1% last week.
Goldman has a wti long to sell you
BS.!!!!!!!
The price at the pump just went up 16c. Yesterday. Someone is making a killing. Buy crude for less than half price and sell the gas for the same as a year ago. It just goes to show that the price of oil has nothing to do with the price of gas.
"The oil market is still clearly oversupplied and “it will get more so as refiners go into maintenance,” Kleinman said."
Big oil owns the refineries and fixes the price. It is all completely price fixed until they begin to manufacture winter blends which are cheaper- on or about Sept. 15. At that time we will begin to see gas prices roughly in line with oil prices and the appearance of "competition."
Is this a big windfall? Of course, but it's like a severance check. Shit's about to get pretty lean for them.
Canadian dollar shorts at record levels. Crude might be about to turn here and take the Loonie with it.
Canadian friend said bombadier and service sector are stonger than oil....this is going to b painful for canadians in denial.
RIPS
The SNB can buy up all the riets in Canada. Dont you worry
Sigh... As long as the crack spread remains this high they will continue to churn out refined products until the "lack" of demand brings crack spreads down to norms for the fall season. If numbers don't normalize, they will continue to suck up oil stocks like a hoover. As Zero likes to say... This time it's dif'ernt!
apparently one can print moar oil. [/poke at usd bears]
there is a fixed cost on rifiner's book to reflect on gas price. oil price is the variable cost. anyone knows the % of the two costs on gas price?
I do. The rack price from an insider. Unfortunately, I have to re-up the newspaper subscription to bring back the eidtorial. When we are talking refiners, we are simply talking about big oil which owns them all. That's why our refining capacity is stagnant- it helps them squeeze consumers.
The part I remember from the article is that in the summer they must take out butane- which the EPA claims creates smog. In the summer I suppose, butane is fine. The insider said the difference between blends is about .15 per gal.
LF, I understand the concept. the two %'s are also variables, which is balanced to determine the gas price for profit. lately the exxon's profit is not that great. a tough question for you, what do you think the oil price would be with a time fram. a wild guess would be ok.
I think by late October we should be paying sub 2.00 at current prices, but they will try to hold the line around 2.25 I think. In Idaho, I pay 18.4 FED tax and 43.5 state tax which means nearly a full third of the retail price will be tax. For years, in these oversupplied markets, buying bulk in late Jan. early Feb. usually meant getting the best retail prices.
In the summer I suppose, butane is fine. Edit* winter.
I would hate to be the trader holding BNO/WTI calls for awhile
My Omnitrader software called a short in oil 1 week ago. first one they got right for awhile, given manipulated markets so I didnt take it. phooey.,
Yeah, I really don't think people understand the concept of a margin unwind, and how China's dumpster fire relates to it.
I'm sure a big part of the price drop has to do with ME. I'm getting close to my first year without an automobile. I was racking an easy 40K mile per year average for the last 20 yrs. This simple change by me is also impacting other economic sectors, Healthcare and big Pharma are taking a huge hit from my world. Now that I'm walking or biking to work or wherever I need to go, all my metabolic functions are within specs without any medication.
I'm no longer the fat fXCK who cant walk up a flight of stairs without taking two rest stops. I have rediscovered my abs in the melting process and enjoy that.
People like me are the problem. The bad example we set needs to be eliminated to keep gas prices, healthcare and pharma markets stable.
I am here to claim responsibility for all the problems seen in the world, my and others like me no matter how few, sick view of what is healthy needs to be changed for the good of all.
Excellent.
These fuckers have captured our culture. First they sell us shit like corn syrup, and gawd knows how many other shit ingredients, then as we develop type 2 diabetes, heart disease, and other nasty side effects of our current lifestyle- they are waiting there to gouge us for health insurance and health care.
It sounds as though you found your way out of the matrix.
Good for you. Fuck em.
Thanks for support. I'm heading back into the matrix of Healthcare soon to see if I can pick up some FRN. That market is swimming in cash and I estimate about 90% of the projects in the domain are in trouble which in my book means opportunity.
I like oil here. 60% off sale and the sentiment is terrible. Looks to me like it's tired of going down.
Next up is the rig count in ten minutes. Will probably go below $40 if the rig count goes up.
nope...expectations are just what you indicate..."bottom Must be near".....thus, it isnt
said everyone about gold 2 years ago
the very long red bar with a tail around 39.50 in one minute period could be the bottom is near.
WAR WAR WAR
OAS, CLR and WLL are all going to zero
El Nino will change everything!
No. The reason is ZIRP, which gives and advantage to investments with a long time horizon, and also to consumption now in stead of later.
When the oil reaches the market, the consumers are exhausted. It is world wide.
My shorts on oil since beginning of july have been successful. I am keeping them. Just sayin'.
Kyle bass does not agree... he wants to go long Oil.
They had to mess up the BP refinery in Whiting, IN to bump up gas prices. Went up $0.80 a gallon in one day here south of Chicago.
i am actually happy. i am happy, without schadenfreude for others, if that is possible. I am happy, because i am somewhat younger and my investment horizon is much longer. Thus, regardless of whether the markets are rigged, or not, I am buying into to this down cycle for the long term. The more it goes down, the more I will purchase. Mid Caps Big Caps and dividends, baby!