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WTI Slides As Goldman Warns $20 Oil Looms, Crude Storage "Too Full For Comfort"

Tyler Durden's picture




 

Despite spoiradic algo-crazed ramps, crude oil prices continue to slide back towards a $34 handle (in Jan '16 contract) this morning following a reiterated downbeat note from Goldman warning that storage levels are "too full for comfort," that positioning is not as stretched short as some believe, and confirming that this will not end until prices near cash costs to force production cuts, likely around $20/bbl.

 

 

Positioning still not stretched short

The move lower was amplified by positioning, with short covering and new ETF long positions ahead of the OPEC meeting providing sufficient ammunition to push prices to new lows. This move was also likely exacerbated by a negative gamma effect around the large WTI Jan-16 $40/bbl strike option open interest. With Brent positioning still off its lows, continued weak oil fundamentals can still push prices lower. Beyond oil, it is also important to note that oil net speculative short positions have tracked dollar long positions closely this year...

 

OPEC and storage concerns weighing on oil prices

The decline in oil prices has resumed, driven by the aftermath of the OPEC meeting, renewed weakness in distillates and exacerbated by positioning. Although prices are now below our 3-mo $38/bbl WTI forecast, we still see high risks that prices may decline further, as storage continues to fill.

 

In further confirmation of these concerns, Genscape data saw a 1.4 mm barrell build at Cushing.

 

The canary in the coal mine

For now, the European distillate market is showing the most acute symptoms of nearing storage capacity with gasoil timespreads, cracks and cash basis falling sharply.

 

Tank tops not our base case, but too close for comfort

Our oil price forecast remains anchored by the view that high producer financial stress and shut funding markets near $40/bbl can halt the oil surplus by 4Q16, mainly through declining US production. Our base case remains that the global oil stock build will on aggregate remain shy of storage capacity, although the storage buffer has once again narrowed, to 340 kb/d on average for 2016. But this rebalancing is far from achieved:

(1) the US rig count and E&P guidance remain too high to achieve the required supply decline,

 

(2) we see risks to our OPEC production forecast of 32 mb/d next year as skewed to the upside (Iran),

 

(3) storage continues to fill with the odds of hitting storage constraints by the spring rising.

As a result, we reiterate our concern that “financial stress“ may prove too little too late to prevent the market from having to clear through “operational stress” with prices near cash costs to force production cuts, likely around $20/bbl.

 

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Thu, 12/17/2015 - 11:08 | 6934980 Bill of Rights
Bill of Rights's picture

Its a recovery dammit!

Thu, 12/17/2015 - 11:18 | 6935024 Stackers
Stackers's picture

News Headline 2020

World in Panic from Oil Shortage due to forced reduction in production levels from the 2015 price collapse

Experts say it could take 5-10 years for marginal oil resources to be brought back online

Thu, 12/17/2015 - 11:24 | 6935051 VinceFostersGhost
VinceFostersGhost's picture

 

 

Where are our $150 oil guys today?

 

You guys doing OK?

Thu, 12/17/2015 - 11:31 | 6935125 Mr.Sono
Mr.Sono's picture

Baby boomers are all in in oil. There retirement does not look rosy

Thu, 12/17/2015 - 11:35 | 6935154 Government need...
Government needs you to pay taxes's picture

Oldest trick in the book:  Goldman uses its muppet-hunters (they'd be their vaunted sellside analysts) to jawbone/test the lows, at which point their prop desks BUY BYE BYE!  Lamp posts - I want to see some Goldman-logoed Gucci loafers swingin' from em!

Thu, 12/17/2015 - 12:03 | 6935310 Master_Blaster
Master_Blaster's picture

They will make up the price difference in volume....

Thu, 12/17/2015 - 11:35 | 6935156 OilCaptain
OilCaptain's picture

OK?  No.  Laying people off left and right.  Oil is the lifeblood of a healthy economy.  The more it flows, the more macroeconomic activity flows.  This should scare the shit out of you.

Thu, 12/17/2015 - 11:38 | 6935171 boattrash
boattrash's picture

Where's Saddam Hussein when ya need him? He sure as hell knew how to get rid of that excess oil.

Thu, 12/17/2015 - 13:36 | 6935718 Vlad the Inhaler
Vlad the Inhaler's picture

Oil is the lifeblood of the oil industry.  It's flowing now and macro is going to shit.  Which goes to show that consumer demand is the lifeblood of a healthy economy.

Thu, 12/17/2015 - 13:53 | 6935795 boattrash
boattrash's picture

If we were to close that "oil spigot" for two weeks, you might see things differently. If I was operating a business at a loss every fucking day, that's exactly what I would do.

Thu, 12/17/2015 - 16:06 | 6936457 Vlad the Inhaler
Vlad the Inhaler's picture

Saudi can break even at $15/barrel and they are solvent until 2020, so closing the spigot is exactly what they are going to force on US companies.  When it comes to oil we are OPEC's little bitch.  The only way we are going to ever reduce dependence on foreign oil is to reduce our depence on oil period.

Thu, 12/17/2015 - 12:35 | 6935454 Tunneler
Tunneler's picture

Mainly pointing out that this drop in pricing has not spurred demand or economic activity other than people buying trucks when they might have bought a prius.  that's the behavior change - the economy is saved.

Thu, 12/17/2015 - 12:41 | 6935484 RockRiver
RockRiver's picture

Crude slides becuase the dollar is on a f'ing moonshot.

Thu, 12/17/2015 - 12:54 | 6935549 boattrash
boattrash's picture

"Crude slides becuase the dollar is on a f'ing moonshot."

The dollar is a fucking concrete boat.

Inflation is on a fucking moonshot.

Thu, 12/17/2015 - 14:47 | 6936064 Youri Carma
Youri Carma's picture

But an oilless recovery.

Thu, 12/17/2015 - 11:08 | 6934983 arbwhore
arbwhore's picture

"Goldman warns".... 

Thu, 12/17/2015 - 11:09 | 6934984 buzzsaw99
buzzsaw99's picture

the speculators can just store it on paper /s

btw - thanks janet /s

Thu, 12/17/2015 - 11:09 | 6934986 NoDebt
NoDebt's picture

Why would we build all that storage capacity if we never intended to use all of it?

Thu, 12/17/2015 - 11:18 | 6935028 Dr. Engali
Dr. Engali's picture

Shovel ready jobs.

Thu, 12/17/2015 - 11:24 | 6935060 VinceFostersGhost
VinceFostersGhost's picture

 

 

The future....is solar panels.

Thu, 12/17/2015 - 11:13 | 6934999 cougar_w
cougar_w's picture

Someone is gonna blow up. Give it a couple months and there will be blood in the water.

Thu, 12/17/2015 - 11:52 | 6935253 semperfi
semperfi's picture

but the rate hike fixed that

Thu, 12/17/2015 - 11:13 | 6935001 IridiumRebel
IridiumRebel's picture

Lord knows the fucking price won't dip below 2 bucks no matter how low the shit goes.

Set those CDS in motion?

Thu, 12/17/2015 - 11:27 | 6935081 MopWater
MopWater's picture

Where are you at? North central USA has regular unleaded at $1.81 last I filled up.

Thu, 12/17/2015 - 11:41 | 6935186 boattrash
boattrash's picture

Clarksville AR. Reg. Unleaded, $1.67 (Cash price). add .02 if you want to use plastic...

Thu, 12/17/2015 - 11:14 | 6935008 Hohum
Hohum's picture

Prices ARE below cash costs.  Oil extractors just keep getting financed for some reason.

Thu, 12/17/2015 - 13:37 | 6935723 Vlad the Inhaler
Vlad the Inhaler's picture

In real life, cash costs include debt service.

Thu, 12/17/2015 - 11:15 | 6935009 arbwhore
arbwhore's picture

So the world has about 4 days of extra storage (outside of China). 

Thu, 12/17/2015 - 11:15 | 6935012 Ms No
Ms No's picture

It's a complete banker induced oil tsunami, banda aceh style.  The layoffs industry wide will be kicking hard come the new year. 

Thu, 12/17/2015 - 11:15 | 6935014 scintillator9
scintillator9's picture

From almost a year ago:

http://www.reuters.com/article/us-usa-crude-stocks-kemp-idUSKBN0L2299201...

U.S. commercial crude oil stocks last week hit their highest level since 1931 - when the opening of giant oil fields in the United States coincided with the Great Depression to create an enormous glut and sent prices tumbling to just 13 cents per barrel.

 

The rush of new discoveries put an end to the peak oil fears which dominated the industry between 1919 and 1922 (“Petroleum Resources of the World” 1920).

But it also caused prices to plunge from $1.88 per barrel in 1926 to just $1.27 in 1929, $1.19 in 1930 and just 65 cents in 1931, according to the BP Statistical Review of World Energy.

 

Odd how history rhymes.

Thu, 12/17/2015 - 11:18 | 6935027 Mark Mywords
Mark Mywords's picture

Odd indeed.

Great gem you dug up there. I never realized peak oil stupidity had been parroted back then, too.

Deeper I go down the rabbit hole...

Thu, 12/17/2015 - 11:28 | 6935102 Hohum
Hohum's picture

Everything I see indicates net energy from oil extraction (energy put over energy in) peaked years ago.  Contrary information welcome (but not just ideology).

Thu, 12/17/2015 - 11:50 | 6935242 Bangin7GramRocks
Bangin7GramRocks's picture

That's gay!

Thu, 12/17/2015 - 11:37 | 6935167 OilCaptain
OilCaptain's picture

Nice find. 

Thu, 12/17/2015 - 11:20 | 6935021 Battle Beagle
Battle Beagle's picture

Goldmans Business Plan 

Step 1: Leverages Oil Short Positions 100 to 1 

Step 2: Buy A Couple of Tanker Loads of Oil Offshore or From Non Publicly Counted Storage 

Step 3: Flood Official Storage Areas With Oil

Step 4: Release Negative News About Oil Prices

Step 5: Profit When Oil Prices Fall 

Step 6: Repeat    

Thu, 12/17/2015 - 11:20 | 6935026 MopWater
MopWater's picture

Long overpriced SUVs and Pickups.

GM, FoMoCo, and FCA must be licking their chops to sell more 'mericans more trucks to cruise the mall parking lots and show off how rich they are.

Thu, 12/17/2015 - 11:33 | 6935135 Bangin7GramRocks
Bangin7GramRocks's picture

No money down! 120 month 0% loan. Come one, come all!

Thu, 12/17/2015 - 11:19 | 6935031 John Law Lives
John Law Lives's picture

Fedspeak isn't fixing this growing crisis in the oil and gas sector.

Thu, 12/17/2015 - 11:19 | 6935033 Conax
Conax's picture

Storage is full so the price drops.  Ok.

Where will they store all the $20 oil? 

Thu, 12/17/2015 - 11:23 | 6935048 MopWater
MopWater's picture

Hard to ask more money for a good no one wants.

Thu, 12/17/2015 - 11:25 | 6935064 firstdivision
firstdivision's picture

That's when they start to just burn it.  I'm going to position long on some contracts myself as I don't see this lasting much longer.

Thu, 12/17/2015 - 12:39 | 6935479 Tunneler
Tunneler's picture

I sometimes think that's why they decided to start bombing IS oil tankers

Thu, 12/17/2015 - 11:41 | 6935183 Montani Semper ...
Montani Semper Liberi's picture

The oil producers will be forced to cut production when the storage problems eventually backs up to the wellhead.

Thu, 12/17/2015 - 11:44 | 6935198 Doubleguns
Doubleguns's picture

One would assume that enough producers would have shit the bed by then and the remaining producers would just be producing the daily consumption but that means one has to "assume" and we know how that works out....

Thu, 12/17/2015 - 11:59 | 6935290 Montani Semper ...
Montani Semper Liberi's picture

 I know my municipal water system stops pumping from the treatment plant once the storage towers are full, even though they are capable of producing much more.

Thu, 12/17/2015 - 12:17 | 6935366 pemdas
pemdas's picture

Yes, and the same with my sanitary district.

Thu, 12/17/2015 - 11:23 | 6935045 Panic Mode
Panic Mode's picture

The world is shorting ISIS.

Thu, 12/17/2015 - 11:24 | 6935053 firstdivision
firstdivision's picture

Over production just cause loans be cheap leads to bankrupt energy companies and banks holding bad loans...but not to worry us as taxpayers will pay it cause god forbid a bank take a write-down.

Thu, 12/17/2015 - 11:30 | 6935110 MopWater
MopWater's picture

Sounds like a glorious opportunity for some cheap buying by big oil and big banks in the coming months. I had heard a number of the major oil corps weren't in on the oil sands boom...too bad that the oil is so low that they're gonna fold up./sarc

Ahh yes, failure by the many means even greater power, money, and influence by the few.

Thu, 12/17/2015 - 11:26 | 6935077 franzpick
franzpick's picture

And $999 Au, $12 Ag and $30 crude are just days away:

http://m.investing.com/commodities/

Stacking cash to buy more PMs, lower, later - is still working.

Thu, 12/17/2015 - 12:53 | 6935547 pitz
pitz's picture

Whats 'stacking'?

Thu, 12/17/2015 - 11:27 | 6935084 Johnny Horscaulk
Johnny Horscaulk's picture

Unlikely. The Saudis cant take too much more of this, no matter Uncle Sugar's hopes and dreams.

Thu, 12/17/2015 - 11:29 | 6935108 John Law Lives
John Law Lives's picture

If the Saudis are out to crush US shale production, it wouldn't seem to make much sense for them to let up now.

Thu, 12/17/2015 - 11:33 | 6935132 MopWater
MopWater's picture

Keep in mind, Russia is also getting hit by this too. Between cheap oil and the "economic sanctions", they're getting pummeled on multiple economic fronts.

Saudis poison the well and hope like hell they have enough antidote to hold them off longer than Russia and USA shale.

Thu, 12/17/2015 - 11:36 | 6935157 John Law Lives
John Law Lives's picture

Russia claims they will keep on pumping oil even at low prices:

http://money.cnn.com/2015/12/14/news/economy/russia-30-oil-budget/

Thu, 12/17/2015 - 11:47 | 6935226 Johnny Horscaulk
Johnny Horscaulk's picture

They dont have any choice. I *think* us shale is less of a threat to SA than some have made out, i think its mostly the us using them to help the us economy some (transpo costs are sig even if any household excess just goes to mortgage and credit cards) and mostly punishing russia and iran.

But - you might be right and they may figure they can do this for a while...

But all of a sudden they are sinking into Yemen's sands and have a lot less cash in the piggy bank for shit like offshore drilling and desalinization - i dunno... But they are greedy fuckers and they could well begin looking to stop the insanity.

I guess youd have to have a sense of how long they can go so long so low, and I just dont know. But the Yemen thing has to be a drag already now this rumored 100k anti isis (anti assad) army? Mucho dinero.

Thu, 12/17/2015 - 11:41 | 6935189 Panic Mode
Panic Mode's picture

Russia gets hit but it is nothing in the scale of US shale companies.

Thu, 12/17/2015 - 13:45 | 6935751 Rip van Wrinkle
Rip van Wrinkle's picture

Or Saudi. The Russians know hardship....the Saudi's need to keep the lid on the population. One way or another.

 

Thu, 12/17/2015 - 11:27 | 6935089 ersatz007
ersatz007's picture

Pretty sure I read an article a few mojths on ZH that said oil was going to $20.  

Thu, 12/17/2015 - 12:27 | 6935409 vollderlerby
vollderlerby's picture

Today: Crude oil futures down 2% today, gasoline futures up 2.5%. 

Since mid November:  Crude down 15%, Gasoline down 2.3%

Corporate fascism at work, good bye middle class. 

Thu, 12/17/2015 - 11:30 | 6935113 Spungo
Spungo's picture

We could always set the surplus oil on fire. Think of all the jobs it would somehow create.

Thu, 12/17/2015 - 11:30 | 6935114 ghostzapper
ghostzapper's picture

Gonna be a sharp countertrend rally here that is playable.  Where and when is the entry?  I have no clue at the moment.  After that runs its course drifts down to the mid 20's by mid year 424ish gun to my head.  

Thu, 12/17/2015 - 11:35 | 6935155 Dazar Nummers
Dazar Nummers's picture

 

 

 

The beast is laid down in his lair

Thu, 12/17/2015 - 11:37 | 6935165 Panic Mode
Panic Mode's picture

Putin did warn of shale gas bubble few years ago. Obviously, the west has too much ego to listen.

Thu, 12/17/2015 - 11:43 | 6935192 SpanishGoop
SpanishGoop's picture

Yea, we noticed.

Average price $ 7.30 a gallon here in Europe.

 

Thu, 12/17/2015 - 13:46 | 6935756 Rip van Wrinkle
Rip van Wrinkle's picture

In the UK, it's 25 pence a litre....plus 75 pence tax.

Thu, 12/17/2015 - 11:45 | 6935205 numapepi
numapepi's picture

With crude prices so low, wouldn't it make sense for the US government to be filling the strategic oil reserve?

Thu, 12/17/2015 - 11:46 | 6935223 CHoward
CHoward's picture

It would but we're talking about the federal government - they'll wait until it goes up to $150 barrel before they buy.  It's just OUR money. 

Thu, 12/17/2015 - 11:45 | 6935209 GreaterFool1965
GreaterFool1965's picture

Translation:  Go short so we can squeeze the shit out of you, then we'll go short when you panic and cover.  Because our balance sheet is bigger than all of yours combined.

Thu, 12/17/2015 - 12:32 | 6935440 magnetosphere
magnetosphere's picture

100% this

Thu, 12/17/2015 - 11:45 | 6935212 CHoward
CHoward's picture

Prices are down to $1.94 gallon as of yesterday (Delaware).  I'm not complaining.

Thu, 12/17/2015 - 11:55 | 6935265 saldulilem
saldulilem's picture

According to Mike Maloney's playbook, oil is going to $10 (deflation), then central banks are going to Ctrl+P like there's no tomorrow (hyperinflation). I thought it was too fantastic at the time but not anymore in light of recent developments.

Thu, 12/17/2015 - 11:56 | 6935275 commie
commie's picture

This is going to be a drag on Pootin's dreams of world conquest.

Thu, 12/17/2015 - 11:58 | 6935284 Bryan
Bryan's picture

If Goldman is short oil, I am going long.  Guaranteed winner!

Thu, 12/17/2015 - 12:08 | 6935319 Ms No
Ms No's picture

I can't wait to see how they go about ramping oil up the next go round. If there isn't a large war they will come up with something. 

We will get hit from multiple directions at once. Saudi will have shut down the spigots, oil infrastructure will be damaged, our oil storage will be reported full one week and then some fissure will open up and drain the SPR meanwhile ISIS has slant drilled into Gulf storage tanks and disabled their oil level readings under the cover of cloaking devices. Shale will have long been shuttered.

 

Thu, 12/17/2015 - 12:10 | 6935326 arbwhore
arbwhore's picture

CRB has broken hard through 40 year support. Next stop 135 (currently 170). That was previous resistance for last 200 years.

Thu, 12/17/2015 - 12:23 | 6935391 yogibear
yogibear's picture

It's what happens when you kill the economy and demand.

China is still declining. So is Europe.

Thu, 12/17/2015 - 15:14 | 6936158 roadhazard
roadhazard's picture

I <3 realistic gas prices.

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