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WTI Breaks $98 As Disconnect From Commodity Complex Widens

Tyler Durden's picture


Having tracked each other almost tick-for-tick for much of the last few weeks, WTI crude has disconnected dramatically this week from the rest of the commodity complex. We mentioned the disconnect yesterday and see three potential reasons: 1) Unwinds from long EU risk hedges due to margin calls, 2) the escalation in the Iran-Israel shenanigans, and/or 3) the weakness of the IAEA report. It seems that after last night's dismal macro data from Europe that this is not the sign of growth that so many would like it to be - but has all the consumption-deflationary impetus we have become accustomed to.

Chart: Bloomberg


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Thu, 11/10/2011 - 13:50 | 1866623 GeneMarchbanks
GeneMarchbanks's picture


If anybody would like to explain the action in WTI the last 48hrs I'd be... thankful surprised?

Thu, 11/10/2011 - 13:56 | 1866661 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Peak production of oil happened years ago, and the SPR release coupled by JPM's shorts against their tanker (of the east coast) could only last so long.

Thu, 11/10/2011 - 13:59 | 1866680 GeneMarchbanks
GeneMarchbanks's picture

Appreciate the info but it's not applicable to this schizo action. War rumor? maybe. The technicals are out of whack here and something stinks.

Thu, 11/10/2011 - 14:05 | 1866723 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Thank you for saying so, and it is just my opinion, but why would war spike oil and not gold?  We know that gold is the heart of the economy, and it would be a way for the West to leverage above the East (the East does not have the claimed gold that the Western Central Banks have).  Why would corn, and soy spike otherwise?  Drought, crop failure, and inflation.  We know inflation is pricing in more everyday.  So the main reason for oil's spike is that the fundamentals are once again driving price action.  Supply is the underlying fundamental.  Supply is decreasing.  Price is rising.

Thu, 11/10/2011 - 14:54 | 1866961 data
data's picture

"Thank you for saying so, and it is just my opinion, but why would war spike oil and not gold?"

A number of reasons:

Tanks and planes don't run on gold but  a fighting army does does use a massive amount of petroleum.

A war is likely to affect oil distribution and production.

Iran is the 4th largest oil producer and war would damage its fields and really hurt production

The Strait of Hormuiz  (a major oil chokepoint... 33% of the world's seaborne oil shipments)  could be shut down.

Gold production will be affected very little by war.  Iran is not a significant producer of gold.  Most of the gold production is far away from Iran:

1 China 320,000 2 United States 223,323 3 Australia 222,000 4 Russia 205,236 5 South Africa 197,628 6 Peru 182,390 7 Indonesia 127,716 8 Canada 97,367 9 Ghana 97,197
Thu, 11/10/2011 - 15:02 | 1866993 CrazyCooter
CrazyCooter's picture

I think his point was that if it really was conflict driven, there would be other correlated bets which would also generate gains. So, in absenece of those other bets, war gets marked off the possibility list.

On the contrary side, I see peak oil as a macro issue, or a slow steady upward push in price as production slowly falls behind demand. So I am skeptical that there is some behind the scenes news that isn't public yet driving this trade.

I don't have a horse in this race, but I do appreciate that perspective as I haven't considered it before and certainly will going forward.



Thu, 11/10/2011 - 15:22 | 1867116 data
data's picture

"I think his point was that if it really was conflict driven, there would be other correlated bets which would also generate gains. So, in absenece of those other bets, war gets marked off the possibility list."

It depends on the correlated bets. Those markets can have their own dynamics that obscure the change  or it can be a issue of timing...the change isn't visible...yet.

Which correlated bets are we reffering to?

Thu, 11/10/2011 - 15:29 | 1867147 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You will see, if anyone goes to war with Iran, gold will spike with oil.

Thu, 11/10/2011 - 15:41 | 1867205 r101958
r101958's picture this very good article by Orlov (Nov 5, 2011) that puts it all together.

Thu, 11/10/2011 - 16:12 | 1867328 data
data's picture

"You will see, if anyone goes to war with Iran, gold will spike with oil."

So  you are saying that all modern wars correlate with a spike in oil and gold?

Far more than war affects those prices. These are complex markets with many forces.

What if there is gold price suppression occuring at the same time war is breaking out?

Perhaps that is occuring now and it is limiting our ability to see the future war in the gold price?

Also, think of  gold during the first Iraq War from 2 August 1990 – 28 February 1991. The price movement isn't that heavy in correlation to the war.  The year 1990 with started with gold at $399 and ended at $385.  

In contrast, think of the price drop in gold  induced by  Paul Volcker in the 1980's. That was no outbreak in peace that induced the tumble in gold.  

Thu, 11/10/2011 - 17:25 | 1867730 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Peak gold production happened in 2001, so the price will rise anyway because of supply constraints.  Throw in demand, and the price is rising very quickly, especially considering the massive deflation hitting housing, etc.

But when the world goes to war with a country like Iran (Iran is better equipped than Afghanistan, Iraq) then you will see a spike in gold with oil. 

You will see.

Thu, 11/10/2011 - 15:05 | 1867009 Cdad
Cdad's picture

WTI is now WAAAAAAAY out over the tips of its skis.  

Thu, 11/10/2011 - 14:52 | 1866943 CrashisOptimistic
CrashisOptimistic's picture

This is not religion.  Physicists and Engineers aren't talking about belief.

The underlying reason why oil is not understood is because there are two words of the English language that Economics views as synonomous.

They are "demand" and "consumption".

Economics thinks those two words are the same thing.  Petroleum geologists know that they are not.

It is, and will now be forever, a world where you can want oil and demand oil and be willing to pay for oil, and not get it.  There's not enough for 7 billion people, at any price.


Thu, 11/10/2011 - 20:56 | 1868407 Barbar
Barbar's picture

there was a comment here

Thu, 11/10/2011 - 14:04 | 1866716 ratso
ratso's picture

Peak oil is just another myth that just won't go away.

Thu, 11/10/2011 - 14:06 | 1866730 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Read "The Party's Over" and get back to us.

Thu, 11/10/2011 - 14:16 | 1866775 r101958
r101958's picture

Also recommend 'The Long Emergency' by Kunstler and/or 'Crash Course' by Martenson and/or 'Twilight in the Desert' by Simmons and so forth. I see there are still quite a number of folks out there that need to do some studying about this subject. It is too easy to buy in to all the alternative energy hype being bandied about. All the while not understanding what EROEI is nor the affect it has on our debt based economy and standard of living. Also, too many scoff at the term Peak Oil only because they do not really understand it. It does NOT mean running out of oil. It means peak of oil production (in this case conventional oil).

Thu, 11/10/2011 - 15:06 | 1867021 CrazyCooter
CrazyCooter's picture

Oil 101 by Downey is a must have reference. Read it if you want to follow oil. The breadth of knowledge I have gotten from that book on how the oil industry works (mechanically) is indispensable. He explains refining, API, different types of ships used to carry cargo, you name it.



Thu, 11/10/2011 - 16:03 | 1867314 csmith
csmith's picture

It means peak of oil production (in this case conventional oil).


What does it matter if we've discovered enough gas and gas liquids to last the next 100 years? Swap the systems over to run on gas and we're good to go.

Thu, 11/10/2011 - 16:12 | 1867345 Flakmeister
Flakmeister's picture

Peak oil means peak liquid hydrocarbon production.... conventional vs unconventional doesn't matter...

And no, we have not discovered NG and NGL to run this country for 100 years.... quite listening to propaganda and educate yourself.

You do realize that the US is still a net importer of NG and that peak US NG production was back in 1970? Do you?

Thu, 11/10/2011 - 14:32 | 1866859 Ragnar24
Ragnar24's picture

The Peak Oil crowd always seems to ignore advances in extraction technology and the political motivations prohibiting drilling (which would increase production).  The price mechanism will always be there as well: high prices will encourage development projects in remote regions, which will then bring supply online (forcing a drop in price).

Oil is no doubt a finite resource, but geopolitics, monetary policies, and environmentalism all distort when peak production will actually occur.

Thu, 11/10/2011 - 14:38 | 1866883 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

On Extraction:

Oil is a finite resource, so if you increase extraction then you quicken the depletion.

The House of Saud, the Swing Producer, peaked production in 2009.

Thu, 11/10/2011 - 14:38 | 1866887 Flakmeister
Flakmeister's picture

Agreed... clearly way over his head...

Sat, 11/12/2011 - 14:19 | 1871797 Ragnar24
Ragnar24's picture

Are we not talking about GLOBAL peak oil? Not peak oil for one field?

I didn't realize the Peak Oilers of the 70's anticipated the rig construction TECHNOLOGY or the sky-high prices that would enable Deepwater Horizon to drill some 30 years in the future. I didn't the realize they accounted for advances in computer mapping TECHNOLOGY that found those deepwater reserves. And remind me... did the US government block shallow water wells that would have allowed all that tech to be refined at shallower depths?

And I'm sure that BP's expectations for oil PRICES back in 2000ish had nothing to do with its decision to invest in all that expensive TECHNOLOGY that would ADD to GLOBAL PRODUCTION capacity.

So when i say extraction tech I'm referring to oil sands, deep water, and other "hard to reach locales". Oil producers don't start drilling in the arctic until production has PEAKED in Saudi Arabia -- that doesn't mean there's no oil to extract in the arctic, it simply means PRICE dictates how capital-intensive the extraction elsewhere can be. So no shit Saudi fields are depleted... they've been the easiest places to extract with old technology.

But now producers have to move to more difficult locales, innovate efficient ways to extract it, and prices will rise until the drilling and distribution are justified.

But I'm sure BP went straight to the deepest part of the Gulf merely because it was prettier way out there (or maybe DC/EPA didn't want to see rigs close to shore and so extraction tech hadnt been tested ufficiently at shallow depths).

And is it possible that the Oil embargo of '73 made arctic projects of that day profitable that otherwise wouldn't have been (and therefore ADDED to GLOBAL production capacity)?

Do you not think that once Saudi's are tapped out -- causing prices to skyrocket -- that Americans may decide to tell the EPA to fuck off and we'll see Alaska get drilled with latest advances in tech? But that wouldn't add to GLOBAL production now would it?

Sat, 11/12/2011 - 15:38 | 1872344 Flakmeister
Flakmeister's picture

So many errors, hard to say where to begin....

In fact I am not even sure what is the purpose of the above post...

Sat, 11/12/2011 - 16:47 | 1872420 Ragnar24
Ragnar24's picture

The point was to shut you up so it worked. You can't offer one fact to refute my original argument that forecasts for the DATE of peak oil continue to be revised farther into the future.

Until you can offer a single reason, please refrain from making pointless posts.

Sat, 11/12/2011 - 18:07 | 1872543 Flakmeister
Flakmeister's picture

You are in way over your head.... I suggest you simply STFU before you make a bigger fool of yourself.

An exact date does not matter, especially given the mounting evidence that it is in the rear view mirror....

You are aware that discoveries peaked in the '60's... and we have not had a year where we have discovered more than we have extracted since about 1980....

Sat, 11/12/2011 - 20:28 | 1872638 Ragnar24
Ragnar24's picture

Great! So you agree: we haven't extracted more than discovered since the 80's. Now try to focus here... this is where you need to use your brain...My contention was simply WHY that's been the case.

One more time: i simply argued that DISCOVERIES don't matter as long as they aren't being DEVELOPED due to REGULATIONS/GREENPEACE, TECHNOLOGY, or COST.

If even one of those impediments is removed from the equation, would or would not annual output increase? It's that simple. But I wont hold my breath that you'll be able to offer one intelligent comment that directly addresses that fundamental point.

Sat, 11/12/2011 - 23:01 | 1872932 Flakmeister
Flakmeister's picture

Is your reading comprehension that bad... We have pulled out more than we have found for 30 years despite dramatically increasing the expense and difficulty....

The Tupi find increased developable and proven reserves by about 2%, won't/can't change the peak....

The peak occurs when the outright printing of money cannot increase the supply... Last time I looked that is where we are.

How much do you think has been spend developing new fields in the past decade? What are the time lines?

Go and educate yourself about places like Kashagan, the eastern OCS, the geology of the Bakken and the like and then get back to me....

Sun, 11/13/2011 - 00:17 | 1872989 Ragnar24
Ragnar24's picture

PAY ATTENTION: What do you think would be a cheaper field to develop and distribute in an unregulated, free market world: a land-based ANWR or what we know was the ultimate cost of a Deepwater Horizon rig floating atop 5,000 feet of saltwater with unproven technology (because regulations made even shallow water cost prohibitive)?

THAT is my THE point. BP overspent on the development of Horizon because REGULATIONS pushed them to ultra deep water and away from land (e.g. ANWR) or shallow water. Had regulations not forced production away from easier fields, then the total cost of global production would be far less (particularly after accounting for cleanup of accidents that result from unproven technology that can't evolve from shallow to deep)

And money Printing has nothing to do with supply, it distorts DEMAND.

Sun, 11/13/2011 - 00:54 | 1873126 Flakmeister
Flakmeister's picture

You clearly have no idea what you are talking about....

BP went there because that was the best field they could find, period, end-of-story

Educate yourself.... or go elsewhere. Preferably the former, but if you insist on being ideologically held captive to a wrong position  I'll settle for the latter. 

 The US is the most drilled place on the planet... the oil is gone. Do you know how many rigs are currently in operation?

Sun, 11/13/2011 - 02:23 | 1873235 Ragnar24
Ragnar24's picture

Holy shit. I've given you ample opportunity to educate me. I've encouraged you to do so. Instead you've chosen to repeat almost exactly what I contend: that Horizon was the best field BP could drill.... but after all this you still refuse to address the question of WHY it was the best?

I will say it one final time: my explanation for the WHY is that regulations and geopolitics play an outsized role in which fields get drilled first. The response then is that producers either invent new technology or wait for prices to rise until extraction is profitable with existing tech.

BP applied both responses. It undertook the risks of Deepwater Horizon because ANWR wasn't an option. And one more time: WHY was it not an option? Environmental regulations.

Sun, 11/13/2011 - 11:36 | 1873506 Flakmeister
Flakmeister's picture

Google around, ANWR is not the pancea you are making it out to be.... You are assuming that there is a large amount of oil there...There isn't, turns out it is predominately NG. As an introduction, have you read this

Piss on Wiki if you like, but it is a gateway to the USGS studies if you are so inclined....

It was the best field given that if poking a hole is going to cost $500 million, there had better be a good chance of finding a lot of oil...

You are assuming that there are significant plays in shallower water that are off limits, there are not. The seismic studies point to the lower Tertiary as having the best plays

Here is something recent on the GOM

To put in perspective 28 Gbbl found in the GOM represents 1 year of world demand that will take 30 years to extract....

Here, this came out today

the above discusses what is seen as the basis of the Perry Energy program...follow the links 

The material is there, I cannot spoon feed you....


Edit: Here is a post from an insider at NA link above


In following the theme of a broad over view I’ll offer my personal perspective of exploration of conventional reservoirs in the Gulf Coast Basin. I’ll not focus on the numbers either. HO and others have painted that canvas quite well. Instead I’ll stick with the business side of drilling. In the end it doesn’t matter what potential reserve numbers are tossed out if the wells needed to develop that oil/NG aren’t drilled. And remember I’m just talking about conventional reserves.

As many know my privately owned company drills only conventional oil/NG targets in the onshore/offshore shelf in the Gulf Coast. We’ve drilled about $300 million of wells in the last 3 years. All of those prospects were generated by other companies. It takes many years to establish a prospect generating shop and put a viable drill program together. We didn’t want to take the time.

There is a whole subset of companies that don’t actually drill the prospects they generate. We call them “promoters”. They employ the staff: geologists, geophysicists, engineers and landmen. They buy $millions in seismic and spend $millions more leasing the prospects. Often this effort leads to dead ends: a lead doesn’t mature to a viable prospect or, even if it does, the leases can’t be acquired for a number of reasons.

Then my cohorts and I evaluate all the prospects that fit our business model. The trade when we buy such a deal: cash to cover actual expendatures such as seismic and leases, some more cash to cover their overhead and the “promote”. Typical promote is “third for a quarter”: I pay 1/3 of the cost to drill the well but only earn 25%. In essence the generator gets 25% of the well drilled for them at no cost. If it’s a dry hole they haven’t lost any money but have covered all their cost, including their salaries, and made a little cash. And if that $8 million well that they didn’t risk a penny to drill nets $80 million they get $20 million in “mail box money”.

The take away is that there is a great incentive for a promoter to do his thing if there is a market for his prospects. With current high prices there is a good bit on incentive. Yet come 31 December I’ll turn back about $40 million of my budget due to a lack of prospects to drill. Texas has more prospect generators than the rest of the world combined. Given the unique nature of ownership of minerals rights in the US we have many times the number of promoters in Texas as the rest of the world. Every promoter in Texas and La. knows my company and the big fat checkbook we have.

And we can’t find enough conventional prospects to drill. That should give some sense of what little conventional reserves may be left. We’ve actual begun our own prospect generation effort in the offshore GOM shelf. Bought $10 million in 3d seismic out there and will pull together some consultants to work it. Once the govt cut back on the permit prcess the promoters that worked offshore cut back their efforts significantly. They weren't going to invest 100’s of $millions with the uncertainty of when they might get leases/drilling permits. Even our efforts will focus solely on prospects that can be drilled from existing platforms…permitting new platforms takes even much longer. Even with that hedge we don’t expect our drilling effort will be in full swing until 2013.

Yes: there are conventional oil/NG reserves left to develop in this country. Just not nearly as many as were drilled to generate our current production. This fact is THE reason the public oils are going after every shale play they can…they have no choice. There aren’t enough conventional prospects left to support half the companies in the oil patch IMHO. The public companies have to replace their produced reserve or their stocks take a hit from Wall Street. They would much more prefer to drill for the prospects my company goes after: we make 2 to 3 times the profit many of the shale players do even with relatively low NG prices. Though their profit margin would be better most couldn’t begin to replace their reserve base. Some folks dislike the public oil companies but without their efforts we wouldn’t be seeing the gains in US production without their desperate attempts to support their market caps.

My company would be more than glad to drill the unconventional plays…Once oil and NG reach sustained prices of $150/bbl and $10/mcf. The question still remans though: can the economy sstain such costs?

Thu, 11/10/2011 - 14:43 | 1866905 r101958
r101958's picture

Good post. Technology does help however, one might ask why conventional production has not increased in current active fields with all this new tech. Also, new tech increases EROEI. We might also ponder the following; if there is so much oil available, why are we drilling 5000 ft under the floor of the GOM? Why are we talking about drilling in Antarctica? I agree that leaving energy policy in the hands of the pols in D.C. is about as intelligent as......well, leaving the economy in the hands of the pols in D.C.

Thu, 11/10/2011 - 14:58 | 1866978 EnglishMajor
EnglishMajor's picture

I bet you also really like those fracking commercials about "getting America back on track".  We will be sure to let all of the ex military psy-ops guys who now work for the natural gas industry know.

Thu, 11/10/2011 - 15:26 | 1867131 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Natural gas will never replace crude. 

Thu, 11/10/2011 - 15:34 | 1867169 ffart
ffart's picture

I notice the peak oilers always come out whenever something related to our horrible political system or mismanaged economy comes out. It's almost like they're paid shills that are trotted out to take people's attention away from how utterly destructive to our standard of living government has become.

"The money supply has tripled in the past 3 years, and now there's threats of war and capital controls all over the planet. Obviously commodities are skyrocketing because production has peaked and not because of the fucking HORRIBLE state of our economy and how debased our currency has become."

Thu, 11/10/2011 - 16:02 | 1867306 Flakmeister
Flakmeister's picture

The reason we come out is that if the only people posting here were clueless asshats like yourself we would be even worse off than we are...

Consider it a form of community service on our part....

Thu, 11/10/2011 - 14:03 | 1866701 Testudo321
Testudo321's picture

Maybe plans to bomb/invade Iran are in final stages...


Thu, 11/10/2011 - 14:18 | 1866782 CPL
CPL's picture

The oil sands are out of diesel...again.  With no pipeline in place that how oil is getting transported.


Basically the price hike is to pay for the pipeline.


Told you guys a week ago.  $167 per barrel is the target.

Thu, 11/10/2011 - 15:08 | 1867035 CrazyCooter
CrazyCooter's picture

I have been thinking 150+ for almost a year now. It won't happen until there is an "event", but because of production/consumption tension I don't think the price comes down after the event; its going to ratchet up and stay there.



Thu, 11/10/2011 - 15:14 | 1867060 CrazyCooter
CrazyCooter's picture

Oh, I looked but didn't find your previous post on oil ... if you have it handy I would read it ...



Thu, 11/10/2011 - 14:45 | 1866919 Oilbug
Oilbug's picture

increased rail capacity was opened up from the Bakken to gulf coast refineries, the gap should narrow between WTI and Brent as more Bakken oil can be sold into the brent market as opposed to the WTI market

Thu, 11/10/2011 - 13:47 | 1866630 slaughterer
slaughterer's picture

War, simple as that.  Premonitions of WW III.  

Thu, 11/10/2011 - 13:52 | 1866645 Oh regional Indian
Oh regional Indian's picture

Probably true.

Tomorrow is definitely acharged date. 11/11/11

We shall see, eh?


Caveat Emptor

Thu, 11/10/2011 - 14:00 | 1866685 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You will know war is approaching when crude and gold spike together.  Until then, it is based on supply/demand and the raging inflation that is consuming the world.

Thu, 11/10/2011 - 15:18 | 1867080 Oh regional Indian
Oh regional Indian's picture

Mr LH, war is already here. Look what Gold has done since Late 2001. And oil?


Thu, 11/10/2011 - 15:21 | 1867106 Flakmeister
Flakmeister's picture

Golds bottom was about $250.... Oil was about $6.... oil is up 20-fold, gold is up 7-fold....

Thu, 11/10/2011 - 15:27 | 1867136 Oh regional Indian
Oh regional Indian's picture

I'd say that tells us we've been at war, no? A continuous war in a booming economy, oil leap-frogged on that massive consumption surge. 

Now an expanding war will take over the deflating connedsumer.


Thu, 11/10/2011 - 21:57 | 1868550 UP Forester
UP Forester's picture

Booming economy?

Oh, right, the Afghani-Dubai-Mexico-U.S. Heroin economy.

Thu, 11/10/2011 - 14:03 | 1866687 LawsofPhysics
LawsofPhysics's picture

I agree.  Humanity has, once again, gotten ahead of it's own potential.  Time to thin the herd or allow all assets and labor to be simultaneously marked to their true value.  Now what do you think TPTB want to happen?

Thu, 11/10/2011 - 13:49 | 1866637 SheepDog-One
SheepDog-One's picture

Jerusalem Post last nite says attack in Iran is imminent. 

All this stock market crap will suddenly not matter at all one morning when the US gets EMP'd. Boom, lights out.

Thu, 11/10/2011 - 13:57 | 1866667 blu
blu's picture

Dust of yer bicycle. But what you really need in the Mad Max age is one of these:

50 cal BMG optional, but highly recommended.

Thu, 11/10/2011 - 14:00 | 1866682 Withdrawn Sanction
Withdrawn Sanction's picture

+161.8  mpg

Thu, 11/10/2011 - 13:59 | 1866675 Hephasteus
Hephasteus's picture

UN says they want to negotiate a non military fix.

Constantly being threatened and negotiated under duress. And people wonder why they call it a criminal gang organization.

Thu, 11/10/2011 - 14:01 | 1866691 LawsofPhysics
LawsofPhysics's picture

Yes.  Perception is everything, nothing actually has to change.

Thu, 11/10/2011 - 14:43 | 1866904 Floordawg
Floordawg's picture

Operation Opera part II... and thats all that will happen. EMP? Lets keep it real.

Thu, 11/10/2011 - 13:50 | 1866639 Belarus
Belarus's picture

With the WTI nearing $100, good luck to the Berank coming to the resecue anytime soon. On the other hand, we still have 1.5 trillion in stimulus spending a year. 

Thu, 11/10/2011 - 14:01 | 1866693 SheepDog-One
SheepDog-One's picture

Counted as 'GDP component', laughably.

Thu, 11/10/2011 - 14:07 | 1866733 tmosley
tmosley's picture

What do you mean?  He's got all his fingers and toes and his dick in holes in the dike.  He just isn't saying anything about it.  He's put up a sheet so you can't see him.  But you can see through it by looking at the money supply.

Thu, 11/10/2011 - 14:19 | 1866790 CPL
CPL's picture

One year target is $167.


However the market will tank badly long before that.

Thu, 11/10/2011 - 14:26 | 1866833 r101958
r101958's picture

The other interesting aspect of all this is that RBOB (gasoline) price has disconnected from Oil price which may indicate that price suppression/manipulation has moved from WTI to RBOB. Two facts; 1-up until last August(2010) WTI and Brent were very closely aligned; 2-Up until very recently, RBOB price movement has been closely aligned with the WTI/Nymex price movement. As an example of the 'new' trend: today WTI up 2.24%, RBOB up 0.06%.

Thu, 11/10/2011 - 15:19 | 1867093 flattrader
flattrader's picture

FWIW Monday morining (US time) I heard on BBC World News mid-day (London) that the price of gasolin in the US was expected to go to $4 a gallon this winter because US refiners were concentrating on diesel production for sale to South America at premium prices.


More likely than not is is to fuel the war machine.


Thu, 11/10/2011 - 13:56 | 1866648 scatterbrains
scatterbrains's picture

coming back into line with historic Brent spread maybe... but why all of a sudden?

Thu, 11/10/2011 - 14:32 | 1866857 r101958
r101958's picture

Costing TPTB too much? Also, an above poster may be correct about the SDR release affect wearing off. However, after watching this for a loooong time, I believe the manipulation has moved to RBOB - perhaps less expensive?

Thu, 11/10/2011 - 13:53 | 1866649 blu
blu's picture

Damn those heathen speculators.

And just as the northern winter is revving up.

Long whale oil and oakwood.

Thu, 11/10/2011 - 13:54 | 1866651 slaughterer
slaughterer's picture

11DEC price target on WTI is $125.  The Squid is pumping this target through their client valves.  

Thu, 11/10/2011 - 13:55 | 1866656 Dick Darlington
Dick Darlington's picture

Ah, hello "transitory" inflation, my old friend!

Thu, 11/10/2011 - 13:58 | 1866671 blu
blu's picture

No no you have it wrong. These days we call that a glitch.

You know, like how the Glitch Stole Christmass.

Thu, 11/10/2011 - 14:02 | 1866694 Dick Darlington
Dick Darlington's picture

Does this belong to the same glitch family as the german and irish glitches where all of a sudden the states discover billions from the couch?

Thu, 11/10/2011 - 13:58 | 1866659 Cdad
Cdad's picture

There is a fourth possibility.  The Street is getting massively short equities here, especially in consumer discretionary stocks [many of which are STILL priced for stupid], and they are looking to put the last nail in that coffin with rising gas prices.  This as they simultaneously dump US oil EnP stocks that have moved dramatically during this rumor rally.

We have been here before.

Thu, 11/10/2011 - 13:58 | 1866672 SheepDog-One
SheepDog-One's picture

AF assless jeans arent bought hand over fist this time of year....time to stuff the channel on those 'consumer discretionary' stawks.

Thu, 11/10/2011 - 14:03 | 1866705 slaughterer
slaughterer's picture

Instructions for all ZHers

Short the following:





thank me in a month.


Thu, 11/10/2011 - 14:08 | 1866735 tmosley
tmosley's picture

No thanks.  What if our brokers pull an MF Global?

Thu, 11/10/2011 - 14:21 | 1866800 CPL
CPL's picture

Exactly, ETF's are nothing but risk right now.


Unless holding for ten minutes and doing swing trades.  There is nothing worth putting a penny into.

Thu, 11/10/2011 - 14:53 | 1866951 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

ETFs are shit.

Thu, 11/10/2011 - 14:37 | 1866886 SilverIsKing
SilverIsKing's picture


Thu, 11/10/2011 - 14:53 | 1866957 CPL
CPL's picture

Don't waste your time looking for it.



Thu, 11/10/2011 - 15:00 | 1866987 r101958
r101958's picture

That is what the Bernank is doing to all of us.

Thu, 11/10/2011 - 14:03 | 1866708 Raymond Reason
Raymond Reason's picture

Probably the most likely possibility.  It's rigged, like everything short term. 

Thu, 11/10/2011 - 13:56 | 1866662 DaMule
DaMule's picture

What about gold. Is it tanking today for the same reasons??

Thu, 11/10/2011 - 13:57 | 1866669 Vaiman
Vaiman's picture
Merkel Greek Gambit May Backfire   Bloomberg


And the market keeps on in it's little rally mode obviously oblivious to this latest news!

Thu, 11/10/2011 - 14:00 | 1866684 SheepDog-One
SheepDog-One's picture

For the moment anyway. One of these hours someones going to hit the escape button and send the whole house of cards imploding.

Thu, 11/10/2011 - 14:00 | 1866674 walküre
walküre's picture

If there's war, oil to the moon. The rest goes into the crapper. Nobody will be able or will want to afford anything.

Go short everything across the board except oil and energy related stocks. Gold won't play out either.

Thu, 11/10/2011 - 14:07 | 1866732 Raymond Reason
Raymond Reason's picture

Gold won't play out?  What are they going to use as a medium of exchange for oil and bombs? 

Thu, 11/10/2011 - 14:14 | 1866766 walküre
walküre's picture

What they've always used. Stone cold cash. Bundles of it. The financiers (lenders) of war are making cash loans to both parties of the fence and in return get paid in cash, lots of it. The lenders may convert the cash to gold or take gold from bankrupt nations as collateral but it won't have much effect on the net purchases of gold.

Thu, 11/10/2011 - 14:22 | 1866804 CPL
CPL's picture

Print print print

Thu, 11/10/2011 - 14:57 | 1866972 walküre
walküre's picture

Who? Israel or Iran? Who cares?

The US and Europe won't print. They will confiscate.

Thu, 11/10/2011 - 14:23 | 1866811 The Deleuzian
The Deleuzian's picture

If oil spikes...Gold spikes, it's wartime...Volatility is what really goes berzerk...Headlines this, headlines that....

Thu, 11/10/2011 - 13:59 | 1866676 The Deleuzian
The Deleuzian's picture

One of those days..."Gold can't be there so Let's put it here" days for sure...

Dollar down...Gold Down...Equities up...Oil up...Mixing it up!

Thu, 11/10/2011 - 14:00 | 1866678 Bam_Man
Bam_Man's picture

$100/barrel next stop!

Must be a sign of global economic "recovery".

Couldn't possibly be a sign of a brutual and persistent "stagflation". Right?

Thu, 11/10/2011 - 14:00 | 1866681 NEOSERF
NEOSERF's picture

I hate the stock is completely decoupled from fundamentals, at the company, federal and world is a like a epileptic drunk with Turretts...

Thu, 11/10/2011 - 14:04 | 1866710 TradingJoe
TradingJoe's picture

4) how about some good old SPECULATION, eh?!?!

Thu, 11/10/2011 - 14:21 | 1866803 walküre
walküre's picture

Joe, that's absolutely plausible.

Also blatant manipulation to give the Bernank and Fed cover NOT to inject any real liquidity into the economy.

See, they've done QE1 and QE2 because not all of the 1% had the memo that markets would crash in 2008 and their networth would suffer substantially. So Bernank gives THEM 2 years to put their houses in order but now the time is up and there won't be further injections.

Now the world is allowed to starve. You should listen to some of these uber wealthy. They've felt for a long time that the people had become too lazy and asked for too much. How do you think the elite feels about people challenging THEM in their status quo which by the way has been for the most part inherited from piracy, theft, corruption and war profiteering?

The 1% needs to be chopped. The system needs to be allowed to restart from the top down.

Thu, 11/10/2011 - 14:04 | 1866715 Bam_Man
Bam_Man's picture

No stagflation to see here. Move along!

Bond vigilantes must be salivating at the profits-to-be-had shorting US Treasuries from these levels.

Thu, 11/10/2011 - 14:37 | 1866885 tarsubil
tarsubil's picture

Peak government.

Thu, 11/10/2011 - 15:03 | 1866997 azusgm
azusgm's picture

It's a reroute, not a cancellation.

That stuff should be refined in Alberta, not Texas and piped out as refined products.

The pipeline is set to run from north to south in East Texas. There are lots and lots of pipelines around here, but this one may be used to set a new course for that TransTexas Corridor that Rick Perry promised his buddies.

Thu, 11/10/2011 - 15:21 | 1867099 CrazyCooter
CrazyCooter's picture

Perry only has three buddies ... Larry ... Moe ... and ... Uh ... Uh ... Larry ... Moe ... and ... Uh ...



Thu, 11/10/2011 - 19:10 | 1868124 Augustus
Augustus's picture

Peak Government is exactly correct.

There is no particular difference in running refined products or crude through the pipe.  Let us have the asset base and profits increased in the Lower 48, rather than in another foreign outsourcing.  However this cancellation is typical of the O'Bama plan of skyrocketing energy prices.  Just delay, postpone, delay, postpone, delay, , , , until the applicant gives up.  This pipe has only been studied by the govt. for over three years.  What $$$$$$  investment is sitting in this proposal to date?  And the nutters question why investments are going elsewhere?

Thu, 11/10/2011 - 14:20 | 1866793 PulauHantu29
PulauHantu29's picture

$160 oil sayeth GS...$220 predicteth Nomura.

If NATO invades Syria (or Israel attacks Iran), Nomura's will be an underestimate.

Thu, 11/10/2011 - 14:20 | 1866794 pmcgoohan
pmcgoohan's picture

Oh dear. Bullshit rumours about large bailout for Italy now. Has the big money changed sides again?

Thu, 11/10/2011 - 14:25 | 1866826 walküre
walküre's picture

Use the rumors wisely to place your shorts would be my advise.

There's no bailout large enough to support Italy. Germans won't pay for Greece, you think they pay for Italy?

The way I see it, the rumors are there so the smart money can offload their crap to the dumb money.

Thu, 11/10/2011 - 14:29 | 1866848 pmcgoohan
pmcgoohan's picture

I would if I wasnt already maxed out. The real test will be whether it drops back 100% when this guff is debunked, or just shaves off 25% as per the net positive rumour mill over the last month.

Thu, 11/10/2011 - 16:22 | 1867375 citrine
citrine's picture

Given that January contract is trading lower than December (active) one, which expires in a week, this seems like a very reasonable explanation.

Thu, 11/10/2011 - 14:21 | 1866797 AndrewCostello
AndrewCostello's picture

I'm deeply concerned about the huge disconnect in general between real commodities and the paper market.  People fail to understand how few real resources there are.



Thu, 11/10/2011 - 15:09 | 1867039 CPL
CPL's picture

Don't be concerned, just prepare.


If your fellow man is too dense to see with their eyes and listen with their ears, then fuck'em.

Thu, 11/10/2011 - 14:24 | 1866818 adr
adr's picture

Even is oil production became marginally harder it cannot explain the massive jump over the past five years. $20 to $40 a barrel, maybe. Massive consumption in China, yeah maybe $40 a barrel. There has not been nor can there ever be any demand based fundamental to put oil over $40 a barrel outside a complete supply disruption, which we have not had.

Even with the massive "increase" in Asian demand, which has actually been soaked up by lessened western demand, we still have an oversupply of world oil. So much so that massive tankers are still anchored offshore and our storage facilities are overflowing with oil. Demand for an actual use of the commodity is not the culprit. The culprit is the demand for use of the commodity as a profit generating hedge.

Speculators are 100% to blame for oil being at any level above $30 a barrel. You can make part of the argument that the government gave the speculators the tool they needed in the form of printing trillions of dollars to run the price up, but that still doesn't excuse the argument that oil demand can't even begin to justify the price. Oil doesn't need to be used as a speculative tool, and the price can be brought down to reality in less than one day if small changes are made in the way of margin and contract transfers. Simply forcing contract holders to take delivery of oil would drop the price to less than $50 in one hour. Putting a contract transaction tax could cut speculation in half as well.

If we truly had a problem with supply it would be very difficult to fill up at any one of the thousands of gas stations in the region. It truly is amazing that in five years during this massive unprecedented spike in supposed global oil demand I have never come across a gas station that was out of gas or had mile long lines like the Arab embargo crisis. Even without building a single new refinery in 30 years I can still go pump 100 gallon at any gas station and not even have to worry.

To make a counter argument against the fact that oil is heading to $100 due to speculative bets in order to realize immediate gains on contracts held is simply moronic. How about we wait and see if anything is going to happen before we decide that oil should be at $150 a barrel because something might happen. The day the first Goldman Sachs commodity trader gets thrown out of a 20th floor window is the day the world finally turns for the better.

Idiots fucking riot because a football coach gets fired but they don't do anything to stop corporate traders from repeatedly fucking everyone on planet Earth up the ass. Maybe if we start some rumors about Blankfein keeping little boys in his closets. Hell you know that guy probably has little boys shipped from Asian islands to his many homes for playtoys. If a story broke that Blankfein liked to lube up 7 year old boys, I'd say what is that supposed to be news.

Thu, 11/10/2011 - 14:30 | 1866852 walküre
walküre's picture

I like the way you think.

However, consider the increased cost of getting oil out of the ground?

The last 10 years were a massive speculative oil game, combined with super low interest rates resulting in a gigantic and epic debt bubble.

Incomes haven't kept up to support oil at these levels which is why credit is through the roof. In reality 50% of the population couldn't afford to drive anylonger if it wasn't for credit cards.

Imagine where that would have put output of cars, prices of homes and everything else over the last decade!

Thu, 11/10/2011 - 14:56 | 1866967 r101958
r101958's picture

(sarc/on)....and, of course, it has nothing to do with the world burning through 33 Billion brls of oil each year. Nope not a thing.........(sarc/off)

Thu, 11/10/2011 - 15:03 | 1866999 aerojet
aerojet's picture

I agree, I think every commodity is overpriced due to speculative activity and will eventually crash once these fuckstick traders are unable to get their hands on anymore funny money from the Fed printing press.  Everything has an end.

Thu, 11/10/2011 - 14:47 | 1866928 Flakmeister
Flakmeister's picture

Ah fuck, quit with the warm fuzzy shit and take notice that since 2005 that the amount of oil available on the world markets is down about 10%...

Now go back to sleep, you seem to be enjoying your dream.

Thu, 11/10/2011 - 15:03 | 1866992 CrashisOptimistic
CrashisOptimistic's picture

What does marginally harder mean?

Have you yet figured out that trading is not what oil is about?

It's about life.  You don't get oil, you die.  If there is just 1 barrel too little of it, people die, and no one volunteers to be that person.  The bidding has no ceiling for that 1 lousy barrel.

There is almost no slack in oil.  If you want to live, you burn oil.  It takes oil to plant food, spray insecticide and harvest food.  Be one 42 gallon barrel short and an acre rots in the field.  If your family needs that acre of food, you'll bid til you get it that barrel.

You don't understand that oil is not about trading.  It defines civilization.

But you will.  Soon.  You'll drive to the grocery store to see empty shelves.  Then you'll understand.

Thu, 11/10/2011 - 15:05 | 1867012 aerojet
aerojet's picture

You need to figure in inflation (all the dollar "printing" easy money spigots that shops like Golman have first access to), but otherwise you dead on.  Not a demand-driven market in commodities.

Thu, 11/10/2011 - 15:06 | 1867017 sdavis
sdavis's picture

Billionaires may store their wealth in the form of oil tankers, much as governments store wealth in the form of gold bars, and the smart people store their wealth in the form of gold coins. Tankers off shore mean only that there is a bit of oil to be sold at $150 dollars. 

It costs about $10/barrel a year to store oil in a tanker. You need to be very sure that the price of oil is going to go higher if you want to profit from that. In my opinion, many tankers full of oil parked off shore is a very bullish sign. Rich people think oil is going up - these are the same rich people that rull the world.

 However, are their really bunches of tankers just sitting out there?

Thu, 11/10/2011 - 15:13 | 1867048 Flakmeister
Flakmeister's picture

Dingleberry, the tankers are sitting there because net oil exports are down ~10% since 2005 while tanker tonnage has increased..... More boats and less oil, take a look at the earnings in the tanker cos. over the past few years.

Take a close look at NAT....

Thu, 11/10/2011 - 15:17 | 1867079 Flakmeister
Flakmeister's picture


Thu, 11/10/2011 - 17:35 | 1867780 blunderdog
blunderdog's picture

There has not been nor can there ever be any demand based fundamental to put oil over $40 a barrel outside a complete supply disruption, which we have not had.

Where'd you learn this?

Thu, 11/10/2011 - 19:17 | 1868146 Augustus
Augustus's picture

It was written on the toilet wall in the truckstop outside of West Memphis.

The cost of production will tend to eventually limit the downside price of the commodity.  It does not limit the price on the upside when producers are limited by government in the amount they can produce.  The fellow has never been to an estate auction.  If anyone thinks the white haired ladies there buying table clothes are speculating when they bid it up, they are nuts.

Thu, 11/10/2011 - 22:00 | 1868558 blunderdog
blunderdog's picture

Based on your reply, I'd infer that you don't think the previous poster has access to sufficient information about every facet of the oil market to be able to unilaterally declare "the price" of the commodity.

I'm not a PhD in economics, but my understanding is that in the supply/demand model, "price" can only technically be a historical datapoint based on a transaction that has occurred in the past, so the idea of the "current price" itself is inherently a bit problematic.

Still, if the guy'd gotten an email from God or something with the "real" oil price in it, I'd want to know.

Thu, 11/10/2011 - 14:32 | 1866860 Skunkmonger
Skunkmonger's picture

"The first train with Bakken crude oil shipments embarked on Monday from the newly completed Bakken Oil Express terminal near Dickinson, North Dakota, Lario Logistics said on Wednesday."  The Brent WTI differential is going to disappear.

Thu, 11/10/2011 - 14:48 | 1866935 Flakmeister
Flakmeister's picture

Yes, the spread is going to vanish... stay away from the Mid-continenet refiners that have feasted on the artificially wide crack spreads....

Thu, 11/10/2011 - 19:19 | 1868152 Augustus
Augustus's picture

That is one of the best reasons for WTI to be up in price.  It will soon be much closer to the world price = Brent = move up.

Thu, 11/10/2011 - 14:54 | 1866916 Flakmeister
Flakmeister's picture

Not surprising....

All this verbal bantering and kvetching over WTI and *nobody* points out that "Total Commercial Inventories of Petroleum products" was down 15.3 million barrels last week....

 That is a fucking huge points to Americans being priced out of the available net exports on the market...

Sort of flies in the face of "God granting the USA the right cheap gas until the end of the universe"

Thu, 11/10/2011 - 14:55 | 1866965 walküre
walküre's picture

What is the cost of gas in China?

Don't be a fool.

Thu, 11/10/2011 - 14:58 | 1866979 r101958
r101958's picture

What is the cost of gas in Europe...?

Be a fool.....

Thu, 11/10/2011 - 15:21 | 1867105 walküre
walküre's picture

Europeans can afford the high cost of gas, so can Americans.

Chinese get cheap gas because that's all they can afford. Look at gas prices in any shithole around the world, some don't even have local refineries and the price of gas is lower. Why? Because oil companies know what their customers can afford and will sell at that price. Some government subsidies and intervention granted as well.

Oil companies as well as governments are using the American and European consumer as their personal piggy banks. They charge whatever they can get away with.

Thu, 11/10/2011 - 15:37 | 1867183 r101958
r101958's picture

It is called 'subsidized' in China.

Thu, 11/10/2011 - 15:00 | 1866986 aerojet
aerojet's picture

How exactly are Americans priced out?  That doesn't make any sense.  Are you saying that the Chinese are willing to pay more for oil than Americans? 

If US inventory fell by 15.3mm barrels, and Americans aren't using more of it (e.g. it is not a demand-led situation) then what that says to me is that suppliers are having a hard time finding credit to maintain inventories and are trying to get by with less on hand.  It sounds like a dangerous precedent, quite frankly.  That still doesn't explain the price spike. 

The spike has to be due to Israel/Iran saber rattling, and that is just another nasty market manipulation going on.  The US is not recovering, demand is not recovering, Europe is teetering on the brink, so we get some Zionist assholes to go threaten Iran again so their buddies can clean up in the commodities market with oil. 

Thu, 11/10/2011 - 15:08 | 1867029 Flakmeister
Flakmeister's picture

You clearly have no understanding about consumption patterns in the US and in the BRICs.

Thu, 11/10/2011 - 15:09 | 1867030 CrashisOptimistic
CrashisOptimistic's picture

You don't understand.

"what that says to me is suppliers are having a hard time finding credit to maintain inventories . . ."

Suppliers' inventory is 5 miles down and no credit is required to maintain it.  An above ground tank is not maintained by "suppliers".  That tank fills and empties several times a week.  Suppliers don't give a shit about it.

And yes, btw, the Chinese ARE willing to pay more for oil than the US.  They pay 100% Brent or higher.  A portion of US refinery input is priced at WTI, which is presently the only blend in the world even remotely under $100, and it's the least used.  Only a few hundred K barrels/day of WTI comes out of the ground.  It's all been burned up.  It's an obsolete measure.

Thu, 11/10/2011 - 14:56 | 1866968 aerojet
aerojet's picture

Wouldn't margin calls run the price down?  People need to sell, there are not enough buyers, so the price tanks until it finds demand?

Thu, 11/10/2011 - 15:08 | 1867033 0cz
0cz's picture

"We're all going to get rich during this war"

Thu, 11/10/2011 - 15:18 | 1867087 dereksatkinson
dereksatkinson's picture

Gold sold off because it's rallied $200 in a very short period and hit resistance at 1800.  We need a few down days.  No biggie.

Thu, 11/10/2011 - 15:41 | 1867206 Goodluck Jonathan
Goodluck Jonathan's picture

Replace WTI with Brent, Cushing pricing is not reflective of global crude.

Thu, 11/10/2011 - 17:02 | 1867606 dcb
dcb's picture

so I have had no problem buying wti as the spread between that and brent is so huge i had to narrow, Now I don't know how bigh this is, but i agree the current action is a bit nuts. thinking all of those who bet on the spread increasing are buying? any other ideas?

Thu, 11/10/2011 - 20:24 | 1868321 dcb
dcb's picture

i was plotting out the weekly charts, and I'd be very carefull here!!!!

Thu, 11/10/2011 - 22:41 | 1868626 mcarthur
mcarthur's picture

The IEA bombshell of $150 oil vs hedge fund pumping of copper to $3.50 is the difference here.  I would not touch metals right now but I do like taking the Hummer to get groceries and not the local bus.

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