maximax

Whither Canada's Tar Sands?

regarding Woolsey's allegation - there may be some truth in it historically, but i find it rather cynical for an American to claim that KSA wanted the price to crash. They only increased output to late July levels very reluctantly, after heavy international political pressure and a Bush visit.

Analyst: Oil Prices Inflated by 50%

don't know what the price was when that interview was made but cannot agree to the 50% statement base on, say, a $100/bbl price. oil production cost inflation and opec countries' budget inflation as well as expensive tar sands and to some extent biofuels becoming an important supply source have brought up the cost floor to not much lower than we are right now, say $80-90, below that, KSA and tar sands output will react quite significantly.

Should We Listen to Boone Pickens on Oil?

opec lost its ability to keep the oil price within a target range, actually it only had this ability for a short while earlier this decade. however opec can still act to define a loose floor to the price as long as spare capacity is so low and nearly all in opec hands. look at the national budgets of the opec countries, if they are at risk going into the red due to a low oil price then (at the very latest) opec members will decrease quotas.

Just a Commodities Correction - Not the End of the Bull (Part 2)

"We don't have skyrocketing interest rates and double-digit inflation." - we do not have double digit inflation due to changes in the measurement thereof, using the old methodology, inflation would be double digit. Google Shadow Stats for more info.

"According to Merrill Lynch, oil demand growth in the emerging markets has never contracted year-over-year in the modern era." - comments like these kill it for me. So you are writing about oil but do not even seem to have access to consumption stats, you seem to be merely quoting the conclusion of others. That won't go far in the shady sector of oil... and you get it wrong in saying that consumption increases have all been from the developing world. the big consumption jump of 2004 was led by China, but the US came to a rather close 2nd. But the main theme of the article, commodities are just pulling back and will resume, sounds reasonable to me, for oil that is. However that oil pullback could now last a bit longer than the 3-6 months I personally had expected, unless political events necessitate a strong rebound.

Oil: Does Supply and Demand Still Apply?

have to agree with the direction of the comments above. advise the author to take a look at the IEA medium term oil outlook 2008 and review his analysis.

The Crude Reality

going forward, at least near term, heavy sour crudes will see a revival in interest due to KSA stopping fuel oil exports, thus creating a supply gap that refineries elsewhere will have to fill. the cold season is coming up (given crude delivery schedules and production lead times it is already quite near) which is when demand for fuel oil is strong. expect fuel oil refinery margins to increase along the line.

Getting More Constructive on Crude Oil

would not normally respond to such a contribution as I share Jake H's opinion but the author was so far one of the more decent contributors in the energy section of SA. Most of the other comments are pretty much akin to the standards provided in tabloids, I don't want to waste my time with them. One can still be bullish mid/long term on oil even if you believe in global warming and trust in the speedy development of alternative energy generation techniques, in fact some of them will be necessary if we are to get along with the amount of oil we can obtain going forward. Sure, peak oil concerns have been around for so many years, but unless you think that the stuff is infinite, they will be right one day. So no need to force into place solar cycle theories. And keep on thinking that man's activities on earth cannot have an impact on nature/the climate etc. Hope peddling such myths generates generational wealth to whoever does it, otherwise it is just not worth it.

Oil Headlines

Just a hick, hope my response is not too late.

Russia still has a long way to go, but I doubt the political will to max out their production/go beyond 10 Mnb/d, not even getting to the Russians' abilities. So their oil might not run out in a long time, but I don't think they will be doing as much as until recently to cover the incremental demand. There are few places left to find another Ghawar, while it still may be possible, the probability is low enough so that one should not bank on it. Also, new non-Opec discoveries will be a lot more expensive to bring to market than older ones due to rampant cost inflation in the up&downstream sectors. Also, drill ships are booked out for another five years or so, and as a rule of thumb it takes ~10yrs from first oil to exportable production. Consumption in exporting countries is rising rapidly, see e.g. KSA's decision to stop fuel oil exports which will increase demand for heavy crudes as refineries elsewhere will produce more of that stuff.

I cannot comment much about the Pickens plan in terms of viability etc as I am not in power gen, but some diversification of energy sources should not harm, and diversifying energy sources/lowering the US dependence on oil will improve matters for the majority, especially as China is not actually that far ahead of the US in terms of incremental oil demand over the past five years. Beyond that I have no interest in weighing into politically motivated analysis/discussions, other than to expose such contributions here on SA which pretend to deliver sound analysis when they are most likely spam from the political think tanks or the like.

As to abiogenic petroleum, well this is just as with the global warming thing, no, actually opposite. The former has no credible proponents that I know of, the latter has pretty much no credible opponents left (more or less citing the Economist which is not exactly tree hugger's publication). John Egan is not the only one who has to admit that he made a detour to the pits of Oil is Mastery site, from what I remember the cited science there was published in the 19th(!) century. Not that abiogenic petroleum does not exist at all, it is just that the huge quantities of oil man extracts from earth on a daily basis cannot really come from a replenishable source. Ok so let's say oil is infinite... how come we bother about OPEC? Start wars for oil? Is this "oil is limited" thing is just a conspiracy driving up prices? It is not. So why are you worrying about declines in existing fields if oil is unlimited anyway? I quite like this article: www.monthlyreview.org/... - reminds me of that old Greg Palast article on the Iraq war. It may also be just another conspiracy theory, but unfortunately the most credible I have seen. As to sub-$100 oil, I don't want to tie myself too much to oil price f/c, so just my loose expectation: oil will continue to decline near term, say H2 08, but rise in mid term. Bottom? 100 well likely, but not below 80. the quicker prices now fall, the less demand destruction, which will fuel the next ascend.

Oil Headlines

"I think people are starting to realize that the supply is infinite" - lmao, dude you have posted some ridiculous comments here in the energy section, but this one tops them all on the funny scale. what a start to my day... i think i'd be out in no time if i told our clients that oil supply is infinite. keep on rolling, make my day.

A Glut of Petroleum Products

i didn't know that either, and I don't think it is correct, see bottom of tonto.eia.doe.gov/dnav... . So stocks seem to be based on compulsory surveys with a response rate of 98-100%. Now that still leaves the possibility that these respondents themselves model rather than measure the stocks, but that is unlikely, as it is simply easier for a refinery/port/etc to read their meters rather than devise a model. dieuwer, if you have any other serious info, please provide.

Confirmatory Bias and Oil Investing

one particular comment on the IEA cuts demand comment - if you are familiar with the IEA reports you will have noticed the serial correlation of their demand revisions. Their demand forecasts have been ridiculously bullish for a while and people with a professional interest in oil demand foreacsts, well those I know and myself, have doubted the growth rates for a long time, so a downward revision of IEA numbers will probably not be a shock to the market, but rather something that had been seem coming. The standard explanation is that the IEA publishes overly bullish demand numbers to exert pressure on OPEC to open the tabs.

Introduction to a Long Lecture on Oil

fireball - wrong. what a daydream. the US army is the biggest oil consuming entity worldwide. google for some articles by Sohbet Karbuz, he has researched US army oil use.

b pursley - not sure why i still react to your ramblings. not knowing you or m damon personally, i would still put him way above you in terms of ideas and insight, given that he is ex-harvard and roles like mr ripley simply couldnt have been played by a dumbass. but then his quotes relate to his movie character, not him personally.

Speculation, Swaps and the Price of Oil

Dan Walker, this old conspiracy theory that the Fed does what their shareholders want is... well, an old conspiracy theory. Rubbish. JP Morgan et al have no say in what the Fed does.

I just read the linked article. Oh man, academia at its worst. The paper reads like a student essay. Those dudes downloaded some data from Haver and slapped some pretty standard econometrics techniques on it. The citations say a lot about the standing of the authors in this field... newspaper articles and a few seminal econometrics articles that one always has to quote when the methods are applied. The authors seem to have no clue of the oil market. They do not demonstrate any knowledge of the data (most of it would have been freely available at the EIA), statements like "OPEC having only 40% of world production" and the finding that the presence of cointegration between longer term oil futures and oil stocks is evidence for hoarding smack of ignorance. They do not even seem to be aware of the role of middle distillates in the current market, they would at least have to acknowledge it, even if they exclude it in their analysis. But their model is too simple to capture the oil market, as far as I am concerned I will not put any value into this paper's findings.

IEA's Oil Market Outlook: Off the Mark

Karl F - I don't think you got that right with your 2nd point, and I think that the IEA is spot on here. Have a look at the Argus Global Markets newsletters of the recent months, the IEA is hardly alone with this view. Refinery margins for middle distillates are high, but not for the rest, especially fuel oil. But due to a lack of upgrading & conversion capacity refiners cannot produce more middle distillates without processing more crude, thus increasing surpluses of fuel oil etc. The net refining margin is thus under pressure, and refiners need to rely on distillate rich crudes (light sweet), which tightens the WTI-type market, while heavy sour stuff (eg Iranian crudes) are in oversupply. And refinery capacity (=crude distillation capacity) is one thing, but refiners normally only refine if they can do so at a profit. And that is a problem these days, although more complex refineries are having an advantage.

Hey, Congress, Speculators May Not Be the Bad Guys

jcrash - unlikely, given cost inflation in the upstream sector.