Kezorm

Why I'm Not Buying Oil's Recent 'Correction'

Quick comments:

Russia just increased export tariffs on crude to $70/bbl. Given the enormous output of Russian crude, this number has got to be part of the equation for calculating a new price floor. After all, $70 is just the tariff.... It does not include lifting, profit, or shipping.

Saudi Arabia and Libya have threatened or promised to slash production if oil fell too far, too fast. Although I do not recall a "strike price" being stated, I'd guess they would defend at $100/bbl or so.

The USA crude oil demand experiences very consistent seasonal variations and we are at the second of two predictable summer minima. From the fourth week of July, till the last week of September, demand traditionally builds. Expect this effect to exert itself, even if other political factors overlap.

Abiotic Oil? It is fascinating that the famous Brazilian prospect called Sugarloaf or Carioca will be the subject of exploratory drilling by Seadrill's West Polaris, on behalf of XOM, HES and PBR over the next year. The particular block being drilled is BM-S-22. The basement structure which is responsible from producing this particular hydrocarbon target is a failed spreading center related to earlier rifting tween SA and Africa. Two miles of salts overlie the old rifting center. See this site: www.searchanddiscovery...
Combine this especially attractive prospect with the recent news about abiotic hydrocarbons found at the Lost City Hydrothermal field, and one is forced to wonder if the massive Brazilian sub-salt reservoirs might be created by inorganic reactions between water and ultra-mafic rocks.

Insiders Preparing for Major Drop in Oil Prices

Forgive this paltry submission to an otherwise worthy pile of messages, but if you look at long term crude oil demand in the USA versus season, there are strong variations and we are at a local minima (third week of July) and set to see demand climb as refiners build inventories and increase demand until the end of September. Surely this is only one variable among many, but didn't the Saudi's, Libyans and other promise or threaten to slash supply if crude neared $100? And didn't the Russians just increase their export tariff to $70/bbl? Another factor is this. IF gasoline prices fell to $3.50/gallon, there would be alot of folks "escaping to Wisconsin" in their SUV's. That is the flip side of destroyed demand - it comes right back if prices fall.