Posted on 02/03/2016 1:11:36 PM PST by bananaman22
Oil speculators spent the latter half of 2015 with an incredibly pessimistic view of the trajectory for oil prices. Speculators piled into short positions, pushing net-shorts to multiyear highs.
But speculators are at a bit of a crossroads at this point. With oil down to $30 and below, a growing number of hedge funds and other major investors are starting to wonder whether or not the selloff has gone too far. To be sure, oil markets are still suffering from too much supply, but with so much production around the world unprofitable at today’s prices, a rally will have to come eventually. While there are differing views on where oil goes from here, more and more speculators are starting to take long positions.
Crude prices fell back to $30 at the start of February, erasing some of the gains posted over the past two weeks. Still, the FT reports that speculators have formed a record level of long position for Brent crude, equivalent to 360 million barrels.
(Excerpt) Read more at oilprice.com ...
I think they had an overly optimistic view.
I’ll bet a lot that in two years time we will have a price spike and gas lines because the world will be short about 5,000,000 barrels of oil a day.
I’ll try this to see if anyone else can see just how freakish, unprecedented, unrealistic and unlikely the 100,000,000 barrel gain in domestic stocks was in the first three months of 2015. It almost looks like someone has tried to drive the price of oil down for some reason and it isn’t good.
I can’t find how it could have happened. The underlying data do not seem to support the reported numbers. Maybe 16,000,000 to 20,000,000 bbls (still a record historical gain) but not five times that amount. The first three months of the year are refinery turn around time. Stocks always go up then and then go back down as refineries start back up and lay in supplies for the summer season.
In the first three months of 2015 the storage volumes went up like a rocket in a way that they never did before and the gain is not supported by the balance of supply and refinery demand and it has never ever gone up like that in the past. The balance is Current storage + production + imports - Refinery Demand = New Storage volume. In the first three months of 2015 production did not increase, imports went down and refinery volumes did not go down by any unusual amount but storage went up a WHOLE LOT more than it appears it should have based on the supply balance.
It is all in the EIA numbers. For storage two numbers are reported, Private Storage ex SPR and Total Storage Including SPR but never is SPR reported. You see, the point is that it looks like oil can be moved from the SPR to Private Storage unreported and as far as we are concerned the SPR volume remains constant.
Where did the 100,000,000 bbls of new oil in storage come from in the first three months of 2015? Whose ring did shithead kiss and to whom did he bow when he took over our white hut? Who is he backing by backing the Syrian Rebels? Who else is backing the Syrian Rebels and why?
Notice another little thing, after the storage volume went up to the highest historical level ever the change in storage tracked the traditional storage volumes in a parallel path but at a new higher level. Meaning? Something different happened at the start of 2015 and only happened once to raise storage to the highest historical level.
Could it be that someone wanted this to happen and made it so? Could it be someone who wants to disrupt the supply of oil and force chaos?
The Saudis are setting on 1.2 TRILLION barrels of proven reserves (30+ years of oil for the world at present rates of consumption). There are probably at least a goodly portion of that amount yet to be converted from resources to reserves. There is no replacement for oil for a lot of things for a long time no matter how much some may wish it so. Why then is the Kingdom of Saudi Arabia hunkering down like it is the end of their world and telling everyone who will listen that they must diversify their economy away from oil and that they must implement new draconian measures to manage costs because oil prices will be very low for a long long time? They made this situation, they can end it.
The Russians are not in Syria just for Syrian Rebels. The Klingdom of Saudi Arabia acts scared and they are acting very strange. Why? KSA has tried to control the price and supply of the world at least three other times, 73, 86, 98 and now. None of these three events has turned out well and all have resulted in price spikes either during or after the manipulation of supply. Nobody wins very much for very long.
We are being played and if you are quite happy about it all because gasoline is cheap enjoy it while it lasts because it will not last. The easy oil is gone in spite of fracing (there is no K in fracture stimulation). I’ll throw out that within two to three years you will wish the Saudis or someone had kept prices more moderate than cheap. And we had all better hope that the skills and means for shale drilling and fracing can come back fast enough to fill the breech but I don’t think it can.
In my humble opinion, you may be closer to the truth than you realize...the Arab producers depend much more on oil revenue to service their National operating costs than the more economically diversified western producers like Norway, the U.S. and Canada...the strategy to bottle up Canadian supply, undercut U.S. oil shale production costs and economically hamper Norway and Russia coupled with the release of huge new supply from Iran is backfiring right in the Saudi kisser...low oil prices have stimulated demand, and once prices start rising again reaching equilibrium levels, supply and demand will be much more in balance and stored oil will be strategically metered..we are a long way from $100.00 oil but moving in the right direction...
A lot of us have been wrong and I was wrong in thinking we would reach equilibrium by 3/4Q15 so I looked for why and found it in the fraclog that I did not believe in and the ability of KSA to increase production by about 2 mmbo/d more than I though possible. Now, with conditions continuing, I and others feel equilibrium by 3/4Q’16. If it does not happen then I’ll give up forecasting because it will not matter much at all. If prices somehow remain depressed at these levels much more than half of this year the industry will be simply decimated with only production operations people, bean counters and legal left and they will be vulnerable because $30 approaches lifting costs in a lot of places these days. The industry simply can’t survive at $30. At that price you need to lay down all rigs and all the people that have anything to do with rigs or development of new production because there WILL NOT BE ANY NEW PRODUCTION AT $30 and that even goes for KSA.
It is telling how bad it is when Exxon’s credit rating is slated to be lowered for the first time in 86 years. If Exxon is hurting almost anyone else is already DEAD. Bankrupt shale companies don’t recover. They get owned by someone else who harvests what is left.
Iran has at most about 500 mbo/d to sell and more likely 150 mbo/d extra to sell. They will not be releasing 4 mmbo/d of new oil to the market.
Supply declines and demand increases are converging at a rate of something like at least 2% a year of 98 or so mmbo/d and the excess has been put at no more than about 1.5 to 2.0 mmbo/d. You can do the math on that. U.S. Production has started to decline.
I have been doing this stuff for 40 years and this is the biggest panic in the industry I have ever seen.
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