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Page added on June 28, 2018

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Oil Spikes to Highest Price in Four Years

Consumption

Oil prices rallied Wednesday, with the U.S. benchmark settling at its highest since 2014 as domestic crude supplies notched their biggest weekly drop of the year so far.

Traders also showed concerns over U.S. threats to sanction countries that don’t stop importing oil from Iran by Nov. 4.

On the New York Mercantile Exchange, August West Texas Intermediate crude CLQ8, -0.01%  tacked on $2.23, or 3.2%, to settle at $72.76 a barrel. That was the highest finish since Nov. 26, 2014. August Brent crude LCOQ8, +0.45% the global benchmark, settled $1.31, or 1.7%, at $77.62 a barrel on ICE Futures Europe, for the highest finish since May.

The U.S. Energy Information Administration reported Wednesday that crude supplies declined by 9.9 million barrels for the week ended June 22—the largest weekly decline so far this year. Analysts surveyed by S&P Global Platts had forecast a fall of 2.3 million barrels, while the American Petroleum Institute on Tuesday reported a drop of 9.2 million barrels.

“Record crude exports and record refinery runs have combined to yield the biggest draw to crude stocks so far this year,” said Matt Smith, director of commodity research at ClipperData. “Even crude production holding at a record level has been unable to offset strong domestic and international demand.” The EIA pegged last week’s total domestic crude output at 10.9 million barrels a day, unchanged from the previous week.

Gasoline stockpiles rose by 1.2 million barrels for the week, while distillate stockpiles were unchanged for the week, according to the EIA. The S&P Global Platts survey forecast supply increases of 160,000 barrels for gasoline, and 500,000 barrels for distillate stocks.

On Nymex Wednesday, July gasoline RBN8, +0.28%  rose 2.8% at $2.134 a gallon and July heating oil RBN8, +0.28%  ended at $2.177 a gallon, up 2.3%.

July natural gas US:NGN18  rose 1.9% to $2.996 per million British thermal units. The contract expired at the end of the trading session.

“We would have seen gasoline prices go up much further today if it were not for gasoline imports that approached 1 million barrels per day,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “Expect the rest of peak driving season to be very much touch-and-go for prices and indeed even supply.”

 

The oil-price gains came after Brent and WTI closed up Tuesday by more than 2% and nearly 4%, respectively, following threats by the U.S. to sanction countries that don’t cut their imports of Iranian crude to “zero” by Nov. 4.

Tuesday’s announcement by the U.S. State Department “may well have been designed to ramp up the pressure on the Iranian regime, but it is also likely to exert further upward pressure on U.S. prices,” said Michael Hewson, chief market analyst at CMC Markets UK.

President Donald Trump last month pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions on the Islamic Republic that were already expected to hinder its oil exports.

Iran currently exports around 2.4 million barrels a day of crude. Analysts had estimated that anywhere between 400,000 to a 1 million barrels could be at risk once sanctions are fully reinstated in six months.

A “total stop [of Iranian exports] is unlikely to happen but the more aggressive tone [from the U.S.] suggests there may be a much bigger reduction in Iranian flows than the market has so far priced in,” analysts at consultancy JBC Energy wrote in a note Wednesday.

The comments out of the U.S. on Tuesday came as Saudi Arabia—the world’s largest exporter of crude—said it would raise its own production from 10.8 million barrels a day this month to 11 million barrels a day in July. The move was meant to help “counter the impact” of sanctions on Iran, according to Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.

This past weekend, the Organization of the Petroleum Exporting Countries and Russia agreed to begin ramping up production next month by up to 1 million barrels a day, after more than a year of holding back output. The decision comes amid steadily rising oil prices, geopolitical risks to supply—including in Iran—and shrinking global inventories.

marketwatch



16 Comments on "Oil Spikes to Highest Price in Four Years"

  1. Antius on Thu, 28th Jun 2018 6:50 am 

    I am no financial expert. But Adam Taggart gives a good description of how quantitative easing (i.e. expanding money supply) led to huge monetary flows into investment vehicles, resulting in asset, equity and bond bubbles. Amongst other things, this allowed US tight oil production to expand rapidly from 2011 onwards.

    Now that rates are rising and money supply is shrinking, these bubbles will soon collapse leading to recession and banks will have no incentive to lend money.

    https://www.peakprosperity.com/podcast/114136/michael-pento-when-yield-curve-inverts-soon-next-recession-will-start

    This would appear to be a double catastrophe for US tight oil, which has weak profitability and depends heavily on credit issued at low interest rates or low yield bonds. Not only will the availability of credit shrink, but oil prices can be expected to tank as well. Expect Canadian syncrude production to collapse at the same rate, given that tight oil is a necessary input to blend the bitumen, making it transportable.

    This is how global liquid fuel production will finally hit it’s historic peak. When will it happen? Taggart’s source Michael Pento estimates that the US will enter recession as early as the fall of this year. With rates rising, property prises stalling, money supply shrinking and trade tariffs increasing; it really is only a matter of time. By this time next year, US oil production will likely be in free-fall.

  2. twocats on Thu, 28th Jun 2018 8:38 am 

    well summarized analysis antius. the path going up has been fairly well illuminated at this point.

    now what remains to be predicted or discovered is what this massive global financial experiment will look like on the unwind. the factors you point to leading to recession are strong candidates.

  3. Bob Jones on Thu, 28th Jun 2018 10:04 am 

    I forgot the source, which I know is important. But, back in early May, the report was oil prices would surge. Then fall back. Then surge again all the way into the 80s (dollar range) into 2019. No forecast after that, but seems plausible to me.

    We all know the US can’t work on $4 gasoline.

  4. roccman on Thu, 28th Jun 2018 12:55 pm 

    once geologic limitations are reached – war will cause rationing of all resources.

    oil could very likely be $250/bbl – but the mob will only be allowed to have 10 gallons of gas a month.

    Geologic limits coupled with the breeding mob are defining the peaking of oil.

  5. george on Thu, 28th Jun 2018 1:04 pm 

    The only resource available after the next world war will be cockroaches.

  6. MASTERMIND on Thu, 28th Jun 2018 2:39 pm 

    This really gets the noggin joggin..

    Marx late capitalism

    https://media.8ch.net/file_store/cdfbbddaecc4c921f3b156987950fbebdd43c765b105835ebbbd0b8af1429ed2.webm

    Eat your heart out Clogg you cocksucker!

  7. MASTERMIND on Thu, 28th Jun 2018 3:05 pm 

    Multiple people shot at Capital Gazette newspaper in Annapolis

    http://www.baltimoresun.com/news/maryland/crime/bs-md-gazette-shooting-20180628-story.html

  8. MASTERMIND on Thu, 28th Jun 2018 3:10 pm 

    Once Trump appoints this new judge..We will see Christian “Sharia Law”..

    Goodbye; Abortion, Gay Rights, Civil Rights..

  9. twocats on Thu, 28th Jun 2018 3:49 pm 

    what’s funny(ish) is that the left has lost virtually everything – state gov’t, house, senate, now executive, the courts for the next 40 to 50 years (Trump is appointing 20 year old MAGA chuds at blistering rate), media (FOX is private run repub propaganda machine, CNN is spectacle, and MSNBC is #resistance #imwithhillary), internet (google is evil).

    i guess they still have a fairly resounding victory in the culture war – but even that is just identity politics.

    i mean to say – the left might as well create revolutionary movement – they’ve nothing left to lose.

    incredible when you think about it.

  10. Cloggie on Thu, 28th Jun 2018 4:59 pm 

    “Eat your heart out Clogg you cocksucker!”

    https://www.rt.com/usa/431161-america-heading-civil-war-poll/

    You have a good life insurence, millimind?
    Should I get worried about you?

  11. Cloggie on Thu, 28th Jun 2018 5:03 pm 

    https://www.infowars.com/the-genocide-of-white-south-africans-is-in-full-swing/

    A millitary intervention in South-Africa would constitute a good oppertunity for the first united European army in history to flex its muscle and use genocidal blacks as practice material, before the real operations in North-America begin.

  12. GregT on Thu, 28th Jun 2018 5:16 pm 

    “You have a good life insurence, millimind?”
    “Should I get worried about you?”

    I wouldn’t be too worried about MM Cloggie. He likely won’t suffer too much, if his aim is good.

  13. Antius on Thu, 28th Jun 2018 6:04 pm 

    “A millitary intervention in South-Africa would constitute a good oppertunity for the first united European army in history to flex its muscle and use genocidal blacks as practice material, before the real operations in North-America begin.”

    Such a campaign can only succeed when the ZOG have either lost too much power to stop it, or are too distracted by another enemy, such as China. It would also require a united Europe with a far more white nationalist outlook; free from shits like Macron and Merkel. At the moment, the EU is run by Marxists that want to make it as brown as possible, though there are tentative signs that things are changing for the better, with the rise of the AFD, The ‘Italian Job’ and the emergence of a strong anti-migrant east European anti-migrant block that refuses to bow down to Marxist idealists in Brussels. I would be happy to see the emergence of a white nationalist Fourth Reich. Had Europe been more aligned in that direction, then I doubt that Britain would have voted to leave.

    I used to work with a Jewish (White) South African. He was a strong supporter of apartheid, believing that it provided a compromise that worked for both sides. He was appalled by the surge in crime and disorder in post-apartheid South Africa. He saw his own people as essentially a European people, whose job it was to protect and work as part of white European world, which he understood to be the highest part of human civilisation. What a damn shame that more of his people don’t think that way. The way things stand, we can only survive and prosper by knocking them down.

  14. MASTERMIND on Thu, 28th Jun 2018 6:09 pm 

    Marx never said Late Capitalism would be fun..

    https://media.8ch.net/file_store/cdfbbddaecc4c921f3b156987950fbebdd43c765b105835ebbbd0b8af1429ed2.webm

  15. GregT on Thu, 28th Jun 2018 6:25 pm 

    “Marx never said Late Capitalism would be fun..”

    If you’re not having any fun MM, you really should consider making a move.

  16. Sissyfuss on Thu, 28th Jun 2018 10:37 pm 

    Marx said ” Hungadunga, the name is Hungadunga.” But that was Groucho, not Karl.

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