Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on August 25, 2015

Bookmark and Share

Out in the Real World, Oil Market Is Much Better Than It Looks

Consumption

The global oil market is healthier than it looks, signaling that crude’s plunge to six-year lows has probably gone too far.

While futures tumbled below $45 a barrel in London for the first time since 2009, Morgan Stanley and Standard Chartered Plc say other measures suggest physical markets for crude have stabilized or even strengthened in recent weeks. China, the world’s second-biggest oil consumer, will keep buying extra barrels to fill its strategic reserve this year, according to Goldman Sachs Group Inc.

“While oil fundamentals aren’t strong, physical markets do not corroborate the substantial weakness in flat price,” New York-based Morgan Stanley analyst Adam Longson said in a report Monday. The “latest oil pricing pressure appears more financial than physical.”

A measure of returns from commodities sank to its lowest since 1999 Monday on concern that a slowing economy in China, the world’s largest consumer of energy and raw materials, will exacerbate supply gluts. Brent crude, the international benchmark, has dropped more than 30 percent since May on the ICE Futures Europe exchange in London.

Financial Flows

The stabilization of the price gap between monthly crude contracts and changes in the relationships between regional benchmarks suggests financial flows are behind the renewed slump, rather than a change in the physical oil market, Morgan Stanley said.

“This is very, very macro driven” with the focus on the outlook for China’s economy, said Paul Horsnell, head of commodities research at Standard Chartered in London. “It’s not based on any kind of oil supply-demand fundamentals.”

The gap between the price of the first-month Brent contract, October, and futures for settlement 12 months forward hasn’t widened enough over the past few weeks to suggest the world is running out of space to store crude, according to Longson. The spread was more than $11 a barrel in January, compared with about $7 currently, ICE data show. This suggests the supply surplus is smaller today than it was at the start of the year, said Horsnell.

The spread between Brent and Dubai, the grade used as Asia’s regional crude benchmark, is at its narrowest for this time of year in several years, according to Morgan Stanley. This signals continued strength in demand from Asia for Middle Eastern crude, Longson said. Prices for West African crude grades relative to Brent have strengthened in recent weeks, he said.

Chinese Demand

“Despite poor headline macro data, most China oil demand data points remain resilient” in July, Longson said. The nation’s apparent demand for gasoline rose 17 percent last month, the highest growth rate all year, he said.

The filling of emergency crude reserves in China “gives the market a lifeline” that distinguishes the current situation from the Asian crash of 1998, Jeff Currie, head of commodities research at Goldman Sachs, said in an interview on Bloomberg Television Aug. 21. Brent crude dropped to as low as $9.55 a barrel in December 1998, according to ICE data.

China will add crude to two additional sites with a combined capacity of 50 million barrels in the second half, according to the International Energy Agency. The nation bought more than 500,000 barrels a day of oil that was surplus to its daily requirements between January and July, according to data compiled by Bloomberg. China National United Oil Co., the trading unit of the nation’s biggest energy company, is on course for its largest-ever haul of Middle Eastern crude purchases in Singapore.

“The irony is if you just take the oil market data on China, it’s good — it’s really, really good,” said Horsnell. “If we were running it purely by the micro data, people would be saying: ‘Hey, this isn’t too bad’.”

RIGZONE



19 Comments on "Out in the Real World, Oil Market Is Much Better Than It Looks"

  1. apneaman on Tue, 25th Aug 2015 5:43 pm 

    You could call it a rule of thumb that the propagandist bullshit can always be found in quotations.

    “While oil fundamentals aren’t strong, physical markets do not corroborate the substantial weakness in flat price,”

    “latest oil pricing pressure appears more financial than physical.”

    “This is very, very macro driven”

    “Despite poor headline macro data, most China oil demand data points remain resilient”

    “gives the market a lifeline”

    ” “The irony is if you just take the oil market data on China, it’s good — it’s really, really good,” said Horsnell. “If we were running it purely by the micro data, people would be saying: ‘Hey, this isn’t too bad’.””

  2. penury on Tue, 25th Aug 2015 6:00 pm 

    If the drop in the price of oil has not convinced people of the weakness of the economy.maybe the sell off in the stock markets will, industry is imploding, retail sales (US) are down, Shipping is down, rail traffic is down, currency liquidity is down. People have no f___ing money.

  3. apneaman on Tue, 25th Aug 2015 6:27 pm 

    I just love the looks on the faces of these sad cancer monkeys. You can almost see the dopamine draining from their brain cells as the only reason for their existence for goes south.

    In pictures: The stocks fall in facial expressions

    http://www.bbc.com/news/world-asia-china-34048459

  4. Nony on Tue, 25th Aug 2015 7:31 pm 

    DEC19 crude futures is at 55. So, it is a lot of contango. IOW, market expects prices to rise a lot. IOW, yes (damn you, Planty!) we are in a “glut”.

  5. Davy on Tue, 25th Aug 2015 7:59 pm 

    Markets have been behaving so rationally lately NOo surely you are right with your optimism for higher prices. Supply and demand rules right NOo!!

    https://www.youtube.com/watch?v=wnmhUpx63kE

  6. Makati1 on Tue, 25th Aug 2015 8:12 pm 

    I’m enjoying the blood bath on Wall Street. It is about time and the sooner it hits bottom, the better for all of us in the long run.

    Maybe there will be a reset that lowers Western consumption to 3rd world levels and allows the species to continue a while longer. Maybe it will also open the eyes of the Western Wannabees in the rest of the world, to what the real cost is of an “American” lifestyle.

    Dow 5,000 by Christmas? Bring it on!

  7. apneaman on Tue, 25th Aug 2015 8:25 pm 

    When the market/god speaks the faithful must listen….and believe.

  8. Davy on Tue, 25th Aug 2015 8:26 pm 

    I’m enjoying the blood bath on the China exchanges. It is about time and the sooner it hits bottom, the better for all of us in the long run. Asia is a cancer of consumption and over population. I live in Manilla a city of 12Mil so I am right in the middle of this cancer.
    Maybe there will be a famines that lowers Asian population and consumption to acceptable levels and allows the species to continue a while longer. Maybe it will also open the eyes of the Asiaphiles Wannabees in the rest of the world, to what the real cost is of an “Asian metastasizing growth”.
    Shanghai Stock Exchange 1,000 by Chinese New year? Bring it on!

  9. Nony on Tue, 25th Aug 2015 8:57 pm 

    I remember Rock laughing about how oilers were eating steak and consumers were taking it up the ass. Worm has turned now. I have seen some sub $2 already.

  10. GregT on Tue, 25th Aug 2015 9:49 pm 

    I’ll remember Nony remembering Rock laughing about how oilers were eating steak and consumers were taking it up the ass, when the oilers go out of business and Nony is trapped in an urban war zone with no food to eat. The lower oil prices go Nony, the closer you are to a whole world of pain.

  11. Plantagenet on Tue, 25th Aug 2015 11:04 pm 

    Its good to see Nony now agreeing with me that we are in an oil glut.

    Eventually everyone posting here—-no matter how biased or dull or uninformed they are —-will figure it out-

    Cheers!

  12. GregT on Tue, 25th Aug 2015 11:10 pm 

    “Its good to see Nony now agreeing with me that we are in an oil glut.”

    You and Nony should hook up. I hear he’s lonely, and the added bonus? You could both be filthy rich. I’m sure that your conversations would make for a great ‘reality’ television program.

  13. apneaman on Tue, 25th Aug 2015 11:22 pm 

    Why is it good mono crop?

  14. rockman on Wed, 26th Aug 2015 10:10 am 

    Funny how some people take my posts trying to explain FOR YEARS how this con was being worked by the pubcos as if the Rockman was laughing at anyone. Even stranger the some of the same folks accused the Rockman of being too pessimistic with his statements. And yet here we are today with the bubble bursted and the reality the Rockman has preached all this time stands as fact. LOL

  15. Nony on Wed, 26th Aug 2015 1:42 pm 

    Rock was wrong. POD meant $100 oil. We are at $40.

    HAHAHAHA!

    Cornies win!!!!

  16. Fat Lady on Wed, 26th Aug 2015 3:57 pm 

    We still have water in the taps, food at the grocery, gas at the pumps. TRA LAAAAAA!

  17. Harquebus on Wed, 26th Aug 2015 9:40 pm 

    “The greatest shortcoming of the human race is our inability to understand the exponential function.” — Prof. Albert Bartlett
    The cornies have lost, they just haven’t realized it yet.

  18. Apneaman on Thu, 27th Aug 2015 3:00 am 

    China Has Big Eyes, Little Stomach for Oil

    http://www.hellenicshippingnews.com/china-has-big-eyes-little-stomach-for-oil/

Leave a Reply

Your email address will not be published. Required fields are marked *