[Schmuto]

This article was just posted on the PO.com splash page:

http://www.laht.com/article.asp?Article ... ryId=10717

Ok, so I read down many paragraphs to find this gem:

But it’s also suggested that the United States quietly boosted drawdowns from its Strategic Petroleum Reserve in April. That suggests both seasonal and policy factors may have been at play, although it’s difficult to work just how much each of these influenced the overall trend.

Has anybody heard anything about any drawdowns of the SPR in the last 6 months?

Did this completely fly under the Schmuto Radar?

If the U.S. government is drawing down the SPR, what could that possibly mean?

Would that not be price manipulation at its most diabolical?

Is there any chance the U.S. government has been slowly drawing down some portion of the SPR to keep oil prices in check?

Wow.

[anador]

Things like this are why I'm starting to become suspicious of a drawn-out powerdown like I once expected.

It seems that governments everywhere are going to manipulate the deteriorating system to keep it going by any means possible until it completely and utterly disappears.

Once we no longer have he ability to effect these situations all of our mitigation efforts will likely fail at once.

The results could be cliff crash rather than a long emergency.

[gnm]

If anything I'd have thought they would be filling at all these great prices. Could they truly be covering up a building shortage? If they are then things are going to get real ugly when they can no longer kick the can down the road. Of course I see that happening with the whole economic debacle as well...

-G

[kmann]

According to the EIA weekly reports, there was no SPR drawdown in April, in fact there was a build, nor was there a drawdown anytime this year.
2009-Apr
04/03 712,887
04/10 714,150
04/17 715,448
04/24 716,673
http://tonto.eia.doe.gov/dnav/pet/hist/wcsstus1w.htm

[Schmuto]

According to the EIA weekly reports, there was no SPR drawdown in April, in fact there was a build, nor was there a drawdown anytime this year.
2009-Apr
04/03 712,887
04/10 714,150
04/17 715,448
04/24 716,673
http://tonto.eia.doe.gov/dnav/pet/hist/wcsstus1w.htm

EIA is an agency of the U.S. government.

This is going to get interesting very quickly, me thinks.

[kmann]

Uh, yeah.... ya know, Kroger has a sale on Reynolds this week. Could be useful. I just saying.

[copious.abundance]

A Venezuelan newspaper is more credible than the EIA on the status of US SPR stocks???

Uhh . . . OK . . .

[pup55]

Has anybody heard anything about any drawdowns of the SPR in the last 6 months?

The Feds were filling the SPR until about the beginning of June, when the pricing got out of hand...

Since then, they have been adding a little to the SPR every week....

[Schmuto]

A Venezuelan newspaper is more credible than the EIA on the status of US SPR stocks???

Uhh . . . OK . . .

On my list of trustworthy sources, the U.S. government ninnies fall somewhere between Pravda and Al Jazeera.

Believing stats produced by the U.S. government is like believing your disturbed Uncle Charlie when he tells you that his semen tastes like strawberries.

[FloridaGirl]

How much is light and how much is heavy? I saw something recently where politicians were proposing to let oil companies get light sweet oil from the SPR and replace it with heavy oil with the purpose being to reduce the price of oil.

[Schmuto]

How much is light and how much is heavy? I saw something recently where politicians were proposing to let oil companies get light sweet oil from the SPR and replace it with heavy oil with the purpose being to reduce the price of oil.

Any chance you can link to that? That would be interesting.

[TheAntiDoomer]

This thread earned this:

[TheDude]

This article was just posted on the PO.com splash page:

http://www.laht.com/article.asp?Article ... ryId=10717

Ok, so I read down many paragraphs to find this gem:

But it’s also suggested that the United States quietly boosted drawdowns from its Strategic Petroleum Reserve in April. That suggests both seasonal and policy factors may have been at play, although it’s difficult to work just how much each of these influenced the overall trend.

He admits to confusion on the home front himself:

Confusion continues to swirl about just how much oil Venezuela is actually producing. Although the Energy and Oil Minister has announced that it plans to issue regular output figures, this hasn’t happened yet.

But the SPR data is pretty clear cut. Theorizing that the numbers are being massaged is just conspiracy in action, and to what end? I would play up the fact that additions to it are being made, to spread the notion that we're still in an oil glut, so as to attempt to depress prices.

Hugo's just upset about losing market share. Join the crowd, dude:



If you really want details about the SPR you can find complete assays for the contents here: Strategic Petroleum Reserve. If you want to pore over what's coming in from Venezuela and everywhere else you can pore over the Company Level Import data at EIA. Shippers are obligated to provide this data in very exhaustive form and massaging it in some fashion would require coordination from a whole raft of parties; as usual I don't think so.

By coincidence, one of the long-running mysteries about EIA data was made clear today in this piece: Estimating errors in U.S. oil demand. I posted about this in the US Supply thread.

[Schmuto]

Well, you certainly have the more reasonable position.

But I simply don't trust the government and any numbers coming out of it.

While I acknowledge that the story is almost definitely wrong, I don't also acknowledge that EIA numbers are trustworthy.

If we are in an 8% decline right now, which is what I suspect, then puffing the SPR numbers would be child's play, if that's what they wanted.

[Plantagenet]

George Soros calls on the US to release massive amounts of oil from the SPR to punish Russia for invading Ukraine Soros' idea is that if the US sold 5 million bbls per day every day, week after week, month after month, the global price of oil would drop to $90 bbl or lower, hurting Russia.

Soros wants the SPR drained to punish Putin

Normally I'd put this in the "crazy idea" file, but (1) Soros is an influential liberal Obama backer and (2) Obama already released 5 million barrels from the SPR on the day the new Ukrainian president visited DC in a clear signal to Putin that the US was ready to use the SPR weapon and (3) causing oil prices to go down just as the 2014 election season starts is just the kind of sleazy political pandering Obama does best.

[Scrub Puller]

Yair . . .

the global price of oil would drop to $90 bbl or lower, hurting Russia.

Wouldn't that be cutting off the nose to spite the face? I wouldn't imagine that strategy would be much help to US drillers . . . could someone set me straight?

Cheers.

[Tanada]

Yair . . .

the global price of oil would drop to $90 bbl or lower, hurting Russia.

Wouldn't that be cutting off the nose to spite the face? I wouldn't imagine that strategy would be much help to US drillers . . . could someone set me straight?

Cheers.

Its worse than that, at 5 MMbbl/d the SPR would only last 120 days, and would it really even cut world oil prices for those measly 4 months? Anyone who has rudimentary math skills can divide 600/5 and get 120, or use a calculator for pity's sake. The SPR is supposed to at minimum let the USA escape the consequences of an oil import shortfall for 90 days. The EIA data shows the USA is importing well over 7 MMbbl/d right now and if you draw down the APR at that rate 600/7=85

Data from last quarter presented by Kopits demonstrated that a 2 MMbbl/d increase in consumption took place in fall of 2013 when the price dipped. So even if SPR draw downs could cause the world price to dip what would be the result? Say its really wild and prices fall to $85.00; the first thing that happens is consumer demand soaks up an additional 2 MMbbl/d just like it did last fall. At that point the 5 MMbbl/d draw down is effectively a 3 MMbbl/d addition over what the market would buy at that price. The second thing that happens is the deep pocket places with their own SPR system buy up as much of this 'cheap' oil as they can to fill their own reserves while they have the chance. What effect does this have on Russia? Is it punishment? Well Putin likes to sell his oil to the EU at market prices which have been over $100.00/bbl for the last couple of years, but he is if anything a strategic thinker. He knows that at those kind of rates the USA storage in the SPR is effectively gone in 4 months, and in the mean time he can just sell the minimum amount of Russian oil he has to to make budget. In four months the USA SPR is effectively empty and he has sold less oil for the last four months, but now the price is spiking back upward and he has plenty of oil to sell at the new higher price.

Yeah if I were Putin I would be quaking in my boots....NOT!

[ROCKMAN]

First, just to get a messy detail out of the way: unless the congress suddenly unifies there’s little chance the CONGRESSION LAW that controls the SPR releases would be amended. Which means two critical aspects need to be taken into account. First, they can only release 1 million bopd. Second, that oil must be sold at a price tagged to the price of oil during the previous 30 days of the release. IOW if oil is averaging $95/bbl it must be sold at $95/bbl. So who is going to buy that 1 million bopd for the next 30 days? Only the folks that could already afford $95/bbl.

And here’s the other problem: if a release does cause some price drop what prevents the Russians and Saudis from matching the release? Yes, they would sell a few less bbls but the ones they did sell would pull in more money. So if they didn’t cut production a tad they would sell more bbls but get a little less per bbl. So perhaps selling a bit less oil brings in the same income as if they sold more into a lower priced market. But regardless what that differential might be it would only be for 30 days. And if they make a second release? The dynamics of the first release don’t change.

Now let’s forget how it would hurt the drilling companies…we don’t really matter. So let’s say the price of oil goes down for a significant amount of time. So the price of refined products goes down. Which means more folks can afford to buy more. But that includes overseas buyers… buyers to whom it’s legal to export products to. Then it’s a foot race to see who benefits most from the lower oil prices: US or foreign product consumers.

And, as pointed out already, US drill rig count would drop which means US oil production would eventually fall which means the US would have to import more oil (especially if the lower oil prices increase domestic consumption). All of which means that Mr. Soros’ oil holding would eventually increase in value. Especially those he bought on the cheap when valuations fall as a result of the US “flooding” the global oil market with that additional 1.1% of oil. LOL

[Plantagenet]

First, just to get a messy detail out of the way: unless the congress suddenly unifies there’s little chance the CONGRESSION LAW that controls the SPR releases would be amended. Which means two critical aspects need to be taken into account. First, they can only release 1 million bopd.

Laws don't mean what they used to mean.

The Obama administration already released five million barrels on the day that the Ukrainian president visited DC---I don't see them prosecuting themselves for breaking the 1 million bbl/day law. Face facts---there are now many examples of the BO administration either ignoring laws, or Obama issuing a decree changing laws, or the BO administration simply not enforcing laws they don't like.

Second, that oil must be sold at a price tagged to the price of oil during the previous 30 days of the release.

Not if their aim is to drive oil prices lower. In that case the BO people will intentionally price the SPR oil at below market prices to drive the price down.

And here’s the other problem: if a release does cause some price drop what prevents the Russians and Saudis from matching the release?

The entire purpose of the SPR releases would be to hurt Russia by cutting their oil income. If Russia matches the SPR release by cutting their production and selling less oil, then that would be a big success according to Soros and the BO people pushing this idea.

[ROCKMAN]

P – You’re not grasping the fundamentals. President Obama didn’t decide to release that 5 million bo…he was mandated by CONGRESSIONAL LAW to do so. The release was required by CONGRESSIONAL LAW. Did the POTUS slick talk you into believing it was his idea? LOL. In fact, recent administrations have been somewhat lax following those rules MANADATING periodic test releases. If you didn't catch it this release was scheduled many months before the Ukraine situation popped up. The POTUS' PR machine just took advantage of it and suckered many folks. IMHO under current conditions in D.C. if he violated the CONGRESSIONAL LAW governing the SPR he would be immediately impeached and, also IMHO, have a good probability of being removed from office.

The POTUS cannot set the price of oil sold from the SPR: that price is controlled by the CONGRESS which has a solid gold plated LAW it cannot ignore. You really don’t seem to understand that this isn’t some little side show. It can be frustrating to go through because of it’s length but the original writers of this CONGRESSIONAL LAW expected these types of potential motives. Pull it up and fight your way through it…give yourself at least a couple of days. LOL.

As far as pricing goes it’s pretty straight forward: If the price of oil goes down 10% and you continue to sell the same amount of oil your income goes down 10%. If the price of oil goes down 10% because X more bbls come into the market but if the exporters cut production by X bbls of oil prices don’t go down. I might be selling less oil but I’m getting more per bbl then if I kept producing the same about. So my revenue loss isn’t nearly as bad.

And let’s be realistic for Dog’s sake: the SPR can release 30 million bbls in one month. The world produces about 2.6 billion bo per month. That release would represent a whopping 1% increase in oil in the marketplace. Exactly how far would you expect Russian oil prices to drop with a 1% increase in oil supply? And remember: that oil has to be shipped and sold to a customer of Russian oil. Selling it to a refinery in Texas wouldn’t have an impact even if it were significant. Oil might be fungible but not that fungible: someone has to pay to transport it and many of the folks buying Russian oil are doing to on long term contracts so some couldn’t buy that oil even if they were willing to pay for the transport.

Selling oil from the SPR to affect prices is just a fantasy that won’t go away IMO.