Exploring Hydrocarbon Depletion
wildbourgman wrote:I could recite field production and consumption stats, quotes from Twilight in the desert ETC, but I couldn't see any other problem. At the same time I started hearing crazies like Peter Schiff, Marc Faber, ETC calling for a major decline in housing prices and a massive credit collapse. I couldn't believe what they were saying. In 2008 I saw it all come together and yes oil was a big piece of that puzzle.
Now there were Peak Oil people like myself that didn't think debt issues, recessions or any other economic problems causing oil prices to drop but they did.
SeaGypsy wrote:How much of the speculation on collapsing oil prices is purely based on fantasy- eg: Saudi America?
Historically, oil has traded at a slight premium in the U.S. over Europe. Then, in 2010, North American oil production grew much more quickly than anyone expected -- including companies that manage oil pipelines and transportation. Domestic demand also remained surprisingly weak.
American prices dropped $20 below world levels because it became impossible to get all the oil out of the middle of the country quickly and cheaply.
Does the end of that spread mean slightly higher prices for American drivers? Probably not. U.S. gasoline prices are determined by world oil and gasoline prices (as well as the cost of transporting gas from refineries). The fact that U.S. oil is now flowing more freely from what had been a midcontinent bottleneck should be a good thing for American drivers.
Graeme wrote:With More American oil coming onto the market, wouldn't you expect prices to fall?
Deutsche Bank strategists Rocky Fishman,
Salil Aggarwal, and Lon Parisi are out with a note warning clients that a “perfect storm” of structural, demand, and supply-driven factors could conspire to cause a “major pullback” in oil prices, with the potential to derail the rally in the U.S. stock market as well.
“A major pullback in oil prices could have a concentrated effect on the S&P energy and industrials sectors, with perhaps further sentiment knock-on effects,” write the strategists. “After WTI’s brief pullback from its peak last month, it may be time to at least consider this possibility.”
WTI crude oil prices have rallied from a low of $US84.05 a barrel on November 7 to $US106.88 at Friday’s close, returning 27.2% over the past nine months.
“Oil is now, according to our commodities team, the most richly traded commodity in the world in real terms after massive appreciation over a multi-year horizon,” says the Deutsche Bank team. “However, structural, demand-driven, and supply-driven catalysts exist for a near-term pullback — and a ‘perfect storm’ of a multiple of these factors could cause an even more significant move.”
Fishman, Aggarwal, and Parisi bullet the three factors that could come together to cause a perfect storm for oil prices:
Structural: Falling inventory levels in the Cushing complex start levelling off or even turning up — whether driven by increased Bakken- to-Cushing transport or infrastructure concerns. The huge net long speculative futures position also could set up downside volatility if unwound.
Demand: Another leg down in China growth impairs Brent pricing, or US economic data disappoint and limit demand for WTI. Low refining margins are indicative of weakening demand.
Supply: Most supply events would be bullish oil, but we wonder if resolution of one or more stress points (e.g. the incoming Iranian regime negotiates an end to its embargo) could materially drive up supply.
Deutsche Bank chief U.S. equity strategist David Bianco hiked his year-end price target for the S&P 500 in mid-July, citing “recent WTI oil price strength despite the climb in Treasury yields and the dollar.”
Bianco also spelled out the logical inverse of his call: “A surge in yields or oil price collapse has long been the chief risks to our strategically bullish view.”
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