CL Redux

cherubian · Feb 22, 2011

Quote from InvestVision:

You're Dreaming If You Think OPEC Can Boost Oil Production At Will
http://www.businessinsider.com/spare-capacity-theory-2011-2

1/ David Fyfe of IEA Paris earlier today attempted to calm world oil markets, by reminding that in the OECD there are over 1.6 billion barrels of oil in inventory. By marshaling these western supplies of already-pumped, above-ground oil, the world could gain a new source of oil for up to one year, at a rate of 4 mbpd (million barrels per day). There are a few sticky issues surrounding such a claim. Not least of which is that oil markets regard drawdowns of above-ground inventories as a reason to send prices even higher. But that point aside, letâs consider what Fyfe did not claim: the head of IEAâs oil markets division did not claim that Non-OPEC oil producers, which account for nearly 60% of world oil supply, could lift supply to make up for the Libyan disruption. Thatâs no surprise. Non-OPEC oil production has already peaked, and couldnât increase supply either tomor

2/ In the graphic to the left we see the latest publicly available charts for OECD inventories, from the 18 January Oil Market Report from IEA. Note that in the bottom chart whatâs being accounted for is not only the 1.6 billion barrels of crude that Fyfe refers to, but another 1 billion barrels of oil products. That said, the scale of these large numbers can be a tad misleading. They represent in part just the normal flows of the global oil market and are a snapshot of oil as it flows from production, to refining, and to distribution. For a different measure, these same levels of inventory represent 57.5 days of supply. Which the IEA itself says are the lowest in the past two years.

3/ In truth, the spare capacity that the world cares aboutâthat the oil futures market cares aboutâis not the inventory level. But rather, actual production capacity that can be brought on immediately. You can see the problem, from a price standpoint. If the world loses Libyaâs 1.5 mbpd production for 90-120 days, and starts drawing down above-ground inventories, this only makes the inventory cushion that much thinner for any new supply disruptions. The question on the mind of the oil market therefore is not Mr. Fyfeâs 1.6 billion barrels of crude, but whether countries like Kuwait, the U.A.E. and especially Saudi Arabia or even Russia can lift supply. Immediately

4/ Even if OPEC is indeed sitting on 1-3 mbpd of spare capacity, itâs not clear for how long they can both increase production, and export that production to the world. Not only has Saudi Arabiaâs production not increased in the past five years, but, Saudi is increasingly using its own oil for its own population. The result? Flat, to declining exports of oil from Saudi
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I think I mentioned before that Saudi went on full production, the most in 30 years when oil was at 147. According to this article, they should now be able to produce 12.5 barrels a day. Anyone know what they are at right now?

"Al-Naimi also said the Saudi government will invest in oil projects that would allow Saudi Arabia to have the capacity to produce 12.5 million barrels per day by the end of next year."

Here is the article from 2008. http://money.cnn.com/2008/06/22/news/international/Saudi_summit/index.htm?section=money_latest

I saw something on bloomberg a while back with a shipping CEO saying when oil was at 2008 peaks, they ordered a ton of tankers to be built, which take 2-3 years to build and bring online, so they are all starting to become available to ship crude. All I remember is they were referring to insurance in the Suez canal on these tankers, so it seems the ability to export oil from that area of the world is more physically possible now, then it was a few years ago. Just my simple understanding though.

InvestVision · Feb 22, 2011

Here is one possible scenario for today

Stage 1: 95.50 now , Here comes Oil LONG funds cashing some of their positions and shorts joining them

Stage 2: Pound down to 94 level

Stage 3: LONG funds and MMs pull back to 97 level

..........

zxd · Feb 22, 2011

Quote from schizo:

Unless you're an idiot (rhetorically speaking ), 100 is a given. We'll most likely hit it tomorrow.
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What happened to our resident short? ;D

NoDoji · Feb 22, 2011

For anyone who cares, I'm cross-referencing all three of my time frames and using 20-tick initial stops to accommodate the volatility. I had one trade earlier run nearly 20 ticks my way and stop me out b/e in about 30 seconds :eek:

BCE · Feb 22, 2011

Quote from NoDoji:

For anyone who cares, I'm cross-referencing all three of my time frames and using 20-tick initial stops to accommodate the volatility. I had one trade earlier run nearly 20 ticks my way and stop me out b/e in about 30 seconds :eek:
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Similar 4 me 2. It's trying to hold and base here. And the verdict is........................?

NoDoji · Feb 22, 2011

Quote from zxd:

What happened to our resident short? ;D
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z, you're still alive!

RichardRimes · Feb 22, 2011

Quote from NoDoji:

For anyone who cares, I'm cross-referencing all three of my time frames and using 20-tick initial stops to accommodate the volatility. I had one trade earlier run nearly 20 ticks my way and stop me out b/e in about 30 seconds :eek:
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Just read this in the ES forum and was just about to ask if this was ES or CL when...oops its gone!!!

NoDoji · Feb 22, 2011

Quote from RichardRimes:

Just read this in the ES forum and was just about to ask if this was ES or CL when...oops its gone!!!
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I have both threads up and mis posted it. I think ES has enough action today that they're not forced to trade this monster

zxd · Feb 22, 2011

Quote from NoDoji:

z, you're still alive!
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Yes and so far it's a good day

BCE · Feb 22, 2011

Time after time the indices have rebounded from any morning pullback. Seems to me they're very overbought and one of these times they'll sell off even more instead. This may not be significant enough news to create that reality though.