mtzianos, The people building the reserves are not âtraditionalâ energy firms â mostly hedge funds and larger institutions (JP Morgan being one). Obviously there are still some regional independent firms building reserves, but the majority is buy/sell-side. WTI-Nymex and Brent narrowed because of the explosion over the weekend.
Again, I don't understand any of this... According to IPE and Brent-oil-ETF website info, Brent is used to price about 65% of the world oil market (vs about 5% or so for NYMEX WTI). On the other hand, the Louton explosion this weekend in England affected stocks which are estimated to be about 100K barrels. So a one-time loss 100K barrels, or say even 1 million, compared to worldwide 85 Million barrels per DAY. A drop in the bucket. And this drove the price of Brent (which is supposed to price 65% of world's oil) over 5% up? i.e. NYMEX and Brent Jan06 traded on par today, vs a $3 spread a few weeks ago (usually spread was $2)!
mtzianos. There is no doubt you see what others are seeing and trading. You might consider buying a spread option(s) on the Brent/WTI spread, if you believe the spread will revert to the mean. Look at the valuations on tanker rates, imports, tariffs and youâll begin to understand what the Brent should be valued at relative to WTI. If you have Bloomberg â Arb [Go].
yep, looks like the Saudi's are running out of oil... http://www.breitbart.com/news/2005/12/20/051220165102.rfmm4n2n.html
'experienced oil speculators' - know that production/supply/demand fundamentals operate over a longer term than speculation in the derivatives, and, as well as possible, take the lags into account. - inexperienced oil traders ignore - or are ignorant of - this, imagining the futures/options markets to provide immediate and truly magical pictures of not just the present but what has yet to be. They believe in efficient markets, which is to say believe in what does not exist. They will usually not admit this since, in the search to justify positions, tend to ignore non-supportive Facts while accepting highly questionable Assumptions up to and including tripe such as 'peak oil'. From this, it's but a minor leap of faith to statements about SA - or others - producing at capacity, a leap which fails to grasp that this has been and is Managed production, and that actual production data is Proprietary. You might imagine that well known data providers' numbers are always accurate - if so, I'd suggest further research. On the refining side, we constantly hear of light sweet vs heavy sour, no matter that more and more refineries, globally, have been increasing their ability to throughput heavier crudes. On the demand side, there seems an ignorance of very basic economics accompanied by a belief that demand itself is not cyclic but straight line. From this we can get into a maze of academic studies re. elasticities, and find whatever 'proof' required. In short, 'experienced oil speculators' know that futures' prices contain non-fundamental variables that can and have pushed price well above (still ~$20) what fundamentals alone would dictate. That such gaps close is an historic given, as always, the 'trick' is when (and why). I still expect to see ~40/bbl by JUNE ex but, depending on geopolitical events, may be very wrong.
There is no refining capacity as some were damaged and being repaired due to the storm that killed NOLA
haven't read the bloomberg art. but Oil Trader is correct, utilization of US refinery capacity dropped to (a very low) 74.9 in early Oct, but has since recovered to around 90.0 (still fairly low). much of the damaged capacity has been brought back online, and it's my understanding that a number of refiners that postponed maintainance last year will begin this in the March-April time frame. So, depending on demand, we might see a greater than normal draw down on unleaded stocks.
Link to the updates below. For some reason I can't copy the tables, as of 1/27/06 there are still half million bpd shut down. "Refineries Still Affected by Hurricanes 1,047,200 Shut down â 557,000. " I don't think "reduced runs" are included so actual refining loss is probably larger. Do you think this might be the reason they can't unload more oil? The port is still not fully operational and storage capacity that is not damaged is probably full. Jodi http://www.electricity.doe.gov/about/about.cfm?section=about&level2=home Look at top stories on lower right side, latest report is there in pdf format. http://www.electricity.doe.gov/documents/gulfcoast_report_012706.pdf