Oil Update
I continue to be amazed at $60+ oil while supply/demand fundamentals continue to deteriorate for the dinosaur juice.
There are now indications that Nigeria's oil production will rebound following this weekend's Presidential elections. Production from two Nigerian fields would be slated to return 320,000 b/d from Forcados and 145,000 b/d from the offshore EA field. These two oil streams have been off-line since January 2006. If these Nigerian barrels return as planned, they would displace other OPEC oil and free up additional spare capacity, a bearish event. Meanwhile, non-OPEC production is running well above expectations and demand is moderating across the globe. How much longer can the market ignore the fundamentals and continue trading on irrational fear???
There are now indications that Nigeria's oil production will rebound following this weekend's Presidential elections. Production from two Nigerian fields would be slated to return 320,000 b/d from Forcados and 145,000 b/d from the offshore EA field. These two oil streams have been off-line since January 2006. If these Nigerian barrels return as planned, they would displace other OPEC oil and free up additional spare capacity, a bearish event. Meanwhile, non-OPEC production is running well above expectations and demand is moderating across the globe. How much longer can the market ignore the fundamentals and continue trading on irrational fear???
posted by Never-Limp at 2:32 PM
4 Comments:
I agree with you in general and in the long run on this. the more i learn the more it doesn't make fundamental sense
but: gasoline demand seems to be far above expectation
the brent nymex backwards spread is wierd and supports prices unless brent drops which i have no reason to expect either outcome on
iran/iraq fear will not go away anytime soon with that baked in how does oil go below 55?
Plus hurricane fear all summer/fall
What do you see that could happen to change things in the next 6 months?
My thinking on oil is mostly long term but I continue to see non-OPEC supply running above expectations and overall demand below expectations despite good gasoline demand.
There have always been geopolitical and hurricane fears in the past but they never generated a massive "fear premium" like they have in the last few. I simply think those fears are irrational and overblown. Despite what you might hear, Iran can not stop the flow of oil out of the Middle East.
Oh, my long-term stance on oil basically goes like this:
The world will be able to get all of the oil it ever needs out of the ground at $40 bbl.
Also, the 3.8% growth in gasoline demand likely relflected stockpiling since vehicle miles driven data showed Jan and Feb down 1.4%. I'm expecting weaker demand in the coming months. The refinery stocks are probably topping here.
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