Oil Prices: Why I believe they will move higher
Posted: Fri May 25, 2012 3:09 pm
May 24th EIA report on spare oil capacity below. You need to read it carefully.
Keep in mind that the sanctions agains Iran go into effect on July 1 and the Iranian oil exports are already on the decline. Plus, IEA (based in Paris) estimates that oil demand will go up from 88.7 million bbls per day in Q2 to over 91 MMBOPD by Q4. Supply/Demand fundamentals are very strong for oil. The 2.3 MMBOPD difference is 4X higher than all oil being produced in North Dakota.
The recent drop in oil prices is all because the U.S. dollar has gone up against the Euro. U.S. dollar is just "the cleanest dirty shirt in the drawer". U.S. economy sucks too but it looks a heck of a lot better than Europe, so banks are buying U.S. dollars.
Article and chart at:
http://www.eia.gov/todayinenergy/detail.cfm?id=6410
The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart above). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). Spare capacity can serve as a buffer against oil market disruptions, and it gives OPEC additional political and economic influence in world markets. There is little or no spare capacity outside of the OPEC member countries.
Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates.
Spare crude oil production capacity is an important indicator of producers' ability to respond to potential disruptions; consequently, low spare oil production capacity tends to be associated with high oil prices and high oil price volatility. Similarly, rising spare capacity tends to be associated with falling oil prices and reduced volatility. However, spare capacity must also be considered in the context of a number of other market factors that can drive crude oil prices, such as global supply, demand, and inventory levels.
EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.
Keep in mind that the sanctions agains Iran go into effect on July 1 and the Iranian oil exports are already on the decline. Plus, IEA (based in Paris) estimates that oil demand will go up from 88.7 million bbls per day in Q2 to over 91 MMBOPD by Q4. Supply/Demand fundamentals are very strong for oil. The 2.3 MMBOPD difference is 4X higher than all oil being produced in North Dakota.
The recent drop in oil prices is all because the U.S. dollar has gone up against the Euro. U.S. dollar is just "the cleanest dirty shirt in the drawer". U.S. economy sucks too but it looks a heck of a lot better than Europe, so banks are buying U.S. dollars.
Article and chart at:
http://www.eia.gov/todayinenergy/detail.cfm?id=6410
The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart above). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). Spare capacity can serve as a buffer against oil market disruptions, and it gives OPEC additional political and economic influence in world markets. There is little or no spare capacity outside of the OPEC member countries.
Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates.
Spare crude oil production capacity is an important indicator of producers' ability to respond to potential disruptions; consequently, low spare oil production capacity tends to be associated with high oil prices and high oil price volatility. Similarly, rising spare capacity tends to be associated with falling oil prices and reduced volatility. However, spare capacity must also be considered in the context of a number of other market factors that can drive crude oil prices, such as global supply, demand, and inventory levels.
EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.