Cogent argument for recovery in commodities:
<<http://www.peakprosperity.com/blog/8238 ... ity-prices
financialization of commodities
Re: financialization of commodities
That is an interesting take on why oil prices have gone up. I do think financial traders have a lot to do with oil prices.
My take is that demand for crude oil ALWAYS goes up during the second half of the year because 90% of humans live in the Northern Hemisphere and a bunch of them heat their homes and businesses with oil. The oil markets are much tighter than most of us realize. U.S. crude oil inventories have dropped over 27 million bbls in the last three weeks.
This year the EIA estimates an increase in demand of over 2 million bbls per day from the low in April/May to a peak in Dec/Jan. The EIA now estimates the global demand for oil (really all hydrocarbon based liquid fuels and feedstock vs black oil) will go from 89.5 million BOPD in Q2 to 91.7 million BOPD in Q4.
To put this in prospective for everyone, North Dakota (home on the Bakken) produces 850,000 BOPD today. Texas produces close to 2 million bbls per day, so unless we just found another Texas, the market is tightening heading into the peak demand that ALWAYS comes in December. See http://www.eia.gov/petroleum/ (click through the charts and see how U.S. oil inventories are falling.)
Add the problems in the Middle East and you pile on a geopolitical risk premium, which I think will hang around for a while. Syria is a major problem and the violence is spreading.
My take is that demand for crude oil ALWAYS goes up during the second half of the year because 90% of humans live in the Northern Hemisphere and a bunch of them heat their homes and businesses with oil. The oil markets are much tighter than most of us realize. U.S. crude oil inventories have dropped over 27 million bbls in the last three weeks.
This year the EIA estimates an increase in demand of over 2 million bbls per day from the low in April/May to a peak in Dec/Jan. The EIA now estimates the global demand for oil (really all hydrocarbon based liquid fuels and feedstock vs black oil) will go from 89.5 million BOPD in Q2 to 91.7 million BOPD in Q4.
To put this in prospective for everyone, North Dakota (home on the Bakken) produces 850,000 BOPD today. Texas produces close to 2 million bbls per day, so unless we just found another Texas, the market is tightening heading into the peak demand that ALWAYS comes in December. See http://www.eia.gov/petroleum/ (click through the charts and see how U.S. oil inventories are falling.)
Add the problems in the Middle East and you pile on a geopolitical risk premium, which I think will hang around for a while. Syria is a major problem and the violence is spreading.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group