Energy Prospectus

A Welcome Return for $100 Oil
By Nick Hodge | Tuesday, February 1st, 2011
And just like that, $100 oil has returned.
(You can't say we didn't tell you it was coming here, here, here and here.)
Chest-pounding aside, if you've prepared correctly, Benjamin-a-barrel oil should come as a blessing.
But if you're like most, blaming some faceless “they” for the new weight on your wallet because you were too lazy or stupid to see what was coming, rising petro prices can be a petulant penance...
For those of you in the latter group, this is your last warning:

There is no “they”. They don't control oil prices... They can't just pump more.
There is only supply and demand — and people like you and me betting on which one will win.
Yes, as the chart shows, oil can jump 8% in eight hours. It could also go up 80% in 80 hours.
There's nothing stopping it.
The Suez siren
As unrest grows in the Middle East, traders quickly sent oil back to territory not seen in more than two years. Brent rose as high as $101.73.
It hasn't been that high since September 2008. You remember that month, right?
Anyway, the Egyptian situation should serve as a clear indication that oil prices are headed much higher.
The reality is that Egypt has little impact on the physical oil market. Crude that moves through the Suez Canal and SUMED Pipeline only accounts for 2.5% of global demand — a mere 2.1 million barrels per day.
That should be your siren. A blaring, piercing, deafening warning that the tiniest disruption in supply will send traders — and, therefore, price — over the edge.
The 2.1 million BPD that flow through Egypt have not even been disrupted... Oil prices jumped almost 10% because people think they might be disrupted.
What happens to the price of oil if they actually are disrupted?
More importantly, what happens to the price when there's an actual 2.1 million BPD shortfall because of the dwindling availability of easily available oil?
I believe traders sending up the price over the past few days is a function of psychological reaction to the realization of Peak Oil... But Egyptian tensions make a great cover.

Brent closed at over $102/bbl today. (BTW this is very good for TGA)
There is a lot of crude oil at Cushing, OK that is keeping a lid on WTI. When this oil at Cushing is moved out it the gap between Brent and WTI will close.

Also a good link for oil prices.

http://www.upstreamonline.com/marketdat ... _crude.htm

MSG from the BRY board.and new high
Oil price shoots above $103 on Egypt crisis
Feb 3 09:45 AM US/Eastern
Brent crude rallied to a 28-month high above $103 on Thursday as the political crisis in Egypt erupted into violence, sparking fresh concern over energy supplies in the crude-rich Middle East.
"The continued unrest in Egypt has prompted Brent oil prices to climb overnight to $103 a barrel, the highest level since September 2008," said Commerzbank analyst Carsten Fritsch.

Brent North Sea crude for delivery in March climbed to $103.37 a barrel -- the highest level since September 26, 2008. It later stood at $102.67 in London trade, up 33 cents compared with Wednesday's close.

New York's main futures contract, light sweet crude for March, gained 79 cents to $91.65 per barrel.




Msg: 65650 2/3/2011 9:31:28 AM
Author: rdesroch

Why Brent Trades Much Higher Than WTI
(I caame across this article)

But West Texas Intermediate is trading at an all-time discount to other grades of oil. Last week, it was trading at a record $12 per barrel discount to competing European Brent Crude. Until the Egyptian uprising captured the market’s attention, the two prices were actually heading in opposite directions with WTI sinking to a two-month low of $85 per barrel, while Brent was within a dollar of triple digits.

The divergence is no mystery. Unlike Brent crude from the North Sea, which can be shipped to refineries pretty much anywhere in the world, oil in storage at Cushing can only be absorbed by refineries in the U.S. Midwest. With nowhere else to go, WTI is not even an accurate barometer for oil prices in the U.S. market, let alone the global market. For example, the price spread between it and Light Louisiana Sweet on the Gulf coast is as big as its spread with Brent. And by all accounts, the spread between WTI and Brent is going to become even bigger, rendering the former increasingly irrelevant as a global pricing benchmark.

It is largely new crude from the Alberta oil sands piling up at Cushing these days, often coming in much faster than local refineries can process it. And within a couple of months, there is going to be another 150,000 barrels a day of Alberta crude coming down Transcanada Corp.’s newly completed arm of its Keystone Pipeline that will connect Cushing with the flow of oil sand crude from Hardisty, Alberta.

Until TransCanada can connect the ever-increasing flow of crude from the oil sands to refineries on the Gulf of Mexico (not likely before 2013), there is going to be a bigger and bigger disconnect between WTI and global crude demand as more oil piles up at Cushing.

As that happens, the oil industry and the investment community will look to Brent as the new benchmark for global oil prices. Soaring purchases of Brent crude contracts have already driven the European oil benchmark to the highest level in five months against NYMEX oil futures contracts as more investors bet it is a better indicator of global demand.

So don’t be fooled by bloated inventories of Canadian crude held in storage in the middle of nowhere. Check out the Brent March futures contract if you want to know where world oil prices are trading.

And when you do, you may just find you are already in a world of triple digit oil.