Oil Price - May 5

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dan_s
Posts: 37318
Joined: Fri Apr 23, 2010 8:22 am

Oil Price - May 5

Post by dan_s »

Phil Flynn

More Production Destruction

Oil prices are on the rise as traders are starting to see signs of production destruction. What is production destruction? It is the opposite of demand destruction. When prices go too high we see demand destruction or demand fall. When prices go too low we see cut backs in spending and investment that will cause production to fall. We are now seeing the early stages of production destruction of a mammoth scale that will be felt for years to come.

While oil prices seemed to focus on the Energy Information Administration (EIA) report that showed that oil supply increased by 2.874 million barrels last week, the real story was another drop in U.S. oil output that fell for the eight week in a row. It seems that the trend of falling output may be accelerating. The EIA reported that U.S. oil production fell to 8.825 million barrels a day, down from 8.938 million barrels a day the week before.

Full article: http://www.investing.com/analysis/the-e ... -200128183

"We continue to say as we have for months that we are at a generational low in the oil market. We are at what we believe is the bottom end of a historic bust cycle that will at some point be a new super spike. While the biggest risk to this call is another global economic crisis the reality is that the history of global oil prices suggests that prices will be substantially higher in the future. When you kill billions of barrels of future production we will see a shortage in the future. Plan for the future now by strategies that are long-term in focus."
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 37318
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - May 5

Post by dan_s »

Two events also adding upward pressure on oil prices:
> Wildfires in Canada that may disrupt oil output
> Further disruptions in Libya with eastern and western political factions fighting in a stalemate and preventing the cargo to be lifted out of port.

As Supply / Demand comes back to balance we should see $10 added to oil price for geopolitical risk to supply.
Dan Steffens
Energy Prospectus Group
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