Oil drops to $43 a barrel

That's what happens when the produces throttle back their output. None of the producers want $20/bbl oil. Hell, they don't even want $50/bbl oil, but they'll have to take what they can get.

 

It's interesting that even after the global economic cluster that has taken place the price of oil is still 3-4 times what it was at the end of the last century.

 

Once you get the sheep used to a certain price floor, then it's all good. Baaaa

 

Donald Trump was interviewed by O'Reilly last night.
when asked abt the economic cluster, he was adamant abt the fact that as long as Opec controls the oil, we are doomed.
that it should be $20/barrel today, not $40+.
he said that Opec is a monopoly and will continue to control the prices as long as we rely on their oil.
that once our economy returns, the price of oil will go up.

also told us to watch the Apprentice.

 

They're throttling back production because there is insufficient consumption. Reducing supply only increases a commodity's price when the demand is at the margin of supply. There is still more supply than demand.

You still have to look at the futures markets to determine what's going on, as the quoted price is the futures price for the current month. 'Paper oil' is still in more demand due to the absurd idea that commodities are an investment class. Go to https://www.theice.com/marketdata/reportcenter/reports.htm and select Category: Daily Volume and OI, Report: Daily Volume and OI - ICE Futures Europe. There is no way that real physical hedging would attract 290,000 trades in a day (Brent) or nearly 170,000 trades per day (WTI). Compare with UK Natural Gas, a non-indexed commodity: only 4,500 trades. These rates of trading are actually higher than at last year's peak prices.

 

OPEC have complained that there is too much futures price manipulation. When they increased output in response to government demands, the price went up; when they later reduced their output to combat the sharp price falls, the price continued to fall.

Trump is a commodities investor and should know full well that it's his fault (among others). H.R. 977, the Derivatives Markets Transparency and Accountability Act of 2009, must pass and soon. (It was introduced in the Agriculture committee as commodities investing, not corn for ethanol, was responsible for ballooning food prices last year.)

 

and outright demand for grain. Asian meat consumption has spiked over the past couple of years, putting increasing pressure on grain supplies.

I was just pointing out that supply has been cut back. I agree with your reason. The demand just ain't there, which is fine by me. I really don't like all of this speculation and gambling. This sort of nonsense should be done away with.

 

I saw John Vogle of Vanguard interviewed tonite on Bloomberg TV. He is testifying before Congress about IRA reform. He said 75% of the stock market today is owned by big financial companies--not individual investors. That is a big change from the past.

I believe what's happening in oil futures is the same as what's happening in the stock market. The big institutions are short of cash and are selling off in both markets. A lot of people don't understand that when you sell the price drops, when you buy the price goes up. It's that simple. These big institutions have lost a bundle gambling on bad debt, and now they are raising cash selling off oil and stocks.

Frankly, I don't think the public is being told the whole story of what's happening. You have to put 2 and 2 together and figure these things out yourself. OPEC has not been able to control the price of oil in quite a while--since deregulation of oil futures. They say it, and that's the evidence.

 

Yes, it's a giant scam. Truely criminal how most of the sheep are the ones paying the biggest price

 

Have you noticed that sheep figure into almost every discussion we have?

Tom

 

You miss my point. Throttling back production is not causing increases in gas prices. Increases in gas prices are disconnected from the level of actual production. Production is decreased because there's nowhere left to put the excess.

In yesterday's crazy market, WTI crude futures dropped 11% at one point. Sorry, no screenshot, but I did get this one a couple of weeks ago, on 19 February:



This is from the homepage of the InterContinental Exchange. Spot the V-notch at the end - prices dropped 4-5% then shot back up 5%. The highlight bar is on WTI Crude but the graph is for Brent - the site has a lot of lag. You'll have to trust me that WTI had a similar, but deeper notch.

 

I'm willing to start a new thread on that topic if you agree to participate in the discussion



I bet Tony and Evan are clutching their chests in unison, with tingling sensations in their left arms, just at the thought of it

 

Mike, crackin' graph, mate. That's interesting.

 

How fast can production be changed? A gigantic industrial infrastructure has got to take some amount of time to adjust.

 

Modern petrochemical plants can ramp production in realtime, due to modern digital control buses. Older plants, with a mix of pneumatic and discrete analog control, can require a few days to slowly adjust while keeping within UCL and LCL boundries

 

What about the rest of the supply chain going and coming? Things like ship loaded with crude and well production schedules.

How long would it take to shutdown tar sand extraction operations? I'm expect there are legal and political motivations for keeping production at a rate that might not match supply and demand in the short (and maybe? long) term.

The big picture question is would oil refining operations fluctuate with prices or be constrained by some production aspects to respond much more slowly?

 

Tanker deliveries require anywhere from 1-5 week notification. Apparently there are small fleets of full tankers more-or-less parked offshore Mid East, due to excess supply eg reduced demand

Well production is fairly constant for established wells. There is a definite production peak, with an upslope and then a downslope curve.

The Fort McMurray area can actually get a bit colder than Winnipeg in winter. All the heavy equipment will have to be properly "mothballed." That is, batteries removed, tires removed and put up on blocks, coolant drained, fuel drained, preservatives put into the engines, transmissions, and axles, etc

The production site will have to be mothballed as well. All the process steam and water piping would have to be "pigged" and then have a light oil run through to prevent corrposion

The pipelines would have to be mothballed by pigging and then having either a light oil or a nitrogen gas run through it. At one time, when pipelines were temporarily mothballed, methanol was run through them to clean them and absorb the moisture. With gas purging, the pipelines were left in fairly good shape. This was done to the Haines Pipeline in Alaska

Sheldon Museum and Cultural Center: Historical Vignettes

DEC - Contaminated Sites Program - Site Summary - Haines-Fairbanks Pipeline Corridor

Apparently, this process worked very well for the Haines Pipeline.

Probably related to jobs? Otherwise I know of no such legal or political requirement. The Tar Sands are now bleeding red ink very badly. Realistically, oil has to be +$70 a barrel for them to break even. The huge expansion push occured once oil pushed north of $100 a barrel

There is probably a higher interest in artificially constraining older refineries. These refineries have very high costs on the production curve, due to obsolete and energy-inefficient design and construction

Ideally, if fuel price is lowered, demand - consumption - increases, and production would have to increase.

 

Worthwhile information. It's now pretty clear that small fluctuations can be handled relatively quickly, but securing or starting a major operation or refinery is a very long term decision. One that's hard to make based just on price estimates.

 

Whoops, guess I never answered your original question: how long to shut down or "mothball" the Tar Sands?

If I were Project Manager of *that* task, I'd want at least 60 days to properly mothball all the equipment