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Old 10-21-2015, 11:47 AM   #1
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Default Oil Glut Appears To Be Getting Worse, Not Better

Wed, 21 October 2015 14:18

Back in the spring, oil prices plunged to 7-year lows amid fears that U.S. inventories were going to fill to the brim. As we all know now, that didn’t happen – although they did peak at a mighty 490 million barrels.

Fast forward six months, and the global crude market still resembles a saturated sponge trying to mop up an additional two million barrels per day of excess supply. Fears of running out of storage space in the U.S. during the refinery maintenance season have retreated. Instead, a much scarier specter is haunting the oil markets: that of global storage topping out. Some would dismiss this out of hand as preposterous, but read on.

Related: Day Of Reckoning For U.S. Shale Will Have To Wait
What started as hints of congestion in early September has morphed into a body of evidence for swelling floating storage. A rapid spike in freight rates in recent weeks for VLCCs (very large crude carriers) was initially interpreted as a bullish phenomenon, driven by surging demand from China.

This was not a wholly unreasonable conclusion to jump to; it is common knowledge that China has voraciously been filling strategic petroleum reserve sites in areas such as Huangdao and Shandong this year. In addition, the Chinese are historically renowned for going on bouts of bargain-hunting amid lower oil prices – an opportunity that the recent swoon in prices has presented in abundance.

But as a build-up of oil tankers outside Chinese ports have proven in recent weeks, the spike in freight rates is not due to a ramp up in demand, but instead due to over-congestion. Wait times outside Chinese ports have lengthened considerably, although producers have the consolation that those barrels are already committed to an end-user.

Related: The End Of The European Refining Boom Or Just A Pause?
The situation in the U.S. Gulf is not much different. Over the last couple of weeks, vessels have been sitting at anchor for longer before off-loading. This has pushed the total overhang sitting off-shore in the Gulf close to 20 million barrels, double the usual volume that is waiting to discharge. To put this into perspective: This is an entire week’s worth of imports for Gulf Coast refiners.

Further signs of oversupply have come in the form of idling vessels, laden with crude, sitting off the coast of Singapore. This indicates one of two scenarios: either no buyer can be found for the crude, or that the buyers have no place to store it. This anomaly was even alluded to by the IEA in their monthly oil report out earlier this week, highlighting that oil at trading hubs in Europe and Asia is being stored on ships, even though the economics don’t seem to justify this move.

Related: A New Era For Canadian Oil And Gas, For Better Or Worse
But the most startling sign that global inventories could be full is being pointed to by activity – or a lack thereof – in the Arab Gulf. While a recent drop in West African crude loadings can be explained away by the lack of vessel availability due to the traffic jam in Asia, what is less easy to justify is the number of oil VLCCs idling in the Arab Gulf. Our ClipperData shows seven cargoes holding 13 million barrels of crude in this area, seemingly in a similar fashion to Singapore; there is either an absence of buyers or storage capacity. Or both.

What started with congestion in China now appears to be a traffic jam stretching half way around the world to the Arab Gulf. The best case scenario is that this is a temporary phenomenon caused by strong fall global refinery maintenance season. But even if this is the case, it serves to highlight that the current global oil glut appears to be getting worse, not better.


By Matt Smith
http://oilprice.com/Energy/Crude-Oil...ot-Better.html

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Old 10-21-2015, 12:55 PM   #2
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Saudi, US Oil Inventories Hit Record High
as Demand Fizzles

by Wolf RichterOctober 19, 2015

The amount of oil in storage globally, not including the various “strategic petroleum reserves” in the US, China, Europe, Japan, and other locations, has grown to staggering proportions this year, as oversupply drowns out tepid demand.

In the US, oil storage is seasonal. A big buildup starting late fall gets Americans and their favorite gas or diesel sipping or guzzling toys or clunkers through “driving season” – late spring and summer – when somehow everyone has to drive somewhere. After driving season, petroleum stocks fall. This pattern has played out this year as well, but with a difference.

Last week, the EIA reported that crude oil stocks rose 7.6 million barrels to 468.6 million barrels, the highest for this time of the year since records have been kept. Crude oil stocks are now 98 million barrels higher than they were last year at this time, when they were already bouncing into the upper end of the 5-year range.

This chart from the EIA shows the out-of-whack relationship between the five-year range (gray area) and the weekly buildup (blue line) this time around:




Instead of getting better somehow, this situation simply got worse over driving season. At the peak of the buildup this year, crude oil stocks were 22.5% higher than a year earlier. Now they’re 26.4% higher than they were at this time last year.

If the inventory buildup this fall, winter, and spring continues in this manner from today’s much higher starting point, we can look forward to a fiasco on the storage front – and on the pricing front. Because at this rate, by April, we’ll be having oil coming out of our ears!

But this is a global issue for producers (or conversely, an opportunity for oil consumers). Here’s Saudi Arabia, which has been pumping oil at record levels to maintain its market share against Russia and the boys from the oil patch in the US and Canada: its inventories are ballooning too.
Matt Smith of Oilprice.com reported:
Finally, a theme of high global inventories has once again thrust itself into the limelight, as JODI data over the weekend highlighted that Saudi Arabian crude stocks have reached a record high of 326.6 million barrels in August. As Saudi continues to keep production elevated, and as it struggles to find a home for all its exports amid a highly-competitive global market (awash with crude), this extra oil is finding its way into stockpiles as exports ease (chart via Oilprice.com):





Add to the calculus the additional supply Iran will deliver to the global market as the sanctions are lifted. Which will come regardless of what OPEC says, Oil Minister Bijan Namdar Zanganeh assured reporters today in Tehran.

He saw no imminent change in OPEC’s production strategy though he urged other members to cut production, presumably to make room for additional Iranian oil, so that oil prices would somehow rise to a range of $70 to $80 a barrel.

Just about all producers want that. Even the world’s high-cost Canadian tar-sands players might live to see another day at this price range. But rather than just go away, this problem, given the ongoing inventory buildup and production increases, is more likely to get really ugly.

For US oil, 2016 is going to be brutal, according to the CEO of oil-field services giant Schlumberger. But then, there are dreams of “a potential spike in oil prices.” Read… The Dismal Thing Schlumberger Just Said about US Oil

http://wolfstreet.com/2015/10/19/sau...emand-fizzles/

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Old 10-21-2015, 01:21 PM   #3
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This was not a wholly unreasonable conclusion to jump to; it is common knowledge that China has voraciously been filling strategic petroleum reserve sites in areas such as Huangdao and Shandong this year.

In addition, the Chinese are historically renowned for going on bouts of bargain-hunting amid lower oil prices – an opportunity that the recent swoon in prices has presented in abundance.
Not just oil but all raw commodities.


Quote:
The situation in the U.S. Gulf is not much different. Over the last couple of weeks, vessels have been sitting at anchor for longer before off-loading. This has pushed the total overhang sitting off-shore in the Gulf close to 20 million barrels, double the usual volume that is waiting to discharge. To put this into perspective: This is an entire week’s worth of imports for Gulf Coast refiners.
I am not an expert on oil trading and sales but I think the price is decided at delivery. Making a super heavy wait a week can have some not insignificant cost savings if the price is sliding anyway.

I also hearing that refineries in the Gulf Coast are almost 100% capacity. No time to even do turn arounds.

Quote:
Further signs of oversupply have come in the form of idling vessels, laden with crude, sitting off the coast of Singapore.
A lot of speculative trading in the world including Singapore. Same as above or someone bought the options and trying to unload it. I don't think there are any refineries in SG. Malaysia and other countries in the region, yes.
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Old 10-21-2015, 09:41 PM   #4
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An "increase" in productivity (demand/need) would solve this problem overnight. There is a term for this......... (I am just pointing out that the "pump" is getting "primed").
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Old 10-21-2015, 10:11 PM   #5
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Will someone hurry up and give Andy his room already?!?
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Old 10-22-2015, 01:12 AM   #6
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It is one thing that Russia is selling oil below cost..... it is another thing when Russia can not sell oil!

Just to make this worse, Iran is about to get back into the oil exporting business. This will push the price of oil cheaper. There is nowhere for the oil to flow. It would be Peak Oil in reverse. Everybody is going to try to undercut everybody else. China is going to revalue it's currency and arm their new islands. Russia is going to grab the ME and strangle the Saudis. Europe has a big problem. Just saying.

Maybe I am just being paranoid? It is sort of fun in a gruesome fashion.

By the way, did you hear that Russia disconnected their country from the internet? They wanted to see if it would work. They are working out the mechanics of what the world would look like.
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Old 10-22-2015, 01:58 AM   #7
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OH? WWIII????
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Old 10-22-2015, 09:43 AM   #8
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Saudi Arabia and the Russians are in a game of petroleum chicken where neither seem able to take their foot off the gas.
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Old 10-22-2015, 12:00 PM   #9
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+ Russia is spending millions as a effective economical counter sanction toward the US in Syria.
Hard times all around.
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Old 10-29-2015, 08:11 PM   #10
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I just wanted to mention that Venezuela is going broke because it can not sell oil.
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Old 10-30-2015, 08:22 AM   #11
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The world around who is laughing about this and who is crying?
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Old 10-30-2015, 08:29 AM   #12
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I imagine cheap oil globally should be quite helpful at a time like this .

Sadly nothing like enough though .

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Old 10-30-2015, 08:41 AM   #13
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Yes, but *specifically* who is benefiting from this cheap oil glut and who is losing?

I am of the opinion that the parties responsible for starting this have lost control of what is going on so that gain/loss equation is now out of whack.

Overall I think this is very good for most of the industrialized nations. Were it not for the relatively cheap energy available our current economic mess would be a good deal worse than it presently is.

It's killing the energy exporters though. I'm having difficulty in feeling sympathetic however as historically these last forty years or thereabouts they have caused real grief to a large part of the global population. Saudi Arabia, Iran, Venezuela, Russia, et al.
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Old 10-30-2015, 09:13 AM   #14
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Quote:
Originally Posted by A.T. Hagan View Post
I'm having difficulty in feeling sympathetic however as historically these last forty years or thereabouts they have caused real grief to a large part of the global population. Saudi Arabia, Iran, Venezuela, Russia, et al.
And Norway, the country of the whale killers.

When the oil prices went up, the economists started wailing. When the prices go down, they are also wailing. When will they not wail ?
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Old 10-30-2015, 09:14 AM   #15
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Obama, GOP Want To Sell Off 40 Percent Of US Strategic Oil Reserves To Fund Gov’t Programs

Quote:
Lawmakers are pushing legislation that could result in the selling off of 266 million barrels of oil from the country’s Strategic Petroleum Reserve (SPR) over the next decade, mostly to fund more government spending....

Legislation for health care, highway funding and financing the government could end up drawing on down on oil supplies meant for emergency situations. If all three bills are signed into law, some 266 million barrels, or nearly 40 percent, of the current 695 million barrel SPR would be sold off in the next decade to raise about $23 billion....
And I was thinking now would be a good time to buy oil to add to the reserve. pfffftt!

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Old 10-30-2015, 09:53 AM   #16
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I think this started out as the Saudis trying to put the shale'ers out of business. Instead the shale'ers are putting all of their chips from mega-project funding into shale. There may be little profit in shale - but it is NOT a mega-loss. The net result of the unintended consequences is to make the world more unstable. Th ere are a lot of Soviet aligned, hungry Venezuelans who might want to start migrating our way?

The Russians, Syrians, and Iranians are going to pressure the Saudis. Israelis going to freak out.... I just do not see good times ahead.

Now the US is going to sell off it's oil reserves to do liberal funding.
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Old 10-30-2015, 09:54 AM   #17
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Essentially all the US employment gains in the last 7 years have been in the oil and gas industry—same for wage increases, which have been dismal elsewhere. Energy has also been the only bright spot in a chronically gloomy balance of trade picture for this country. The steel industry and manufacturing in general have both become increasingly dependent on a (now shrinking drastically) energy field, and even IT is being heavily affected.

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Old 10-30-2015, 10:40 AM   #18
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It's definitely hurting Canada, and my city. The "tube mill" next to the steel mill here has let everyone go. No need for pipe for gas.

I would imagine it's hurting the east coast area, too. Traditionally a very low employment area, a lot of those people were working in Alberta, and have been let go.

Don't know if we can take another year of this.
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Old 10-30-2015, 02:36 PM   #19
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rb - Suncor is making some big moves - trying to buy up all outstanding shares of Canadian Oil Sands among other things. OTOH, Husky is still shedding jobs. Think we'll continue to see the marginal players shrivel away & the big boys taking the short term hits for some long term gains.

Sure not fun if you're directly employed in that sector or in supporting occupations.
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Old 11-05-2015, 09:47 AM   #20
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Oil edges up, but signs point to growing glut of barrels

LONDON | By Amanda Cooper
Markets | Thu Nov 5, 2015 7:09am EST
Reuters/Nick Oxford

Oil prices rose on Thursday, paring some of the losses incurred a day earlier after data showed U.S. inventories had risen for a sixth week and weakness spread through the physical market.

On Wednesday, oil fell nearly 4 percent after the Energy Information Administration said U.S. crude inventories added 2.85 million barrels last week, in line with forecasts, despite a drop in imports to their lowest level since 1991. <EIA/S>

Brent crude futures LCOc1 were up 17 cents at $48.75 a barrel by 1135 GMT on Thursday, nearly 4 percent below four-week highs above $50 hit two days earlier.

U.S. crude futures CLc1 rose 10 cents to $46.42 a barrel, having lost 3 percent the day before.

"Production was a bit higher in the U.S. It wasn't a good number and I think that kind of killed the sentiment," Petromatrix analyst Olivier Jakob said.

"For me, (Brent) is still really in a range. Each time it goes up $2, people get a bit excited, but then it goes back down $2. Technically, there is no trend," he said.

The discount in the price of oil for immediate delivery relative to that for delivery in a year, or contango, neared its largest in nearly two months this week, touching $7 a barrel.

This gap in price can often reflect the perception that near-term demand is falling short of supply.

Ample supply of North Sea crude, which underpins the benchmark futures price, has pushed physical prices to their lowest since June. [CRU/E]

"The contango in Brent futures could widen more than the current levels ... just looking at the weight of the physical market," Jakob said.

Contributing to the generally bearish sentiment was an internal OPEC document seen by Reuters that showed weaker demand in the next few years for oil from the group.

OPEC oil ministers will meet on Dec. 4 to decide whether to extend their year-old strategy of allowing prices to fall to slow higher-cost rival supply.

OPEC, along with Russia, is unlikely to change tack, BMI Research said in a note on Thursday.

"Our view remains that OPEC and Russia will continue on their strategy of producing as much oil as possible to squeeze out higher-cost producers," BMI said.

"With oil production of major producers strong, falling output from U.S. shale will be insufficient to balance the oversupplied oil market over the next two years," it said.

(Addtional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)

http://www.reuters.com/article/2015/...0SU03Z20151105

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Old 11-06-2015, 04:40 PM   #21
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Is this Peak Oil in reverse?
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Old 11-12-2015, 02:44 PM   #22
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Crude prices tumbled to 2½-month lows on Thursday after the U.S. government reported a stockpile build four times above market expectations.

Also weighing on markets was an OPEC forecast that said maintaining the producer group's current pumping rates would boost supplies by half a million barrels of crude daily by next year.

Crude futures were down about 3 percent each after U.S. oil inventories rose for a seventh straight week. Stockpiles increased by 4.2 million barrels last week, compared with expectations for a million-barrel build in a Reuters poll and an earlier report of a 6.3- million-barrel jump by industry group American Petroleum Institute (API).

"It's another data point highlighting the oil glut in the U.S. or the global markets for that matter," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

Read MoreTexas jobs, consumer economy feel the low price of crude oil

Brent crude futures were down $1.47 at $44.34 by 12:46 p.m. EDT (1746 GMT), near the lowest level since Aug 27.

U.S. crude futures fell $1.09 to $41.84 a barrel and also hit the lowest intraday level since Aug. 27.

Crude futures have fallen in six of the last seven sessions, losing more than $5 a barrel.

Gasoline stocks, which have been hovering at seasonal record highs since early October, fell by 2.1 million barrels, compared with analysts' expectations in a Reuters poll for a 807,000 barrels drop.


Distillate stockpiles, which include diesel and heating oil, rose by 352,000 barrels, versus expectations for a 931,000 barrels drop, the EIA data showed. Inventories now stand at their highest for this time of year since 2010.


Read More Average US gasoline price edges higher, ends 19-weeks of losses: Lundberg



Futures had earlier steadied as demand for gasoline and technical buying offset worries about a large global supply glut.


Gasoline margins in Europe have tripled since mid-October as low prices boosted consumption.

Demand is also strong in the United States, where gasoline importers on the East Coast are losing a trans-Atlantic tug-of-war over European supplies, outbid by Nigerian buyers anxious to avoid a holiday shortage.

"There is strength across the gasoline complex, which is supportive, and there is technical support as we reached the bottom of a two-month range yesterday," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.


Brent is still down more than 3 percent this week after a 4.3 percent fall last week on worries about a global glut and little sign of significant cuts in production


Read More Top Gulf state plans oil expansion, bets on recovery


Sentiment has also been hit by a growing sense that Asia's two biggest economies were slowing sharply after China's factory output growth eased further.


The slowdown in China has pulled down the entire commodity sector, with products such as crude, copper, liquefied natural gas, coal, and iron ore down between 20 and 30 percent this year.


Adding to demand worries are fears that Japan's economy may have fallen into recession and that emerging markets across the world are struggling with a debt mountain that threatens growth.


http://www.cnbc.com/2015/11/11/us-oi...month-low.html

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Old 11-13-2015, 02:55 PM   #23
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Nov. 13, 2015, 10:38 AM
Crude oil tumbled towards $40 per barrel on Friday morning.

West Texas Intermediate crude futures in New York fell to as low as $40.47 a share, a drop of more than 3% to the lowest level in about two and a half months.

Crude oil is extending a decline that worsened after data from the Energy Information Administration (EIA) on Thursday showed that US inventories rose for a seventh straight period last week.

The International Energy Agency's (IEA) monthly report warned on Friday that with a record 3 billion barrels of oil in stockpiles, the "overhang" that first developed in the US is spreading across the world.

And although demand has risen to a five-year high, it's expected to ease in 2016, as the factors that boosted it fade.

"The impact of oil's steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China," the IEA said.

There were also a few notable oil-price forecasts this week, including the EIA's lowered projection for 2016 average oil prices by $2 per barrel to $56 per barrel.

Later on Friday, driller Baker Hughes will release its weekly tally of US oil rigs.

This chart shows the decline in oil prices on Friday:

fut_chart (5)
Finviz Please enable Javascript to watch this video


More: Crude Oil



http://www.businessinsider.com/crude...ber-13-2015-11
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Old 11-13-2015, 04:00 PM   #24
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We're not going to forget how to explore and frack for oil and gas. The reserves in direct U.S. control are not going to go anywhere. They'll still be there for when we really need them.

In the meanwhile Saudi Arabia, Russia, Iran, Venezuela, and many other oil producers are bleeding themselves white trying to do each other in which is resulting in many heavily petroleum dependent industries around the world not being under quite so much pressure as they were before.

I have not forgotten what it was like to pay $4.00plus for a gallon of gas. There are millions around the world who have not seen a significant pay raise (or any raise at all) for years now. If we cannot get a raise at least one of the commodities we simply must buy regardless has come down in price.
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Old 11-13-2015, 11:27 PM   #25
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We hit the economic tipping point.....
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