Marc Faber On Oil

[broken_legs]

Coles:

If you believe that the economy is good and the events going forward will be positive, this is bullish for oil.

If you believe there will be WWIII, this will be even more bullish for oil.

http://www.cnbc.com/id/41961949

[TheRealTimHorton]

For someone who reads Zerohedge, I'm shocked you also read CNBC lol.

[broken_legs]

Originally posted by TheRealTimHorton
For someone who reads Zerohedge, I'm shocked you also read CNBC lol.


You know, for all the CNBC bashing that ZH does, there's still lots of great interviews, and good info on there mixed in with all the propaganda. :)

[JBreaks]

Oil inventories in N.America still overflowing, infact barely declined from the 2008 levels that helped send it to $32/bbl during the uncertainty.. Saudi upped production to gain on this unrest aka: "To balance production losses in Libya ect."... IMO oil over valued.. backwardation in futures supports this somewhat, eg traders are not buying the future at this level. a couple puts against July/Aug WTI futures might be a good speculative play.

But I'm talking 6 month time frame.... longer term I'm still a oil bull..... unfortunately no good financial device to get long term exposure exists outside buying a sh*t ton of oil... can't keep that in the garage.....bro.

[broken_legs]

Originally posted by JBreaks
Oil inventories in N.America still overflowing, infact barely declined from the 2008 levels that helped send it to $32/bbl during the uncertainty.. Saudi upped production to gain on this unrest aka: "To balance production losses in Libya ect."... IMO oil over valued.. backwardation in futures supports this somewhat, eg traders are not buying the future at this level. a couple puts against July/Aug WTI futures might be a good speculative play.

But I'm talking 6 month time frame.... longer term I'm still a oil bull..... unfortunately no good financial device to get long term exposure exists outside buying a sh*t ton of oil... can't keep that in the garage.....bro.

Doesn't backwardation also imply that there is delivery shortages? People are willing to pay more for immediate delivery than in the future.

ie Oil for delivery RIGHT F*CKING NOW is worth more than imaginary oil from the future?

The Silver market went into backwardation for the first time in history recently and look what happened.

Also, the supplies in the North American market don't really affect anything in the rest of the world. Haven't we been over supplied or at/near record highs in OIl Distilates and gasoline inventories for the last 18 months or so? Why did the price go up?

Saudi hasn't actually upped their production - They have upped the price to Asian and European markets.

Furthermore, the WTI doesn't tell you what refineries are actually paying for light sweet crude in the gulf (which last time I checked was closer to 120$ USD.

Anyways, just some random thoughts on the subject.

[JBreaks]

Price went up on speculation that this could be a huge issue that leads to a oil sucking war. The suez canal is the main transportation lane for a sh*t ton of energy, and the speculation that there would be some constriction here was a major price driver. We are talking WTI price here. Cushing delivery point gets something like 1% of oil from Egypt/Libya. North American Market not effecting the rest of the world..?? America is still by farrrrrrr the #1 consumer of petroleum products. Yes the market has been completely ignoring the supply side, my argument being that supply/demand will again set the price once the panic trading subsides and the revolutions/unrest is complete. Saudi actually increased production. That had previously restricted production (or just stored production) twice during 2009 when N.American inventories were legit maxed out (no more storage capacity). Note that when the Egypt thing started to wrap its self up, spot price plunged right back down to 86$. Days later this Libya unrest started, and people are actually being killed ect, its a bigger deal. Libya puts out about 1.8 Million bbl equiv a year... a drop in the bucket globally. The oil sands put out over 1.3 Million bbls of synth crude PER DAY, then including conventional and horizontal drilling, thermal, SAGD, nat gas ect in the rest of the western basin+ sask heavy oil.

[broken_legs]

Originally posted by JBreaks
Price went up on speculation that this could be a huge issue that leads to a oil sucking war. The suez canal is the main transportation lane for a sh*t ton of energy, and the speculation that there would be some constriction here was a major price driver. We are talking WTI price here. Cushing delivery point gets something like 1% of oil from Egypt/Libya. North American Market not effecting the rest of the world..?? America is still by farrrrrrr the #1 consumer of petroleum products. Yes the market has been completely ignoring the supply side, my argument being that supply/demand will again set the price once the panic trading subsides and the revolutions/unrest is complete. Saudi actually increased production. That had previously restricted production (or just stored production) twice during 2009 when N.American inventories were legit maxed out (no more storage capacity). Note that when the Egypt thing started to wrap its self up, spot price plunged right back down to 86$. Days later this Libya unrest started, and people are actually being killed ect, its a bigger deal. Libya puts out about 1.8 Million bbl equiv a year... a drop in the bucket globally. The oil sands put out over 1.3 Million bbls of synth crude PER DAY, then including conventional and horizontal drilling, thermal, SAGD, nat gas ect in the rest of the western basin+ sask heavy oil.

Suez canal has a pipeline - Goldman Sachs says its pumping around 2 million bbls/day. 2% of world oil production. Roughly equivalent to Libyas production. Roughly equivalent to the 'drop in a bucket' you mentioned.

Libyas production is entirely off line (?) last i heard.

So we have roughly 4 million barrels of oil going to Europe that is now at risk. Europe consumes roughly 13 million bbls/day.

Thats 30% of Europes supply, and thus why we see Brent so high.

The disconnect in prices between Brent and WTI is what I was referring to.

You're right - USA is the #1 consumer in the world. They are also the #2 producer in the world after Saudi.

NA is paying risk premium and supply disruption premium for a supply that is not being disrupted nor is at risk AFAIK.

What I understand is that light crude is being delivered well over the WTI price, despite the oil glut.

So IMO - what happens in North America (Supply GLUT) does not affect the price of oil in the rest of the world as we are currently seeing the price rising.

It's really not about how many % of world production a certain country makes, it's about what % production a certain can can get and what they are willing to pay to get more. Can't just build a new underwater pipeline or massive oil terminals to receive tankers overnight.


Anyways, thats my thoughts o the subject, and I think oil goes higher.