Oil Price - is reality about to set in for a while?
Crude Oil is overflowing everywhere - and until a week or two ago nobody knew why everyone everywhere was building up such huge stockpiles.... now we do.
World politics and economics have seemed to moved on a dime as trade and possibly real wars have come from the laughable to the edge of reality. Clearly now, the powers that be all over the place have had more information than the rest of us.
Apart from tank-tops and barges floating around full of crude and products unable to unload for lack of space in the US, China has for the past two years built up huge strategic oil reserves that could last for years - without having to import huge extra amounts for a while if necessary. The market was expecting this to be a continuing trend of increasing demand and economic growth in China and the US. But the now obvious was ignored - why were stocks really being built up?
China has been stockpiling vast amounts of crude under the radar for a while, taking advantage of secrecy around their strategic reserves and working around the edges of all the OPEC countries' rules regarding OPEC caps. They have built unbelievably huge onshore tank and underground facilities that are now full, and indeed despite lakes of stored crude there are now ships floating around China too full of crude because there is little space left - and not for lack of facilities onshore. I know because I work in the industry and have heard of very large sales of crude on the side for a while now - which did not seem to make sense, until now.
China can also very easily govern its crude oil and petroleum products usage. Apart from that, a large economic slowdown is underway. They might not need to buy that much more for a while - just enough to keep topped up. The US is now producing so much there will be no shortage there. Cushing might indeed become a lake of crude over the next few years looking at these recent stockpile records!
The US, Saudis, Russians, etc, can pretend to close down the Persian Gulf, bomb the Middle East and Iran to smithereens, set up Venezuela in perpetual stasis, stir up trouble in Nigeria and North Africa, and do whatever else to try and make crude oil prices continue to artificially surge. But, ironically, the market may have now trumped itself in its own greed and misconceptions as to why demand was really there this last little while. Simple supply and demand will put all the stories to bed.
There is now far too much crude oil and products everywhere, despite the ridiculous scare stories written by journalists whose jobs it is to scare up oil prices. Crude, as asset prices worldwide, are probably around 60-80% overpriced, and all will fall together in the correction probably just starting.
World politics and economics have seemed to moved on a dime as trade and possibly real wars have come from the laughable to the edge of reality. Clearly now, the powers that be all over the place have had more information than the rest of us.
Apart from tank-tops and barges floating around full of crude and products unable to unload for lack of space in the US, China has for the past two years built up huge strategic oil reserves that could last for years - without having to import huge extra amounts for a while if necessary. The market was expecting this to be a continuing trend of increasing demand and economic growth in China and the US. But the now obvious was ignored - why were stocks really being built up?
China has been stockpiling vast amounts of crude under the radar for a while, taking advantage of secrecy around their strategic reserves and working around the edges of all the OPEC countries' rules regarding OPEC caps. They have built unbelievably huge onshore tank and underground facilities that are now full, and indeed despite lakes of stored crude there are now ships floating around China too full of crude because there is little space left - and not for lack of facilities onshore. I know because I work in the industry and have heard of very large sales of crude on the side for a while now - which did not seem to make sense, until now.
China can also very easily govern its crude oil and petroleum products usage. Apart from that, a large economic slowdown is underway. They might not need to buy that much more for a while - just enough to keep topped up. The US is now producing so much there will be no shortage there. Cushing might indeed become a lake of crude over the next few years looking at these recent stockpile records!
The US, Saudis, Russians, etc, can pretend to close down the Persian Gulf, bomb the Middle East and Iran to smithereens, set up Venezuela in perpetual stasis, stir up trouble in Nigeria and North Africa, and do whatever else to try and make crude oil prices continue to artificially surge. But, ironically, the market may have now trumped itself in its own greed and misconceptions as to why demand was really there this last little while. Simple supply and demand will put all the stories to bed.
There is now far too much crude oil and products everywhere, despite the ridiculous scare stories written by journalists whose jobs it is to scare up oil prices. Crude, as asset prices worldwide, are probably around 60-80% overpriced, and all will fall together in the correction probably just starting.
Nota
I'VE WORKED OUT HOW THIS COULD POSSIBLY BECOME A BLACK SWAN!It's taken ages to figure. Crude is the most manipulated market on earth...
It's simple. Crude prices are being pushed higher on geopolitics. But theoretically, Iranian Crude does not form part of world pricing anyway. And certainly no longer US WTI ought to be affected by world prices, since the US is now self-sufficient. But turns out everyone has lakes of Crude in reserve. The straights of Hormuz could be closed, but would make no difference to supply for months if not years. Turns out in the meantime Iran has still been shipping huge quantities to China, now sitting in bonded storage and probably in the national reserve - which. would not show up anywhere and not be a breach of sanctions so far. So large amounts of their crude is already there, one document away from the market... Moreover, the Gulf Opec countries have for months, if not the last few years, done. the same thing to get around their very own OPEC restrictions. Even Saudi, carrying on about their "cuts" have no doubt built up huge stocks stored in the Far East or sold into national reserves, which would not be caught by the OPEC restrictions or not show up in the figures anyway....
At the same time US crude production is reaching an all time high.
Oil is a commodity. One extra unnecessary barel is worth ZERO.
All the Crude is already where it needs to be for a long while. Doesn't matter if the gulf is shut for a long time.
This means the geopolitical premium of perhaps 100% put on Crude by the oil industry analysts paid to cause panic and force prices up is completely artificial.
Eventually all distorted markets get caught up. This level of distortion could infect the whole world financial system and become one of the seeds of a crash. Don't forget Crude prices have been used since the 1970's, when FIAT currencies fully took over independent of Gold, to provide the alternative liquidity to the world economy since all oil. is priced in dollars and therefore is converted from oil into US dollars. That's why the first place trump flew to was Saudi Arabia, and why everyone has put up with their nonsense for years...
Anyway, as we move from an energy to tech economy, there will be a change in how crude affects the markets - hence the possibility for it to become a black swan. Just as when Crude took over from coal and steel as the West moved from the industrial revolution into industrialised economies... the move into post-industrial, post oil-centric to the new oil of data is bound to also cause disruption - and therefore potentially a black swan... or Grey Rhino!!!!!
Nota
By the way, bear in mind that virtually no oil anywhere on earth in production now costs (or ought to cost) more than somewhere between $3 to $20 a barrel to produce... Permian is coming down to $15 this year, even North Sea oil is projected to be around that this year and down to $12 next. Gulf countries are around $3-$5. The rest of the pricing is all because of greedy/bad governments, taxes, and the smoke and mirrors created by the industry....
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.