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Oil Crushed as IEA Releases 60M in Reserves

Ahlevah

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Nymex crude oil is tumbling by about 5% today to less than $91 a barrel in frenzied trading as the market wonders what in the heck the International Energy Agency is doing with a mysterious, emergency press conference scheduled for right about now in Paris.

Oil Crushed as IEA Releases 60M in Reserves - MarketBeat - WSJ

As I write this, Nymex West Texas Intermediate Crude is below $90 per barrel. The amount of oil being released is miniscule compared to the amount of oil being consumed, so it's plain that the speculative emperors have no clothes as they all head to the exits at once.
 
This move may serve one of at least three purposes:

1. Deal with a current/emergent market need. Not all crude is of the same grade. There might have been some kind of shortage that had developed or was developing with Libyan production largely offline.
2. Provide a credible signal to oil producers that the oil consuming nations are facing difficulties under current supply constraints with the hope of influencing the outcome of the next OPEC meeting.
3. An attempt to shift market psychology.

My guess is that the move is probably about the first or perhaps second factor. It amounts to less than a day's global consumption of oil. IMO, the IEA needs to be clear about its goal. If not, ambiguity could lead to challenges and then, if the IEA does not respond in the face of the challenges, lead to market conditions that would be less favorable than they would otherwise have been.
 
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It's weird just how much of our economy is based on perceptions and predictions.
 
It's weird just how much of our economy is based on perceptions and predictions.

I have been trying to get that exact message out to everyone in this Forum for a long time.

Our economy is based on perceptions and the whims of those who bet on tomorrow.
 
From the IEA:

The IEA estimates that the unrest in Libya had removed 132 mb of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011. Given this loss and the seasonal increase in demand, the IEA warmly welcomes the announced intentions to increase production by major oil producing countries. As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market. The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.

IEA Press Releases
 
This move may serve one of at least three purposes:

1. Deal with a current/emergent market need. Not all crude is of the same grade. There might have been some kind of shortage that had developed or was developing with Libyan production largely offline.
2. Provide a credible signal to oil producers that the oil consuming nations are facing difficulties under current supply constraints with the hope of influencing the outcome of the next OPEC meeting.
3. An attempt to shift market psychology.

My guess is that the move is probably about the first or perhaps second factor. It amounts to less than a day's global consumption of oil. IMO, the IEA needs to be clear about its goal. If not, ambiguity could lead to challenges and then, if the IEA does not respond in the face of the challenges, lead to market conditions that would be less favorable than they would otherwise have been.

These can only be guesses as the people who did this will never truthfully tell folks why they did this. That being said I would lean towards #3. Using your own statement that this represents less than one day's worth of production, this can't be making up for any shortage. In addition, this could be offset if some producing nations e.g. Iran and Venezuela cutting production.

The administration is now looking to scare market players out. Who wants to go long if you have the government any time they want, stepping in and blowing up the market short term. This also makes companies like airlines have to scratch their heads when thinking of hedging their fuel needs. Companies that set up hedges last week are screwed and the companies that buy on the spot market won.
 
This also makes companies like airlines have to scratch their heads when thinking of hedging their fuel needs. Companies that set up hedges last week are screwed and the companies that buy on the spot market won.

I imagine airline executives were overjoyed at the price drop, just as investors were:

Airlines, from major carriers like Delta Air Lines and United Continental to discount operators like JetBlue and Southwest Airlines down to regional names like Alaska Air, surged in the face of a breakdown in the oil market that saw crude drop to $91.85 a barrel Thursday....

Airline stocks, long tied to the fortunes of oil prices, have become even more linked to their fuel costs in recent years. In May Aviation Week reported carriers have toned down their hedging practices, with most only 20% hedged, since getting burned in 2008. That year crude spiked to an all-time high of $147 a barrel in July. By December black gold had plummeted to a far more pedestrian $32 a barrel, killing the hedges put in by carriers months earlier in a bid to protect against higher prices.

Airline Stocks Soar As Oil Dives, Thanks Obama - Steve Schaefer - Exile On Wall Street - Forbes

I think this is great. And if it shakes out marginal players, even better.
 
It's weird just how much of our economy is based on perceptions and predictions.

Are you finally admitting I was right when I said its not the TRUE supply that regulates prices, its the PERCEIVED supply? People right here on this forum were arguing with me about what effects the price of oil and I kept saying that just threaten to drill in the gulf or in ANWR and the prices will come down because of a perceived supply increase in the future BECAUSE OF THE SPECULATORS, and I'll be damn, I was right. The price of oil won't come down when the oil well begins to produce, the price of oil will come down when the paper is signed to begin drilling the well.

Thank you, thank you very much.

The post I am referencing:

http://www.debatepolitics.com/bias-...sing-gas-prices-reward-11.html#post1059434606

It's almost like I live in a state that is one of the leading producers of oil for this nation and who's population is largely about the oil industry. Damn, amazing when your life, every aspect of it, revolves around crude. It kinda helps you know what the fuk you're talking about.
 
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I imagine airline executives were overjoyed at the price drop, just as investors were:



I think this is great. And if it shakes out marginal players, even better.

The government should not be in the business of manipulating prices.
 
Point made that this is less than one day global usage of oil. Imagine what an announcement that America would be opening up drilling of exploration, as well as known reserves with lessened EPA interference. Price would drop below $50 I bet....


Obama is a dunce.


j-mac
 
Point made that this is less than one day global usage of oil. Imagine what an announcement that America would be opening up drilling of exploration, as well as known reserves with lessened EPA interference. Price would drop below $50 I bet....


Obama is a dunce.


j-mac

Stripping EPA restrictions would also give a bump to the health industry, especially businesses that deal in cancer and respiritory illnesses. Lawyers would get a big bump handling the lawsuits. The birth rate would probably decrease and infant mortality would increase. Less welfare babies. Work fatalities would increase thus creating more job oppertunity. And we would have an ideal work place to send the kids, that can't afford to pay for school,to everyday.

Man, I say we just slop the planet up and rent out the upstairs to a herd of swine. There are just too many advantages to letting the planet go to hell in a hand basket to ignore. Why the **** should we care? Before it get's beyond inhabitable, we'll be dead anyways.

Just kidding. I'm just patronizing J-mac. I am always looking for new friends. :)
 
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Point made that this is less than one day global usage of oil. Imagine what an announcement that America would be opening up drilling of exploration, as well as known reserves with lessened EPA interference. Price would drop below $50 I bet....


Obama is a dunce.


j-mac

The EPA made the air in south Louisiana breathable again. I'm all for them remaining in effect. I want the companies to extract the most oil they can in the cheapest and safest way possible that doesn't damage the environment.
 
As I write this, Nymex West Texas Intermediate Crude is below $90 per barrel. The amount of oil being released is miniscule compared to the amount of oil being consumed, so it's plain that the speculative emperors have no clothes as they all head to the exits at once.

Are these futures or spot rates?
 
Point made that this is less than one day global usage of oil. Imagine what an announcement that America would be opening up drilling of exploration, as well as known reserves with lessened EPA interference. Price would drop below $50 I bet....


Obama is a dunce.


j-mac

Although under Obama American drilling has increased despite us oil consumptiin dropping. The fact of the matter is that the suggested stronger enforcement of regulating speculation needs to be passed.
 
In other news, Greece is getting a fresh bailout. Papandreou survived a confidence vote. I'll let you peeps think this out one.

But here's a hint:

The dollar extended its losses against the euro from last week on expectations that a second financial aid package would be approved for Greece.

GLOBAL MARKETS-Greece bailout hopes bolster euro, oil - Yahoo! UK & Ireland Finance

And what do institutional investors use oil for? Currency Hedging!!! Euro goes up...oh wait I'm just giving it away now.
 
Last I looked oil was up today, airlines down.

So your point is what? That the airlines are now making money on their hedges again? They're gleefully celebrating the rise in the price of oil as their stocks drop? Or maybe that the limited government manipulation that you lament so much doesn't work, in which case I would argue that maybe we need to have the CFTC impose margin requirements on swaps and futures like the Fed does with stocks. Unless you don't think that setting margin requirements is manipulation?
 
So your point is what? That the airlines are now making money on their hedges again? They're gleefully celebrating the rise in the price of oil as their stocks drop? Or maybe that the limited government manipulation that you lament so much doesn't work, in which case I would argue that maybe we need to have the CFTC impose margin requirements on swaps and futures like the Fed does with stocks. Unless you don't think that setting margin requirements is manipulation?

I simply corrected something you wrote. Not sure where the hatred comes from, get a life.
 
Point made that this is less than one day global usage of oil. Imagine what an announcement that America would be opening up drilling of exploration, as well as known reserves with lessened EPA interference. Price would drop below $50 I bet....


Obama is a dunce.


j-mac

You seem to think that drilling in ANWAR now, instead of during an actual shortage or major international conflict, is a good idea. I don't believe that. You also seem to think that its ok to let petrofules to be drilled from all locations regardless of risk.

The EPA made the air in south Louisiana breathable again. I'm all for them remaining in effect. I want the companies to extract the most oil they can in the cheapest and safest way possible that doesn't damage the environment.

OMG SOMEONE WITH SOME GOD DAMN SENSE!!!
 
But...but...but...increasing supply won't lower the price.
 
But...but...but...increasing supply won't lower the price.

When I was talking about increasing the supply I was talking about LONG TERM COST.
 
I have been trying to get that exact message out to everyone in this Forum for a long time.

Our economy is based on perceptions and the whims of those who bet on tomorrow.

And.... the Obama stinking policies
 
When I was talking about increasing the supply I was talking about LONG TERM COST.

oh no! More supply will, in no way, make things better, for anyone. I know it, because the Libbos have said so.
 
oh no! More supply will, in no way, make things better, for anyone. I know it, because the Libbos have said so.

Look at the long term impact of demand compared to the long term supply estimates then add all the oil in the world. The numbers aren't positive.
 
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