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Thread: Oil Crushed as IEA Releases 60M in Reserves

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    Oil Crushed as IEA Releases 60M in Reserves

    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.
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    Re: Oil Crushed as IEA Releases 60M in Reserves

    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.
    Last edited by donsutherland1; 06-23-11 at 12:01 PM.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    It's weird just how much of our economy is based on perceptions and predictions.
    He touched her over her bra and underpants, she says, and guided her hand to touch him over his underwear
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    We’ll say what? Something like “nothing happened” ... Yeah, we might say something like that.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    Quote Originally Posted by Deuce View Post
    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.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    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

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    Quote Originally Posted by donsutherland1 View Post
    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.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    Quote Originally Posted by washunut View Post
    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.
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    Re: Oil Crushed as IEA Releases 60M in Reserves

    Quote Originally Posted by Deuce View Post
    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-m...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.
    Last edited by dontworrybehappy; 06-23-11 at 11:21 PM.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    Quote Originally Posted by Ahlevah View Post
    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.

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    Re: Oil Crushed as IEA Releases 60M in Reserves

    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.


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