80+ oil is a lock this week.

[wabmester]

Fascinating reading here:  http://hsgac.senate.gov/_files/REPORTTheRoleofMarketSpeculationInRisingOilGasPrices.pdf

Wow.   So, this Senate report basically says that Enron snuck in some legislative changes in 2000 that allowed energy futures to be traded without any oversight, and now former Enron traders are practicing the same price manipulation tactics they got busted for last time.

 

[Zathras]

All those events fall under the expected--only the time/date/faces/places remain to be seen.

That is my point, if either of those things happened, we would see oil prices go up. So while they are expected, they will increase oil costs.

I do agree with your statement: "If the Middle East takes an unexpected bad twist. (how many more can there be?) then we could exceed $78 this week."
if you remove 'unexpected' from the sentance.

 

[brewer12345]

Whew. I just read that they will take 3 to 5 days to fully shut down the pipeline and two weeks to fully inspect it. After that, any facilities with serious corrosion issues will be down for weeks to months for replacement. This is not good.

If there is a GOM hurricane that disrupts production or transport for more than a week, we may have a big problem. I think I will be ordering that half cord of fire wood as an insurance policy...

 

[laurence]

O.K., so lets say a big hurricane hits the gulf and shuts downs the rigs, and prices spike up and we see $4 a gallon gas. Will that be an extra $500 per person annually? It's the trickle down effect through the economy we have to worry about, but in the short term, I'm just not seeing a crisis.

 

[brewer12345]

O.K., so lets say a big hurricane hits the gulf and shuts downs the rigs, and prices spike up and we see $4 a gallon gas.  Will that be an extra $500 per person annually?  It's the trickle down effect through the economy we have to worry about, but in the short term, I'm just not seeing a crisis.

I don't know how things were out west when Katrina and Rits tore sh!t up, but in the Northeast there was serious concern that we would have a fuel shortage. Gas stations started running dry within a few days in some places. I'm willing to pay the going rate for gasoline and heating oil; I just want it to be available.

And the economic fallout would be very ugly. There is already a lot of evidence that consumers are pulling back spending on everything except fuel.

 

[laurence]

There were no shortages here, price bumped and that was it. Sounds like it was ugly!

 

[brewer12345]

I think the east was more directly affected because the pipelines pretty much go from the Gulf north and east. The west coast mostly gets oil from Alaska, with some TX/NM/CO, etc. and some stuff shipped by tanker from the ME and Gawd knows where else (Brazil?). If this BP mess goes on for a while, you guys are probably not going to see any shortages since likely every takker in the Pacific has reoriented toward West Coast destinations by now. But we're gonna be paying up...

 

[Brat]

I used to know all the AK tanker traffic (son & DIL don't sail merchant ships these days so set that issue aside). All are full right now and there is an inventory at the dock in Valdez so, other than price, we have a couple weeks. What is happening is that everyone will max their personal inventory in their gas tanks so we will see a quick retail draw-down in the west that wasn't anticipated.

It is the AVAILABILITY that concerns me, not the price at the moment.

 

[brewer12345]

It is the AVAILABILITY that concerns me, not the price at the moment.

Yeah, but I suspect that avilability isn't much of an issue, aside from some panic buying in the short term. The Western refiners have pretty much all said they have stocks sufficient for a month, give or take. That should be long enough for the tankers to arrive and the SPR is already on line for any refiners that need it.

 

[dumpster56]

Yeah, but I suspect that avilability isn't much of an issue, aside from some panic buying in the short term. The Western refiners have pretty much all said they have stocks sufficient for a month, give or take. That should be long enough for the tankers to arrive and the SPR is already on line for any refiners that need it.

Remember the gasoline lines back in the 70s?

we have problems around the corner.
BIG trouble.

Large SUVs with 30 gallon tanks and credit cards.

People don't care what the cost is these days they charge it run up balances in the 5 digits like 10 15 K on credit cards balances.

Now with the dummies who have no idea that topping off the tank only screws the next guy who needs some gas well. We really is efed.

 

[Brat]

Yeah, but I suspect that avilability isn't much of an issue, aside from some panic buying in the short term.  The Western refiners have pretty much all said they have stocks sufficient for a month, give or take.  That should be long enough for the tankers to arrive and the SPR is already on line for any refiners that need it.

Read closely "sufficient for a month".  The days/weeks the north slope is shut down will impact availability once the inventory of crude is depleated.  It takes time for the existing crude in the pipe to make it to Valdez, there is crude in the tanks at Valdez which will be drawn down by ships now heading north.  Ships heading south are currently full.  The run from Valdez to Bellingham is about a week, about 10-12 days to Long Beach - each way.  Add a couple days to load, same couple days to unload.  There goes a month!

Yes it will be about a month before all is empty, but remember after start-up it will take time to re-supply the network.  Start-up won't be a cake walk either  - the re-pressure will put strains on the system it hasn't experianced for years.  I can understand why BP is saying 'indefinate'.

 

[AltaRed]

Yes it will be about a month before all is empty, but remember after start-up it will take time to re-supply the network.  Start-up won't be a cake walk either  - the re-pressure will put strains on the system it hasn't experianced for years.  I can understand why BP is saying 'indefinate'.

Very nice analysis. Also, I haven't heard whether all Canadian supplies that currently flow to Vancouver, BC from Alberta already go to the PNW, but if they don't, I can envision some incremental diversion to extent possible.

 

[Brat]

I hope BC will share. The BP refinery in Bellingham is very close to the border (cell calls get picked up by CN towers).

At this point I think that the refiners are lining up crude contracts and getting samples so that they can adjust their processes. There are BP, Standard, Tesoro and Shell refiners on the west coast. Williams used to own a plant at N. Pole. Don't know what Phillips-Conoco is doing with their portion. This will be a HUGE scramble.

 

[Alex]

I am long oil as of about an hour ago.

a bit late to the party? I've been long oil for 5 years....via Mutual funds of course. Are you long via commodoties?

 

[eridanus]

a bit late to the party? I've been long oil for 5 years....via Mutual funds of course. Are you long via commodoties?

Yes, on the Nymex. I sold yesterday for a quick gain.

I'd like to get a long term commodity contract but the volume is nothing for 1+ years out. What mutual funds do you use?

 

[d]

80+ oil is a lock this week

the week has only one more day to go ... still "a lock"?

 

[Alex]

Yes, on the Nymex. I sold yesterday for a quick gain.

I'd like to get a long term commodity contract but the volume is nothing for 1+ years out. What mutual funds do you use?

I am in Fidelity's Select Energy Fund - FSENX - It has given me around 20% return per year over the last five years. It is not as volatile as commodities and I still get some exposure to the energy stocks.

It's a comfort level thing for me. I had a Series 3 commodites license, and worked for a brokerage for a few years. This was back when I was in my twenties. The experience scared me away from commodities, permanently! Of course if I was a farmer or end user I would use the markets as a hedge, but the speculators seem to get killed in the long run. Be careful!

 

[REWahoo]

Maybe not quite as much disruption as initially reported...

BP may keep half of Prudhoe Bay open

PRUDHOE BAY, Alaska - BP PLC officials said Thursday they might be able to keep one side of the nation's largest oil field open, just days after BP said it was closing the entire field as a precaution because of leaks and severe corrosion.

BP officials said they may be able to keep the western side of the field open because the company doesn't want to shut down the pipeline entirely.

A final decision was expected this weekend.

About 140,000 gallons of oil were still flowing out of Prudhoe Bay as of late Thursday, said Craig Wiggs, a performance unit leader for BP.

If the western side kept flowing, that would mean the company would be able to maintain the 140,000-barrel capacity — and possibly ramp up to 185,000 barrels — while work continues on the eastern side.

http://news.yahoo.com/s/ap/20060811/ap_on_bi_ge/prudhoe_bay_2

 

[dumpster56]

Lock is broken, terror.

Planes are not flying, or what is flying is drastically reduced = reduced usage, and guess what crude is headed down, probably 72 before we head back toward 100 forget 80 cause the Iranian mess is next up.

 

[d]

Lock is broken, terror

was down in overnight trading before the terrorist roundup

 

[Brat]

Also, remember that the Alaska Pipeline supllies less than 3% of  U.S. Oil use.

I don't think so...

 

[haha]

I believe Cut-Throat's figure is correct. It was initially reported that the shutdown would take off 400,000 bpd. US usage is about 20,000000 bpd so roughly 2%.

The 8% figure that was part of the original announcement referred to 8% of US production. The arithmetic balances- US use is about 4 times our production. (Unfortunately)

Ha

 

[Cut-Throat]

I don't think so...

Well, I read an article in paper about 3 days ago, that outlined exactly that!

The article went on to describe that there are millions of barrel of oil every day that are not showing up anywhere! - They said that there is an extreme amount of hoarding of oil going on currently (unprecendented) - in anticipation of higher prices down the road. Or to create higher prices! - Which ever way you want to look at it!

 

[AltaRed]

I believe Cut-Throat's figure is correct. It was initially reported that the shutdown would take off 400,000 bpd. US usage is about 20,000000 bpd so roughly 2%.

The 8% figure that was part of the original announcement referred to 8% of US production. The arithmetic balances- US use is about 4 times our production. (Unfortunately)

That is about right. Also looks like BP will be able to keep the Western Area in operation thereby shutting in only about 215,000 bpd and alleviating the situation a bit more. There is a lot of inventory at individual refineries, plus many spot cargos floating around the seas looking for the optimum buyer. It is, in fact, these spot cargoes primarily from Saudi that much of the oil traders speculative off of.

Oil trading is a very complex business and major companies have highly sophisticated trading rooms set up to deal with this. Virtually every crude produced has slightly different qualities and this has to be taken into account for refinery purposes. Each refinery has a sophiticated model they use to optimize the crude slate they buy. They are not any less sophisticated than financial markets.

 

[JPatrick]

Lock is broken, terror.

Planes are not flying, or what is flying is drastically reduced = reduced usage, and guess what crude is headed down, probably 72 before we head back toward 100 forget 80 cause the Iranian mess is next up.

Well the $80 lock didn't work out this week and I doubt it will next week either, and I sure don't see anything near $100.  To cause that we would need a Katrina, yet another war, perhaps a dirty/bio bomb in the backyard---possible, but I'm not ready to encapsulate the house just yet.  In fact, I wouldn't buy any additional oil stocks right now(for long term) , but I'm keeping the ones I have.
Still looking for a nice drop in oil to the $60 sometime in the fall or at the latest by the end of Feb 2007.  I fully expect to fill up the beast with sub two dollar petro before St Jpatricks Day 2007.
With all that said, I still call that expensive oil and don't look for anything below 50 for years if ever unless you  are talking about the temperature in International Falls.