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Oil Falls Below $40 for First Time Since 2009 as Glut Grows

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Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#51

Post by ProAm »

washedup wrote: post #46
dwharrison wrote: post #25

And it will go lower! Canadian crude hit $23/bbl earlier in the week. North America is close to maxing out storage capacity...possibly within 90 days. We've not been this close to max storage capacity in more than 80 years. North American crude oil production currently exceeds demand (meaning what we have capacity to refine) by over 1 million barrels a day. All that extra is getting dumped into storage. And the sprea…

There are also some refinery problems in Indiana which is keeping gasoline at a premium when compared to oil.

I'm skeptical this is a true refinery issue/problem.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#52

Post by washedup »

toomuchtodo wrote: post #47
washedup wrote: post #46

Earlier quoted context omitted.

There are also some refinery problems in Indiana which is keeping gasoline at a premium when compared to oil.

Gas prices are about 50 cents more per gallon in Chicago than the rest of the US right now due to this.

Do you think it's bleeding into other regional markets at all?

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#53

Post by toomuchtodo »

washedup wrote: post #52
toomuchtodo wrote: post #47

Earlier quoted context omitted.

Gas prices are about 50 cents more per gallon in Chicago than the rest of the US right now due to this.

Do you think it's bleeding into other regional markets at all?

A bit: http://www.gasbuddy.com/GasPriceMap

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#54

Post by dwharrison »

washedup wrote: post #46
dwharrison wrote: post #25

And it will go lower! Canadian crude hit $23/bbl earlier in the week. North America is close to maxing out storage capacity...possibly within 90 days. We've not been this close to max storage capacity in more than 80 years. North American crude oil production currently exceeds demand (meaning what we have capacity to refine) by over 1 million barrels a day. All that extra is getting dumped into storage. And the sprea…

There are also some refinery problems in Indiana which is keeping gasoline at a premium when compared to oil.

That primarily impacts Canadian heavy crude exports. The BP Whiting refinery was the primary consumer of Canadian crude.

Few other refineries (other than some on the Gulf coast) are configured to handle the product.

That's why Canadian crude prices are collapsing...and why the price of gasoline in the upper midwest is going up.

The only other option for Canadian crude to pipeline export to the Texas gulf coast. The problem is pipeline capacity (that's why some much Canadian oil goes out by train), but even more critically, the pipelines typically offload at the giant Cushing OK storage center...and Cushing is right at 100% storage capacity. (you can't just pump crude straight into a refinery...there a timing mis-match that has to be dealt with via storage).

The Canadians are about to really get squeezed.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#55

Post by ams6110 »

nostromo wrote: post #35
ori_b wrote: post #11

This is slightly worrying, because if we want to reduce CO2 emissions, we need to leave the oil in the ground. High prices may not be ideal economically, but they do reduce demand for oil, and increase demand for alternative energy.

Well, counter-intuitivley, consumer gas prices aren't falling nearly as much if at all. Personally I think the DOJ should investigate refineries, as none of the seem particularly eager to compete on price. They're making record profits as the price of crude collapses while the price of gasoline is flat. http://www.latimes.com/business/la-fi-refinery-profits-recor... It seems very fishy to me that we have so much crud…

Refining capacity doesn't increase because of a drop in crude oil prices. If supply of gasoline cannot be increased, prices will not fall even if the raw crude price falls.

The EPA has been hostile to refinery expansion or new refinery construction.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#56

Post by JTon »

bkjelden wrote: post #49

Lower oil prices seem to be driving the major US indices lower lately. Why is that? Lower energy expenses seems like a good thing for businesses.

Not an expert, but I've been read that demand for oil is typically used as a leading indicator for economic growth. Seems like the global economy is slumping, and as a result doesn't need as much energy (oil)

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#57

Post by sliverstorm »

ams6110 wrote: post #55
nostromo wrote: post #35

Earlier quoted context omitted.

Well, counter-intuitivley, consumer gas prices aren't falling nearly as much if at all. Personally I think the DOJ should investigate refineries, as none of the seem particularly eager to compete on price. They're making record profits as the price of crude collapses while the price of gasoline is flat. http://www.latimes.com/business/la-fi-refinery-profits-recor... It seems very fishy to me that we have so much crud…

Refining capacity doesn't increase because of a drop in crude oil prices. If supply of gasoline cannot be increased, prices will not fall even if the raw crude price falls. The EPA has been hostile to refinery expansion or new refinery construction.

Capacity doesn't increase, but costs do decrease as the cost of raw materials drops.

Now, obviously price is only partly determined by cost.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#58

Post by bradleyjg »

bkjelden wrote: post #49

Lower oil prices seem to be driving the major US indices lower lately. Why is that? Lower energy expenses seems like a good thing for businesses.

Neither is the cause or effect of the other, they both share a common cause. Viz. worries about China's economy slowing down.

Or at least the above is conventional wisdom. No one really knows for sure.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#59

Post by bkjelden »

JTon wrote: post #56
bkjelden wrote: post #49

Lower oil prices seem to be driving the major US indices lower lately. Why is that? Lower energy expenses seems like a good thing for businesses.

Not an expert, but I've been read that demand for oil is typically used as a leading indicator for economic growth. Seems like the global economy is slumping, and as a result doesn't need as much energy (oil)

Ah, so in that case it wouldn't be causal, just a correlation.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#60

Post by adventured »

ryanmarsh wrote: post #24

> ... OPEC members are planning to boost production In 2012 Saudi had a $2.3 trillion USD gross operating surplus in crude petroleum and natural gas. They can afford to play this game (market share) for really long time.

No they can't. They can play the game for about three more years, max. And that's at the risk of destabilizing their kingdom. They're currently issuing debt [1] for the first time in a decade or more, trying to slow the erosion [2] of their $670 billion of reserves. As of today they've lost 10% of their financial reserves in one year, and that's going to get a lot worse as the new lower average price of oil sets in across 2015 and 2016. At a $40 to $50 oil price average for 2016, they'll lose upwards of 20% of their reserves next year. A few years of that, and the anxiety will be great in the house of Saud.

I'm not sure where you're getting $2.3 trillion for anything. Their entire GDP is $750 billion.

[1] http://www.reuters.com/article/2015/07/10/saudi-bond-idUSL8N...

[2] http://www.bloomberg.com/news/articles/2015-06-28/saudi-fore...

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