The Outlook for Oil prices.

The Outlook for Oil prices. (Taz).

I'm posting this because I agree with him the increase in Price per barrels is temporary, it will come back down.

Short Term.

In the next 3 to 6 months, in the absence of major coordinated production cuts, I believe we will see the market price collapse, possibly to levels which test the lows of $26/barrel or so reached in January of this year.

In my analysis, the doubling of market benchmark prices (US WTI and North Sea Brent/BFOE grades) since then represents a financial bubble. This was created by the purchase of massive futures contract positions by managed funds. These market positions - only some of which are the hedge funds whom commentators blame - are supported by liquidity sourced from Euro Quantitative Easing by the European Central Bank.

Furthermore, the current market noise blaming supply disruptions - which to be fair do exist in Nigeria and Libya particularly - ignores the record levels of Iraqi oil production and Iranian oil production which has almost reached pre-sanction levels.

But there is another far more important factor which is not widely understood. Most market commentators have a fixation on reported crude oil inventory levels and their daily recommendations and comments react breathlessly to changes in stocks of oil.

Now, while oil producers and refiners maintain buffer stocks for resilience reasons of security of supply and demand, oil buyers such as China, increasingly also have a financial motivation which is that they prefer to hold oil stocks as a reserve asset to holding dollar reserve assets, which return zero percent per annum.

Commercial oil producers & refiners, and oil traders, on the other hand, are intermediaries or middlemen who are motivated by dollar profits and not by charity. What I mean by this is that such market participants will not maintain an inventory of oil stocks above an absolute minimum unless their costs of storage in tank or tanker, insurance, and bank debt interest costs are met.

Read the full story (Medium and long term) here.

'Make an offer they can't refuse' - Iran may hold oil talks with Saudi Arabia.

Nice installation you got there....would be a pity if something happened to it. 

'Make an offer they can't refuse' - Iran may hold oil talks with Saudi Arabia. (Taz).

Iranian Oil Minister Bijan Zanganeh said he may hold talks with his Saudi counterpart Ali Al-Naimi during the upcoming Organization of the Petroleum Exporting Countries (OPEC) meeting.

Iran does not hold a grudge against any country, Zanganeh said, Mehr news agency reported May 24.

The Iranian oil minister’s remarks come while political situations are tough between the two Middle East powers following the recent changes in Yemen.

Saudi Arabia accuses Tehran of having helped the Yemeni Houthi group topple the country’s former government and taking control over the country. Iran denies the involvement.

Zanganeh further said that both Iran and Saudi Arabia would like the OPEC oil production to rise, seeing it as a common ground between the two countries.

OPEC oil basket price was about $108/barrel in the first half of 2014, but currently the figure is a little more than $62.

Iran's oil export during the pre-sanctions time was about 2.5 million barrels per day (mb/a), but the figure currently stands at around 1.1 mb/d. The country seeks to boost production once sanctions on its economy are removed, something expected to come true through an end-June political deal with the group 5+1 (the US, UK, France, Russia, China, and Germany).


OPEC increased a production level for the second consecutive month in April to above 31 mb/d.

'CHANGE" - The Iran nuclear deal will kill off all US Shale oil production.

Source. 

'CHANGE" - The Iran nuclear deal will kill off all US Shale oil production.(CNBC).

Brent crude oil dropped towards $55 a barrel on Tuesday as Iran and six world powers entered a final day of talks over a nuclear deal that could see the energy-rich country increase oil exports to world markets.

Disagreements on enrichment research and the pace of lifting sanctions remained as hurdles that could scupper a deal to end a 12-year standoff between Iran and the West.

Oil prices extended two days of declines as investors said a deal in Lausanne could lead to an increase in Iranian crude supply to a market already weighed down by oversupply due to rising U.S. shale production.

"If the flood gates to Iranian crude open, (prices) will probably test this year's lows again," Daniel Ang, analyst at Singapore-based brokerage Phillip Futures, told Reuters Global Oil Forum.

Iran could increase oil production by around 500,000 barrels per day (bpd) within six months if sanctions are removed, and by an additional 700,000 bpd within another year, according to estimates by Facts Global Energy.

Western sanctions have limited Iranian crude oil exports to around 1 million bpd, and shipping sources say Iran is storing at least 30 million barrels of oil on a supertankers. Hmmmm....All that is left for Iran is to close the Strait of Hormuz a few months after US Shale production and Canadian tar sands stopped. Great foreign and domestic policy move from the Obama 'admin'Read the full story here.