Destroying Crude Oil Price Rally – Something Dark Emerges from the Tar Pits and Oil Sands

By David Haggith – Re-Blogged From Great Recession Blog

The crude oil price rally has been completely destroyed, though I’ll admit I was wrong when I predicted crude oil prices would plummet in March or April as the perfect storm developed against oil prices. Instead, they rallied. In spite of that, I continued to believe my error was in timing and not in fact — not in the fact that another harsh fall in oil prices was beating a path to our doors.

Crude oil prices beaten down by a storm still building

So, I continued to write articles about the forces building against oil prices, even in the face of a strong rally, which many believed would set a new position for oil for the remainder of 2016. That storm has, as of today, completely clawed back the post-March rally by taking crude oil prices back to a three month low and to where they stood at the start of the year as well. West Texas Intermediate just struck $42/barrel today.

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Oil Price Prospects

cropped-bob-shapiro.jpg   By Bob Shapiro

Crude oil prices have fallen from $100+ two years ago to around $37 today, after going under $30 briefly last month. Not surprisingly, there are differing views on the direction of prices going forward.

Lets look at where we are now.

The Shale Boom has catapulted the US to the top world producer spot, surpassing Saudi Arabia. This has greatly reduced US imports of oil and is a major contributor to the price break we’ve seen. As an aside, the US Balance of Payments has been much reduced by US Shale Oil production, even though the Deficit once again is running at over $500 Billion a year.

But, there are other factors greatly affecting the supply-demand balance for oil.

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Sheen on the Oil Slick Getting Darker

By David Haggith – Re-Blogged From The Great Recession

Last week, I wrote that the day would come soon when oil prices would take another nasty dive because there is nowhere left to store oil, causing the spot price for immediately delivery to dive toward the zero bound. This week we see how close that day is as oil continues to be oversupplied by about a million barrels a day.

Reasoning simple: When all ships, tank cars, tank trucks and tank farms are finally full, immediate delivery of oil will be nothing but a liability. That kind of delivery is called “an oil spill” because all you can do is pump it onto the ground or into the sea … or start filling swimming pools, as one oil industry analyst said is the next step. Production will have to slow to whatever the rate of consumption is, as it will become a situation of one tank used before one tank is bought.

Oil practically spills over in Rotterdam

The Wall Street Journal reported on Monday that oil tankers are backing up at the world’s largest oil seaport. In fact, buyers and sellers of oil are increasingly sending tankers on longer voyages just to avoid a pile-up of tankers at several ports.

Up to 50 oil tankers are waiting to unload cargo in the port of Rotterdam, the highest number since 2009 and another sign that, amid a glut, crude is struggling to find a home. (WSJ)

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