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Msg  331113 of 444693  at  2/12/2015 12:19:42 PM  by

doggydogworld

The following message was updated on 2/12/2015 12:21:43 PM.

 In response to msg 331093 by  dave1mn2
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Re: Normal Oil Prices Here To Stay

Dollar strength comprises a large part of copper's ~20% drop. Same with other commodities cited by the likes of the "If It Was Just Oil" guy. Clearly oil's ~60% drop is a lot more than just dollar strength.
 
Your "days of supply" charts seem to involve some sleight of hand. US consumption hasn't changed materially in six years, certainly not enough to drive a noticeable difference between a chart showing absolute levels and one showing days of supply. Something is fishy.
 
The absolute level of crude oil stocks doesn't really matter, anyway. It's the trend. We see a sharp and unseasonable rise in crude oil stocks. We know steep contango makes hoarding profitable and we know hedgies are doing it. These are not "paper barrels", they are real barrels being pumped out of the ground and not consumed. Clear evidence of a supply/demand imbalance.
 
What makes this imbalance different than others? Two things. Saudi Arabia stepped away from their role as swing producer. For 25+ years they tweaked output in pursuit of price stability. Sometimes it took more than a tweak, such as the huge demand crash in late 2008 which drove OPEC to cut 3m bpd for a short while. But they always worked to moderate price moves. Until now.
 
The other big difference is shale. US output the past decade:
 
2005 8.32  -0.4
2006 8.32  unch
2007 8.47  +0.15
2008 8.56 +0.09
2009 9.13 +0.57
2010 9.70 +0.57
2011 10.13 +0.43
2012 11.12 +0.99
2013 12.35 +1.23
2014 13.94 +1.59
 
We went from decline, to small increases that didn't really move the global needle to skyrocketing growth that broke the global needle. I don't know of any nation that ever grew 3.8M bpd in three years. Saudi Arabia came close circa 1969-74 before slamming on the brakes. But instead of braking, US growth was still accelerating. Something had to give.
 
I know this isn't as fun as conspiracy theories, but sometimes the obvious story is correct.


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Msg # Subject Author Recs Date Posted
331118 Re: Normal Oil Prices Here To Stay dave1mn2 0 2/12/2015 12:57:50 PM






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