Update 5: as the meeting concludes, here are the details as they emerge one headline at a time:
I know that they’ve found an oil field in Alaska (many years ago) that would provide the U.S. easily with enough oil for the next 200 years!!!
A small company just announced that it has made a “world-class” oil discovery in Alaska, which could be the largest find in the state in years.
Caelus Energy LLC, a small company backed by private equity, says that it has discovered oil on Alaska’s northern coast. The field could hold as much as 6 billion barrels of oil, with about 1.8 to 2.4 billion barrels considered to be recoverable. If that is the case, the discovery would instantly raise Alaska’s statewide recoverable oil reserve base by about 80 percent.
But producing the oil will not be easy. Drilling must take place in the winter. To drill the field, the tentative plan would be to build manmade islands to drill through. Oil produced in the shallow water of Smith Bay will need to be moved somehow. Caelus will have to build an $800 million pipeline that travels 125 miles, connecting to an existing pipeline system in Prudhoe Bay.
There is a new drama on the oil front: those who have it in excess can’t get it to those who want it—at least not quickly enough for everyone to be happy.
A recent Reuters story reveals that tankers carrying around 200 million barrels of crude are waiting to leave or dock at ports around the world, creating “the world’s biggest traffic jam.”
One would think that producers and consumers of the world’s most abundant commodity would have had time enough to adjust their port capacities, but apparently this is not the case. Middle East ports are choking on the oil waiting to be loaded onto tankers and shipped to Asia, and Asian ports are forcing tankers to wait for weeks before unloading because their infrastructure can’t cope with these amounts of oil.
* * *
The main catalyst that pushed the price of oil from a 13 year low in early February, when crude briefly traded in the mid-$20 to well over 50% higher less than one month later in one of the world’s most furious short squeezes, was the recurring infatuation with the fabricated narrative that OPEC would if not cut production then, then at least freeze it.
We mocked this, as recently as one month ago, when we wrote “About That “Oil Freeze”: Russian Crude Production Sets New Post-Soviet Record In February” an article which was self-explanatory:
… according to calculations by Bloomberg’s Julian Lee, Russian crude and condensate production just set new post-Soviet daily record of 10.92m bbl yesterday.
And it has only just begun.
Talking of Oil and Gold, last week Deutsche Bank showed a long-term graph of Oil in real adjusted terms, showing that the average real price since 1861 was $47.
Following on from that, Deutsche notes one ratio they occasionally look at is the ratio of various assets to the price of Gold…
Today we update the Oil/Gold ratio back to 1865 and find that the Gold price has just hit an all time high at around 44 times the price of Oil.
The previous high of 41 in 1892 has just been exceeded.
Wait until the the real war is starting.
Just four days ago, on Monday afternoon, “legendary” oilman T Boone Pickens said that crude has hit bottom at $26 per barrel, and predicting that prices should double within 12 months.
Pickens then doubled-down on his wrong call from last year, telling CNBC’s “Squawk Box” that oil prices will rise to at least $52 per barrel by the end of the year. That said, he was at least honest enough to admit that his virtually identical call from last year, when he thought prices would strongly rebound, was wrong.
Oil prices around USD 30/bbl mean that an increasingly significant volume of future oil projects no longer make sense. Although Deutsche Bank does not expect US crude inventories to reach capacity, rising US inventories and high US crude imports may heighten downside pressures to push prices closer to marginal cash costs of USD 7-17/bbl for US tight oil, with few plausible scenarios for a strong price recovery in the short term,
The main reason for oil’s torried surge over the past 2 days is that following yesterday’s Russia-Opec “oil production cut” headline fiasco, crude traders – who as we previously reported already had a record net short position – scrambled to cover their exposure on the assumption that where there is oily smoke, there will be fire. We can now put to rest any speculation that OPEC will proceed with any supply cuts, whether Russia requests it or not, because as the WSJ reported moments ago, not only will OPEC not support a supply cut but it will also not support an emergency OPEC meeting.