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From the Reuters daily oil despatch:

The following shjows why the current BDI charts may not be quite the

deffinitive indicator it has in the past.



SINGAPORE, Nov 12 (Reuters) - A hefty 980,000 tonnes

(7.35 million barrels) of Asian distillates are provisionally

booked for November lifting to be stored off Europe, adding

to the 83.5 million barrels held in tankers worldwide,

traders and shipbrokers said on Thursday.

These do not include another 130,000 tonnes being fixed

for a time-charter, which could end up being stored in


The huge build-up, which will add up to at least 90 million

barrels by year-end, is sending jitters across the markets

as winter has arrived and demand has not picked up

strongly. It now exceeds total daily oil consumption globally.




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Transit times from Singapore to West Coast USA is somewhere between 15 & 20 days, so how much oil or distillate is in transit at any time? We now have an extra days' storage on the water. The trend is alarming, but I wonder if this absolute level of inventory is really all that worrisome.
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A couple of key prices to keep in mind: the Saudis apparently need the price of a barrel of oil to be at least US$50 to balance their books whilst the Iranians need at least US$90 to pay for all the hand-outs they are giving to the populace to keep them quiet. Given that both regimes retain civil order largely by way of maintaining welfare dependencies these governments will live or die by the price of oil.




Already it looks like the Iranian government is being forced to cut back on its subsidies ... last week the government there announced that they intend to pare back on petrol and food subsidies. The price of petrol in Iran is expected to go from the equivalent of 10 US cents per litre to 55 US cents per litre over the next few years.




It is perhaps worth remembering that:


  • Saudi Arabia has a population of only 29m, which includes around 5.5m foreigners who actually do most of the work (about 80% of the labour force are non-Saudi), has a median age of about 21 years, and the official unemployment rate is about 13% but that does not include females, and unofficial estimates put the figure as high as 25%. About 90% of exports are of oil. Saudis are predominantly arab and sunni.



  • Iran has a population of about 67m, has a median age of about 27 years and estimates put unemployment at around 12%. Crude oil acounts for about 80% of its exports. Iran has far more ethnic diversity, with about half being Persian and a quarter being Azeri. In terms of religion it is the opposite of Saudi Arabia, with about 89% being Shia and 9% being Sunni. But in part because of its geography, with natural borders separating it from neighouring areas, it has been a discrete country (civilisation) for thousands of years.
Here is a bit of background about the current tussle going on on the border of Yemen and Saudi Arabia (I've no idea how reliable the info contained in the article is).





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Yes, and not five years ago the Saudi's declared they needed the price of oil to stay above $28. Indeed, $25 being their break even.


Like the rest of the world, the Persians included, Saudi's are living beyond their means, yet Iran in particular had near riots in the streets when they floated the idea of hiking the price of domestic petrol from its miserable few cents a litre. Though it is still rationed, they having no refining capacity. And as for Saudi overstating their reserves, well that's a given, which means that unlike the last oil shock which came to life via the actions of speculators, the next one will be consumption related. Speculators are now in the cross hairs of regulators the world over, and whilst they may have some room to move with a trend in a legitimate way, they will not be allowed to indulge in gluttony as they have done in the past. In short, current oil prices tend to reflect actual supply/demand balances and the only wildcard is the fact the price is struck in US$


Anyone who harbours the notion oil is a safe commodity and we can find more given high enough prices is plain loopy with their assumptions. Rather, just the opposite, the low hanging fruit is long gone and we are on the brink of serious times.

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Do we really know what the break-even cost is? It seems to me most commentators/analysts use a price determined by budgetary balancing rather than the cost of discovery and extraction. They are two widely different measures, and they are constantly changing with currency realignments.


Saudi's budget balancing price was at the beginning of this year around $US50/bbl, but the USD has tanked some 15% (depending on reference points) so is now likely to be around $US60/bbl, or even higher, but still below current prices.


Iran? Well, as we know they are on the other side of the propaganda war so any BS will do. This blogger thinks the breakeven for Iran is nearer $60 - to balance the trading account he effectively says. What about the current account?




We can take as a given that most of the low hanging fruit (low cost oil) has been harvested. Iraq may be an exception, but right now the fruit there ain't so low. Now we are seeing apparently religious based conflict in Yemen, which suggests to me that regional instability is far from a given, even if "victory" is declared in Iraq. The underlying causes of the conflicts still exist.


That's all for now - of to work for a while.

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The developing scandal around the International Energy Agency and peak oil


It is interesting that Australian media has not yet covered the developing scandal around the International Energy Agency (IEA) and its prognoses for future oil production that broke last week. The IEA was established by the OECD nations to advise them on energy and is regarded as the worldÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s highest authority on world energy needs and production. Last Monday week (November 9), in The Guardian, it was revealed by whistleblowers in the IEA (current and former employees) that the IEAÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s future oil production estimates were inflated.


Apparently, the USA has been pressuring the IEA to use the data from its own ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Energy Information AgencyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ (EIA), the reliability of which has been questioned in the past. According to The Guardian article:


A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.


Coincidentally (?) on the same day, the research group of Professor Aleklett (president of the international arm of the Association for the Study of Peak Oil and Gas) of Uppsala University, Sweden, published a peer-reviewed paper in the scientific journal Energy Bulletin that uses the IEAÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s own data to show that it is comprehensively wrong in its estimates of future oil production.


The IEAÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s error has been to radically overestimate the rate of future oil production from undeveloped oilfields and fields yet to be discovered. They also overestimated the amount of ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“natural gas liquidsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ associated with future natural gas production and have overestimated the rate at which oil can be produced from unconventional sources (such as the Canadian tar sands).


Full Article:- http://www.onlineopinion.com.au/view.asp?article=9698

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There has been a lot of talk recently about a looming gas glut. And if you look at the figures there certainly is a lot of it coming on stream in the next 5-10 years. They have made big advances (especially in the USA) in unconventional production,especially shale gas. So much so, that less imported LNG is required over there, and it is being diverted to Europe instead. Australia has huge reserves of CSG and tight gas out in the Cooper and Eromanga basins. I think we will see more advances made in unconventional gas production in a number of countries in the next decade. A lot of previously stranded gas reserves will be opened up via smaller modular LNG trains. The current thin spot market should broaden.

However I am still bullish on LNG for the reasons given in those 2 peak oil articles. The decline is scary, but I think gas(liquids) will take a lot of pressure of oil for transportation in the years ahead and we we see more parity between oil and gas (at present gas trades at a big discount per energy value).

So not disputing the issues raised in those 2 peak oil articles. Just think they may be missing the amount of gas coming on stream and its potential (as liquids) to help fill the gap. Also think Nuclear will do its part as well (i.e for electric). Plus there will be increasing advances in fuel efficiencies.

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I wouldnt discount the effect of the Copenhagen conference either. The global warming issue is only going to gather momentum imo as people put pressure on governments to act. It could well become a global movement as people get warm and fuzzy about saving the planet. Not sure how accurate it is but it says in the link below that the U.S could save 1million barrels a day by making their vehicles 3 miles per gallon more efficient. All this could, in the short term at least, put pressure on the POO.

Global warming is the other reason I like gas mid term. The figures below for the amount of CO2 (pounds) released per billion BTU of energy output are: Gas 117,000; Oil 164,000; Coal 208,000. Coal will have to become a dirty word for power generation. CCS looks like a non event considering the energy required to compress it and get it underground leaves little net benefit. Long term nuclear looks like the only option. In the meantime gas looks the best bet. Some of the alternative energy stocks may do O.K. However, most look like cash burners atm - not good in this type of market.





What Are The Causes Of Global Warming? - Make Earth A Better Place.Org


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