Hey Folks,
Came here to consult with the professionals (people who know way more about this subject than I do). To keep it short: how does it end? I am not saying that the United States will completely empty out its strategic reserves and that we will see $250 a barrel, but what does the next year—two years—mean for the oil market as a whole? As I’ve come to understand futures have remained low in spite of the shortage. Will the two prices ever align? Is this as bad as everyone seems to think? Would love to hear your thoughts.
Posted by Mean_Koala_161
15 Comments
oil go up, especially if bob almandeb go boom
It doesn’t. It just gets more and more miserable
world ending war. technology as we know it would be gone. horizon zero dawn future. humanity took tens of thousands of years to develop modern tech only for it to be over within 200-250 years.
How will it end? The world facing artificial Peak Oil and shifting to a new paradigm. Those who adapt will come out on top, those who are stubborn will be sad former powers laughed at for being stupid and not investing enough in renewables or actually building the infrastructure that works with the type of petroleum domestically available. (It’s us, we’re the sad soon-to-be former power)
I’m hoping that this absolute shitstorm just serves to wake up every other country without their own oil to go all in on renewable energy. If trump is somehow the one to force everyone to go green then at least he’ll have accidentally done 1 positive thing during his time in office.
I don’t know how it’s going to end exactly, but it looks like China is going to be better off than much of the west because of their advancements in renewables.
Some of the lower population Nordic countries will do quite well. They generate more electricity per capita than other countries
You can’t be serious.
If we are smart: Middle East fighting is contained as much as possible without major western involvement. Global recession and inflation caused by spiking oil prices, mid-term movement away from ME oil, long-term movement away from oil on the whole.
If we are not smart: The US does a Russian invasion of Ukraine style invasion of Iran to significant US troop losses and we still have a global recession and spiking oil prices.
Deal by Monday
My guy in D.C. tells me that we are not dealing with a student here, we’re dealing with the Professor. Any time the military has an operation that can’t fail, they call this guy in to train the troops, OK? He’s the kind of guy that would drink a gallon of gasoline so he could piss in your campfire! You could drop this guy off at the Arctic Circle wearing a pair of bikini underwear, without his toothbrush, and tomorrow afternoon he’s going to show up at your pool side with a million dollar smile and fist full of pesos. This guy’s a professional, you got me? If he reaches this rig, we’re all gonna be nothing but a big goddamned hole right in the middle of Alaska.
There are a lot of different angles you can look at this from. I can’t tell you what will happen at the global level, or on the futures sode of things, but I think I have a good idea of where oil supply in the U.S is headed.
Because of how we import our oil and who we import it from, we’re unlikely to run into a scenario where gasoline is simply unavailable, at least on a large institutional scale. Unfortunately that is only a small comfort. Gas prices are going to rise sooner or later unless something changes very fast, and I can only guess as to how high those prices will go. Once prices get too high, we have to ask ourselves what happens if local gas stations are unable to sell gas to people simply due to unaffordability. Maybe they can stick it out for a while, but sooner or later failing to sell gas at all will mean gas stations start closing. Rural areas will be more vulnerable to this. Waiting in very long lines for very expensive gas is, IMHO, the most likely outcome here.
Worth starting by saying futures do not predict the exact spot price in the month ahead, they only reflect how much buyers are willing to pay now to guarantee the price of a future shipment.
If you are asking when front month futures contracts will match the spot price, they routinely tend to converge on the spot price the closer they get to their expiry date. They won’t match spot at the start of the contract right now because there is so much uncertainty as to what the spot price will be over the period of 1 month.
If you mean when will longer futures roughly match the spot price, e.g. 2 month, 3 month and beyond, that won’t happen until the market believes oil prices are likely to remain stable over that many months. That won’t happen until some time after the war is over.
In other words, there is nothing artificially keeping front month futures from matching the spot price. We are in a supply crunch, so people will always be willing to pay more for oil right now rather than a month away.
Oil prices went down before the ceasefire breakdown because the market was expecting peace talks to continue and conclude and for there to be a supply glut as a result.
Futures are low because the market thinks this blows over before any real supply disruption sticks. Physical and paper rarely align in a crisis.
The US is currently exporting a net of 5 million barrels a day of crude and products. I dont see why we should be drawing down the SPR one million barrels a day then. At that rate the SPR will be depleted in early 2027.
P.S. Just a technicality, but I read the last 70 million barrels of the SPR will be difficult to extract, due to its construction.
They are going to utilize the SOH as a revenue source for their Sovereign Wealth Fund they are building. Just like they are doing with Venezuela, and the National Economic and Security Fund.