Monday, July 22, 2019

Even the Prospect of War in the Gulf No Longer Works.

It doesn't take much to send the price of oil soaring. Seizing a tanker raising the threat of conflict on the Strait of Hormuz in the Persian Gulf once would have been more than enough and we would see it within days at the gas pump. There's been a little blip but...

Maybe those days are over.
Sentiment in the oil market has shifted dramatically in recent days, with hedge funds, producers and traders all taking a more bearish tack in response to what they see as weakness in worldwide demand. 
The oil market has struggled to sustain a rally despite supply restrictions that generally would be considered bullish. U.S. sanctions on Venezuela and Iran have removed more than 1.5 million barrels of daily supply from the market, OPEC extended a supply-cut deal into 2020 and tensions between the United States and Iran are rising. 
Yet, Brent futures have struggled to sustain a move above US$65 a barrel and slumped about 7 per cent last week, while U.S. futures have rarely moved above US$60 a barrel. 
“Given all the bullish news we’ve had, the flat price has hardly changed,” said Janelle Matharoo of InsideOut Advisors, a commodities trading and risk management consultancy. “Fifteen years ago, this kind of news would have shifted the price US$20, US$30 per barrel.”
Well, that's certainly awkward when you've got a multi-billion dollar pipeline project in the works with only taxpayers to foot the bill.

Justin Trudeau famously assured US oil execs that, "No country would find 173 billion barrels of ground and just leave them there." Of course no one, including Canada, ever found 173 billion barrels of oil in Athabasca. That's not oil. It's bitumen. Worse yet, the energy giants got the easy stuff while the getting was good. It is becoming progressively more costly to get the dirtier, poorer grade sludge these days.

Investors don't want oil. They want profit from oil. And, when prices slump profits can be hard to realize from high-carbon, low-value sludge, the very stuff Justin is so hellbent on pursuing.

We've been warned. Even the current and former governors of the Bank of England have warned that there's a volatile 'Carbon Bubble' and, at some point, it's going to burst. It's a 'when', not 'if' proposition but, when it happens, the low-value, high-carbon stuff will become 'stranded assets.' And that's the risk Justin has decided we should bear.


Northern PoV said...

imho, Iran made a wise strategic move (messing with the security of the shipping in the sea lanes in the Gulf) in the light the ongoing illegal sanctions against them ....
and then there is the actual tripping point that everyone seems to be overlooking:

"With the seizure of a supertanker off Gibraltar, distracted UK government was set up by John Bolton as collateral damage"

The Mound of Sound said...

Yeah, I read the piece on Bolton, the moustache of pure evil. Theresa May is convening an emergency cabinet meeting today. At least the tanker business will keep her mind off the ignominy she'll endure tomorrow when she gives her notice to the Queen and hands the reins to Blondie.

Trailblazer said...

This is just one of the reasons the market is subdued when there is an oil 'crisis'.

During the Vancouver gas 'shortage' where there were no line ups at the pumps fuel prices were about 30 cents per litre than they are now ; not because of scarcity thats for sure.
Add to this that consumers are turning to the inevitable regardless of the petro pimps..


The Mound of Sound said...

The sooner internal combustion engines are a thing of the past in dealer showrooms the better.