DrumBeat: March 13, 2007
Posted by Leanan on March 13, 2007 - 9:56am
Topic: Miscellaneous
International Energy Agency Warns On Sharp Oil Stocks Falls
The International Energy Agency warned Tuesday that global oil and fuel inventories were being sucked lower at an unusually high pace this year, leading it to fret about demand being met in the coming months and amplifying the need for more crude from the Organization of Petroleum Exporting Countries.The agency's widely-anticipated monthly assessment of the global oil balance said that stockpiles of crudes and fuels held by the Organization for Economic Cooperation and Development group of industrialized nations were falling at a pace of 1.26 million barrels a day so far this year and could spell the largest stock draw in a January-to-March period in more than 10 years.
The IEA, which represents the energy security interests of the OECD, also red- flagged an unusual draw down in crude stocks.
Oil climbs after IEA asks OPEC for more
Oil prices rose above $59 a barrel Tuesday after the International Energy Agency said the world would need extra OPEC oil in the coming months.
Saudi Aramco to cut supply to Asia by 9%
Customers will receive less crude oil as Saudi Aramco complies with Organization of Petroleum Exporting Countries' production quotas agreed last year. The oil producer is cutting exports of its heavy crude to Asia after demand fell as the refining profit to process that grade declined.
Saudis send signal with supply cut for Asia refiners
"It seems a technique to defend oil prices around a US$60-a-barrel level ... cutting Saudi heavy's supply volumes more than others, and selling more expensive Saudi light and extra light," another source said.Other traders said the deeper supply curbs from OPEC's most influential member is a message for the group to fully comply with agreed reductions.
Scientist Says Sea Level Rise Could Accelerate
"What we're learning is that ice isn't slow. Things can happen fast," [NASA oceanographer Eric] Lindstrom said."If the (polar) ice sheets really get involved, then we're talking tens of metres of sea level -- that could really start to swamp low-lying countries," he said.
Richard Heinberg: Comments to the National Petreoleum Council
On October 5, 2005, U.S. Energy Secretary Samuel Bodman requested that the National Petroleum Council conduct a study of global oil and natural gas supply. The motivating concern stated by the Secretary was an investigation into the timing of and responses to peak oil—the plateauing and subsequent decline of world oil production.
Growing political risks imperil oil sands profit, report says
Alberta oil sands producers face growing political risks that could significantly erode their profit margins, and slow the pace of development, says a report from UBS Securities Canada Inc.
Saudi Aramco: 1Q 2011 Start to Karan Gas Output
Aramco has given companies until March 20 to submit bids for the contract to provide project management and front-end engineering design services for the company's first-ever offshore gas field scheme, according to the official documents....Due to Saudi Arabia's rapidly rising gas requirements, the Karan project is being "accelerated," targeting the first quarter of 2011 for start-up.
Shrinking farmland and increased demand is making meals more expensive, raising concern that social unrest will emerge among rural people living on 3,587 yuan, or $463, a year. The central bank will put 5 billion yuan into credit cooperatives in grain-producing regions to boost lending to farmers, the People's Bank of China said.
Farmers Gear Up to Plant Massive Corn Crop
A burgeoning ethanol market has the nation's farmers gearing up to plant massive amounts of corn this spring, creating shortages of some popular biotech hybrid seeds. While growers should still be able to find plenty of corn seed to plant, it may not be the variety developed for their season or bred with the genetic modifications they want to combat insects and diseases in their region, experts said. "It is a nationwide problem. One reason it is so severe in Kansas is that a lot of the seed available for us is being used to replace cotton acres in Texas and Mississippi. But the shortage is nationwide," said Terry Vinduska, the sales representative for Pioneer Hybrid International in Marion.
Titans make Africa their stomping ground
Recent events, not helped by former ambassador John Bolton's antics at the United Nations, may cause some to dismiss the efficacy of US diplomacy to achieve anything beyond elite acquiescence. But those who think so would do well to recall America's long-standing ability to ingratiate itself with supposed "inferiors" when the geopolitics is right.
Chavez touts regional gas export group amid domestic deficit
President Hugo Chavez is portraying Venezuela as a natural gas powerhouse and is pushing for a regional exporters' group despite a deficit of the fuel back home.
Dutch PM voices support for coal-fired energy
Prime Minister Jan Peter Balkenende supports the construction of coal-fired power plants if the greenhouse gas CO2 released is stored in underground former gas fields.
Some experts say high demand could push pump prices past last year's highs. Others say relief is in sight.
'India to be a power surplus country'
Energy-hungry India, which currently faces huge power deficit, will become an electricity surplus country in next four-five years, Power Minister Sushilkumar Shinde told Rajya Sabha today.
Fusion Energy One Step Closer to Reality
A project by University of Wisconsin-Madison researchers has come one step closer to making fusion energy possible.The research team, headed by electrical and computer engineering Professor David Anderson and research assistant John Canik, recently proved that the Helically Symmetric eXperiment (HSX), an odd-looking magnetic plasma chamber called a stellarator, can overcome a major barrier in plasma research, in which stellarators lose too much energy to reach the high temperatures needed for fusion.
Driving a nuclear-powered car may sound a bit like something out of Thunderbirds, but it could soon be a reality if the oil industry's nuclear overtures come to anything. That's one prediction in Trading Climate Change, JP Morgan's latest contribution to the City's voluminous output on the impact of global warming.
Oil region looks to the future
Since 1959, Daqing has produced about 1.9 billion tons of crude oil. Notably, during the period 1975 to 2002, Daqing maintained an annual oil production of no less than 50 million tons, creating a world record.Concerns that Daqing was on the verge of depleting its natural resource stocks surfaced when output began to decline in 2003.
But Gai Ruyin, Party secretary of Daqing Committee of the CPC, brushed aside concerns, saying Daqing's future was more secure since the recent discovery of large oil and gas fields in the region and new "exploitation technology".
Halliburton's not alone in move to region
A number of other Houston oil-field-services firms, including Baker Hughes and Schlumberger, have recently opened or expanded offices in the United Arab Emirates. And their goals are all the same: to be near oil-rich nations in the Middle East and to increase their business in the quickly growing Eastern Hemisphere.
Texas grid says TXU unfairly raised prices
An independent monitor for the Texas electric grid said Monday that TXU Corp.'s wholesale power subsidiary, because of its large size, was able to raise power prices unfairly in 2005, costing wholesale power customers about $70 million.
Efficient methods could bail out biofuels
A new, more efficient method for manufacturing biofuels could generate enough fuel to supply the entire U.S. transportation sector while sharply reducing the amount of raw material required to make it, researchers said on Monday.
Britain proposes legal limits on carbon emissions
Britain on Tuesday became the first country to propose legislation setting binding limits on greenhouse gases as it stepped up its campaign for a new global warming pact to succeed the Kyoto Protocol.
Pelosi Reveals Who's Who On Global Warming Panel
The best-kept secret on the Hill -- the full membership of the new committee on global warming -- is no longer secret. House Speaker Nancy Pelosi (D-Calif.) has announced the 15 members of the committee, formally known as the Select Committee on Energy Independence and Global Warming.
Emission Caps unlikely without Bush help
Democrats running Congress will likely not be able to pass climate legislation with mandatory limits on "greenhouse" gases without help from President Bush, the chairman of the Senate's energy panel said Monday.
How do investors factor climate change into their stock-picking equation?
After years of warnings from environmental and socially responsible investing groups, it seems that corporate America is catching on to the risks of climate change. Investment banks, insurance companies, and big investors are taking a close look at the greenhouse gases that companies are emitting. So how can you avoid a portfolio meltdown if the planet heats up?
Apart from the need for drinking water, 80% of the country's power has traditionally come from hydro-electricity. And, the current boom sectors of the economy - agro-exports and mining - also absorb huge volumes of water.
European businesses go green fast
While in some cases there is still a yawning gap between rhetoric and reality, European businesses are rapidly going green -- albeit driven more by profits and regulations than a desire to do good.
CEO: Locking in energy prices pays off for businesses
Illinois businesses that don't lock in their energy prices are taking a risk, said the president of an energy company that hopes to do business in the state.
Canary Islands: Hot and hotter - Climate change is upon us
“It’ll be a steady progression,” [environmental director Juan Carlos Moreno] said. “Each year the effects will be more discernible and slowly but surely our climate will change, with greater contrasts throughout the year.“We are trying to alleviate catastrophic consequences,” he continued, “with programmes aimed specifically at establishing which form of vegetation is best suited to warding off the worst effects of desertification. We are also encouraging the clearing of ravines to free them up so rainwater will flow downhill unimpeded.”
Okinawa Governor to Inspect Disputed Senkaku Islands
Okinawa Gov. Hirokazu Nakaima said Monday he will inspect the disputed Japan-controlled Senkaku Islands from the air Tuesday, despite a protest from China which also claims them.Nakaima has repeatedly voiced his desire to view the islands -- part of the prefecture -- as well as a disputed Chinese gas field in the East China Sea from aboard a U-4 multipurpose jet of the Self-Defense Forces.
In the present-day world we are deeply concerned with energy. Because the sources of energy i.e., the gasoline products, the petroleum products and even the nuclear energy-provider uranium have a certain finite reserve limit that are found naturally on earth and also their reserves are being depleted due to rampant extraction and usage.
US Senate to Unveil Bills on Oil Leases, Climate Change
Senator Jeff Bingaman, the U.S. Senate's top lawmaker on energy policy, is aiming to unveil a bill later this month that would address what he describes as "the royalty mess down in the Gulf of Mexico" followed by one in April that would address global warming.
Wind energy essential to New Zealand sustainability
A leading international expert in renewable energy has warned New Zealand that it must set clear, defined targets for renewable energy if it wants to avoid an energy crisis in the near future.
Premier Indian steel group to pull out of Nepal
One of India's prime steel manufacturers, the Rs.60 billion Bhushan group, has decided to pull out of Nepal because of the prevailing political, power and labour problems.
...Nepal's electricity authorities have begun enforcing a 40-hour weekly power cut in Kathmandu valley and a lesser outage in the districts to cope with a mounting power scarcity caused by a lean monsoon.
Ticking time bombs and last-minute escapes
But so pervasive have these themes become in American film and literature that much of the public has up until recently unreflectively embraced the idea that all emergencies will be met with unparalleled heroism that leads to the right solution--no matter how hastily and tardily conceived. Perhaps the purest example of this (and maybe the most ridiculous) is the long-defunct television show "MacGyver." For those who weren't watching television closely in the late 1980s, MacGyver (played by Richard Dean Anderson) was a secret agent who didn't carry a gun. Instead, he was amazingly resourceful in crafting weapons out of materials on hand--always, of course, in the nick of time.
Australia's Oil, Iron Ore Output Hit by Cyclone George
Australia's oil production has been cut by the storm, with floating production vessels disconnecting from their buoys and sailing out of the path of the cyclone.
In the summer of 1988, Hansen had what a talent agent might call his breakout moment. He stood before the US Congress and warned that the human-induced greenhouse effect was underway. At the time, many of Hansen's colleagues thought he'd gotten too far out in front of the science. And perhaps he had, a bit—but it also took some vision to put the issue on the map. Hansen, the New York Times noted, had "sounded the alarm with such authority and force that the issue of an overheating world has suddenly moved to the forefront of public concern."
First Draft of an article I'm working on follows. Any comments?
Note that a couple of people commented yesterday that the HL method may be too optimistic.
Could Saudi Arabia Be More Than 70% Depleted?
by Jeffrey J. Brown
In the captioned article, I argued, based on “Khebab’s” technical work, that Saudi Arabia in 2005 was, based on the Hubbert Linearization (HL) method, at the same stage of depletion that the prior swing producer, Texas, peaked, in 1972.
Because we have so much data for Texas, we can get a fairly accurate estimate of Ultimate Recoverable Reserves (URR), probably about 62 billion barrels (Gb), or what I will call Probable URR.
In the article, I noted that Texas peaked in 1972 at 57% of probable URR. Recently, Robert Rapier, on The Oil Drum, has raised some questions about what could have been predicted prior to the Texas peak. As a result of the questions that Robert raised, I have gone back and reexamined the data, and I have come up with some troubling conclusions.
When I first did a HL plot for Texas, I used the data from 1958 through 2004 to get an estimated URR of 66 Gb. Khebab used a slightly different set of data to get an estimated URR of 62 Gb. In any case, the Texas data show a strong linear pattern from 1958 to 1965, with an inflection from 1966 to 1972, where the plot again showed a strong linear pattern.
Qt is an estimate of URR, based on the HL method. If we focus on Khebab’s HL plot, a linear plot using the 1958 to 1965 data would have given us a Qt that is reasonably close to the Probable URR. However, if we use the 1958 to 1972 data, it would give us a Qt of about 85 Gb, about 37% larger than the Probable URR.
Saudi Arabia has shown a strong linear pattern from 1991 to 2002, with an inflection from 2002 to 2005. If we use the data from 1991 to 2005, it suggests that Qt is approximately 186 Gb.
However, if we use the Texas model, and discount the recent inflection, which is probably an artifact of the swing producer maximizing production prior to the peak, it suggests that the Saudi Qt is only 150 Gb, which in turn suggests that Saudi Arabia is now over 70% depleted, with about 40 Gb in remaining recoverable reserves.
Texas:
http://static.flickr.com/44/145149303_e59bbf9890_o.png
Saudi Arabia:
http://static.flickr.com/52/145149302_924470eaa7_o.png
Jeffrey J. Brown is an independent petroleum geologist in the Dallas, Texas area.
E-mail: westexas@aol.com
WT:Your article is well written and easy to read. It appears that you are unsure which HL is more accurate, so I would mention both along with the average of the two methods (64-65% depleted).
Brian,
I think that Robert and I were both on the right path, but we were asking the wrong questions.
IMO, the right question is: What portion of the Texas HL data set prior to 1973 (when the decline started) would result in a Qt estimate close to 62 Gb? The answer is the strong linear data set on the Texas plot from 1958 to 1965.
The implication of this is that the 150 Gb estimate for Saudi Arabia is probably more accurate than 186 Gb, which puts Saudi Arabia at about 73% depleted, which means that we are really, really screwed. In any case, if you plug in the recent production data, they would fall close to the 150 Gb projection.
IMO, this is not a drill. I think that the crisis is upon us, and I think that it will be worse than most of us have been estimating.
Your analysis is excellent. I see people using every upward deflection of the HL curve as proof that the URR is larger. This is wishful thinking. The system is closed as far as the oil is concerned so there cannot be only positive deflections. You demonstrate that in all likelihood the URR is estimated best by HL data that arises during the normal production regime and not forced transients when production stalling starts to become apparent. These forced production regimes show increased production and delay the peak but they do not create new oil. What you extract faster today, you will have less of tomorrow.
Of course if we had enough HLs for enough fields "deflections" could be studied -- average length, degree of deflection, etc.
It would be nice if some HL curves were shown for truly end-of-output conditions. In the Texas case I expect the HL curve to start heading down in the next few years for a URR below 70 Gbl instead of keeping at its 2006 trend towards a URR higher than 70 Gbl.
Now I'm really worried. I already felt your export model was 100% right on and was a stark warning, but if SA is really 73% depleted, we are screwed.
Watching all of the geopolitical jockeying that has been going on the past 5 years amongst the major world players, you can't help but come to the conclusion that something major is up. Before that, gas was cheap, oil wasn't in the news, and there was RELATIVE world peace.
Okay, no rest for the weary. Back to the farm.
Cheryl
Hi Cheryl,
BTW, I meant to say how much I enjoyed your talking about your gardening success with the neighbor girls. Much support.
Thanks! We've worked our butts off the past year. Digging holes in lava by hand is no small task. But we've planted more than 50 fruit trees, and in less than one year at least 30% are already productive. We have fresh juice and fruit every morning.
We still have about 50 mac nut trees, so although they are a bitch to crack by hand, we do have a source of oil and essential fatty acids. And when avocados are in season, they can't be eaten fast enough by the whole population here. Most of them rot on the ground.
The vege garden has been out of control and we can't give it away fast enough. My husband keeps joking, "but the seeds are so little." It helps that he has a green thumb. I would never have been able to do this by myself, so hats off to an old man who is willing to do massive amounts of physical labor every day. It was my idea and I made this whole adventure happen both financially and physically and told him he was either with me or without me, but I was packing up and going. Needless to say, he's here.
I figure we will be in a good position when the SHTF, but the biggest worry will be all of the have-nots in the area. We can help some, but not all of them. And as I've mentioned before, while we are working our butts off, most of our neighbors are drinking beer and watching ESPN. The other night the Twilight Zone episode about the bomb shelter and the neighbors who didn't prepare was on. Gave me the willies. There are a lot of retirees here who just don't seem to have a clue--they think they are going to live out there retirement with ease.
I do suspect that when TSHTF, many of the retirees will leave. Right now it is still very easy to fly back and forth to the mainland to see family/friends and get medical care that isn't available here. I think many of the retirees will go back to the continent to be close to family and medical care.
It's of note that the airline industry has had major fuel problems the past few years, with many airports running out of fuel. About 1 year ago, the main island carriers, Aloha and Hawaiian Airlines both cut back dramatically on inter-island flights. It should have been a wakeup call, but it wasn't. Since I'm a former air traffic controller, I kind of follow stuff related to the airline industry. It never ceases to amaze me at how ill-informed most everyone is. Pretty much everyone thinks it is and will forever be "business as usual."
Nice work, Jeffrey.
Gremlins appear to have eaten my copy of Twilight in the Desert. I seem to recall Simmons starting with the pre-ARAMCO-nationalization reserve estimates and coming up with something in this neighborhood.
As mentioned yesterday, coupling HL with other estimation methods can help select a good data set to use.
Let me see if I follow this logic:
Observation: Texas production will seemingly max out at about 62 Gb. The 1958-2004 Texas HL analysis gives a bit more than that, but there is a linear region prior to peak (6-7 data points) which seems to give an intercept closer to 62Gb.
Conclusion: This short linear region is more "Hubbertian" than the inflection (never mind the error bars on the value of Qt from so few data points, or what it means for that line to have a different slope than the latter 25-year linear region).
Observation: Texas was the swing producer. KSA is now the swing producer.
Conclusion: The inflection period reflected Texas' efforts to maximize production prior to the peak. Thus, the HL for KSA should also show a "Hubbertian" region followed by an inflection as they try to maximize production prior to the peak. Indeed, HL for KSA has a linear region from 1991-2002 followed by an inflection, which can be ignored in estimating Qt.
My Observation: To me, this underscores RR's point that concluding anything definitive from HL of KSA's production data is very problematic. WRT Texas, it seems more likely that, if production for any time period follows a geology-constrained model (Hubbert), it would be right before and over the peak--before they knew what was hitting them. Before then, production was constrained by the TRC. With KSA, you seem to want to focus on a decade when oil prices were crashing through the floor, call that the Hubbert-constrained region, and write off the upswing that happened as prices were climbing. In effect, you're saying that ramping up production after years of steady production, for whatever reason, is a sign of desperation. I would call it wanting to take advantage of increased demand.
Because of the economic and political factors that it cannot account for, the Hubbert model clearly cannot explain production trends over certain time periods, and there is no justification for excluding data which doesn't fit your expectations. Just because it's linear on an HL plot doesn't mean that it is "Hubbertian".
You should read my posts on Roberts thread. This is exactly how HL should be used. I.e only use the points that fit the underlying assumptions not try to fit all the data.
You need reasonable and defensible criteria for excluding points. But the is the right way to do HL.
If you want to use all the data even if it does not fit the criteria for HL then use a different model.
Assumption: KSA is peaking.
Test: use only data points that show KSA is peaking.
Conclusion: KSA is peaking.
Brilliant.
This is a combination of the logical fallacy of Begging the Question (assuming what you're trying to show) and of the data-analysis fallacy of Cherry-Picking (only using data that shows the conclusion you want).
The result is a completely invalid method of analyzing data. Let the data tell its own story.
Well, you can do that...but it ain't science, pal. In the words of a 70's glam-rock band, "You're fooling yourself and you don't believe it".
Wasn't it John F. Kennedy who said:
Let's all do our part to perpetuate what ever delusions we have, lest they be forgotten and fall away into the dust bins of history.
Praised be the giver of all BS. Amen.
(BTW, there is overwhelming scientific evidence that my deity, the Holy BS Giver exists. Just look all around you. The proof is there. The Flying Spaghetti Monster, on the other hand, is a fraud. ;-)
Can you repost this out of the drumbeat as a regular article soon.
Also I mentioned buried in Roberts thread just recently.
http://www.theoildrum.com/node/2357#comment-168542
This may be relevant.
the most important concept i get from HL is that as basins, regions and the globe matures the size of the fields discovered gets smaller, resulting in a peak. i tend to give less weight to the statistical evaluation of production/demand data sets.
some think that "new and improved" technology will somehow result in ever increasing production capacity. but wait just a damn minute: HL, has historical "new and improved" technology built in. sure, we will see "new and improved" techniques and we have seen tremendous impovements in technology in the past , generally resulting in an ability to find ever smaller reservoirs.
we should not loose sight of the fact that ghawar was discovered based on surface geology, the new and improved technology of the day
The International Energy Agency warned Tuesday that global oil and fuel inventories were being sucked lower at an unusually high pace this year, leading it to fret about demand being met in the coming months and amplifying the need for more crude from the Organization of Petroleum Exporting Countries.
They (and the WSJ, who also mentioned this in 2 articles) must read TOD, because that's exactly what I said yesterday. :-) Saudi will be called upon soon to produce. We will know by June whether their current decline has been voluntary, because starting in late April to early May, U.S. demand will sharply pick up.
Here are some excerpts from one of the WSJ articles that one of the TOD readers e-mailed me this morning:
Tell me if I'm wrong here but didn't KSA cut output in advance of the agreed OPEC time to cut. Wasn't this touted as "the market is oversupplied" and that made sense at the time? If the opposite situation now exists does the reverse now apply? Just curious, maybe the 'new price floor is higher, say $100, and we just haven't been informed...yet.
Yes, and that was only a few months ago. Yesterday we also had the news that they were cutting some long term contracts by 10%.
I agree with Robert, we will know the answer this spring, and I completely agree with Jeffery's export model. We appear to be at peak or past peak, and the heavy geopolitical jockeying for oil reserves seems to confirm those suspicions.
I have a oil-production question. Yesterday, it was mentioned that Saudi Arabia's production cuts in April are primarily with respect to their heaviest quality of crude. If the cuts are due to supply issues, shouldn't the cuts be with respect to the types that are in shortest supply - presumably the lighter grades? One of the articles above suggests the pattern of cuts is to provide higher average revenue.
The lighter grades are more profitable. Remember, they are trying to make as much money as they can. They want to squeeze that last dollar out without collapsing the world economy.
I have the same question. If they are cutting "involuntarily" you would think it would be the light grades. Making money would not be the issue.
Perhaps they're saving the heavier stuff for later, when *any* oil will be valuable.
Perhaps they are experiencing difficulties producing the volume of heavy oil consumers are willing to purchase.
I do not think this is likely but maybe they are selling some of the heavy oil to refineries who contracted light oil and refineries that contracted heavy oil get less.
What would the refineries who contracted light oil do with the heavy oil that maybe SA is selling them?
No idea i know nothing about it but if they get oil that are a little bit heavier i guess they try to find better oil or if there are no other surplus capacity they just have to use what they get, lower refinery utilization? Observe that i do not think this is the situation it was just an idea.
I should have posted this quote from a 2004 Report of the National Petroleum Council the first time around:
"Since crude oil quality varies significantly
from one supply point to another and refineries
are designed to operate using crude oil of given
qualities, sudden changes in crude oil supply could
cause a reduction in refinery throughput even
though there appears to be ample volumes of crude
oil available."
http://www.npc.org/reports/R-I_121704.pdf
Also of note in the Bloomberg story, Saudi Arabia is cutting back on its contracted deliveries of light oil to Japan.
Well, it seems clear the refineries were caught by suprise. They didn't ask for any of the reductions. The interpretation that it is due to reduction of demand is an interpretation being placed by outsiders. One report in the media says it is due to reduced demand, the other due to an "anticipated" reduction in demand. In either case, the refiners didn't expect the reduction or ask for it.
So this might suggest they are having difficulies.
I like this line in the Reuters story:
"Other traders said the deeper supply curbs from OPEC's most influential member is a message for the group to fully comply with agreed reductions."
Sheik Aramco: "You guys better cut more cuz if you don't we'll cut our contracted deliveries even more. So there."
I'm always amazed how some people (the traders, the reporter and his/her editors) manage to get paid for their analytical abilities.
Reducing inventories does not "stabilize prices"; it destablizes the entire system. What comes to mind is the early stages in the Bakhtiari scenario where the system bounces between relatively rigid supply and demand constraints and gets increasingly unstable.
Of course, what the article really means is "keep prices up". That will be a different dance.
cfm in Gray, ME
Of course, what the article really means is "keep prices up".
And that's the key. What Saudi would love to do, I am sure, is to "stabilize them" up around $80/bbl. What they want to avoid is stabilizing them at $40/bbl. Your perspective all depends on whether you are buying or selling.
When did they officially change the price band upward from the $25-$35 bbl?? Wasn't their production dropping even though the price had stabilized for some time at ~$60? Should we ignore their price band announcements (or lack of announcements) and look at their production to infer a price band? Obvious follow-up: Should we look at their production to infer the voluntary/involuntary nature of their production drops?
Much has been said about inventories and I presume that the issue of inventories ties in with the general perception that there is a 'refinery bottleneck' or at least when consumption is running as high as it ever has been this seems to be the case.
If there is indeed a 'refinery bottleneck' (when consumption is at peak and/or rising) this would, it seems, lead to great volatility in prices of finished product and maybe of crude as well. As inventories fall, prices rise, producers ship more crude until inventory rises, even though consumer demand may not yet be sated, crude prices fall because of high inventories, finished product prices rise (the current situation of the past week vis-a-vis prices). I would predict more steadily rising finished product prices (depending on the ephemeral 'demand destruction') but fluctuating crude prices in this scenario (basically Sailorman's forecast :))
Does this make sense to others ?