Why Is The Us Doubling Its Strategic Petroleum Reserve

[El_Pirata]

Sorry if OT but:

Does SPR Increase Foretell Iran Strike?

Does aggressive SPR build-up foretell Iran strike?

Light sweet crude is down 20 cents at $54.80 per barrel, after Tuesday's $2.48 jump to $55.04 on reports that the US Dept of Energy will purchase 100K barrels of oil per day starting next spring. While the decision is part of the Bush Administration's latest commitment to reduce US dependency on imported oil, the aggressive approach on beefing up SPR may reflect heightened possibility of a US military strike against Iran as early as March or April, at a time when US navy ships are piling up in the Persian Gulf. Yesterday, markets were filled with chatter of a Kuwait-based newspaper article reporting that the US will launch a military strike on Iran before April 2007, citing "reliable sources". According to the article, the strikes will be launched from US ships with Patriot missiles guarding all oil-producing countries in the region. The attacks would be planned in April, the last month of British PM Blair in office. The immediate result of such an attack is a protracted run up in oil prices, which could reach the $70 per barrel mark in less than a week.

http://www.fxstreet.com/fundamental/market...2007-01-24.html

[tahoma]

I don't think they are even going to try 'proving' a case for war this time around. It's going to be - by the way, the missiles are flying. Best nip out and fill up your tank now.

Now what is the message there? The message is that there are no "knowns." There are thing we know that we know. There are known unknowns. That is to say there are things that we now know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. So when we do the best we can and we pull all this information together, and we then say well that's basically what we see as the situation, that is really only the known knowns and the known unknowns. And each year, we discover a few more of those unknown unknowns.

[Wad]

Sorry if OT but:

Does SPR Increase Foretell Iran Strike?

Does aggressive SPR build-up foretell Iran strike?

Light sweet crude is down 20 cents at $54.80 per barrel, after Tuesday's $2.48 jump to $55.04 on reports that the US Dept of Energy will purchase 100K barrels of oil per day starting next spring. While the decision is part of the Bush Administration's latest commitment to reduce US dependency on imported oil, the aggressive approach on beefing up SPR may reflect heightened possibility of a US military strike against Iran as early as March or April, at a time when US navy ships are piling up in the Persian Gulf. Yesterday, markets were filled with chatter of a Kuwait-based newspaper article reporting that the US will launch a military strike on Iran before April 2007, citing "reliable sources". According to the article, the strikes will be launched from US ships with Patriot missiles guarding all oil-producing countries in the region. The attacks would be planned in April, the last month of British PM Blair in office. The immediate result of such an attack is a protracted run up in oil prices, which could reach the $70 per barrel mark in less than a week.

http://www.fxstreet.com/fundamental/market...2007-01-24.html

Lets not get carried away here. 100,000 bbl per day is only 3 million per month and that is only one tanker load. At the moment the US consumes about 20 million barrels per day so Bush is only saying he is going to add 0.5% of daily consumption to the reserve. Frankly annual consumption is growing a quicker rate than that. In other words it is going to do nothing for US oil security except keep it in line with consumption growth.

In any case, it makes no sense to add oil to the reserve at $55 / bbl and it by no means certain that the Democrats will vote through the budget to actually pay for it.

[tahoma]

Keep your eyes peeled on movements in Iraq regarding the Shiites i.e. the Iranian proxy...

There's a program on tonight about Shiite death squads linked to the Iraqi government, could be worth a watch. I think it's on at 8 (Monday).

[OLDFTB]

As i understand it the primary reason is due to an exceptionally cold winter sparking an increased demand for oil.

[bpw]

OR..

is it to allow for the arrival of the new hurricane season. If we have a repeat of Katrina with several damaged platforms and a refinery then supply from the gulf could trigger an even worse price shock.

[needle]

Sorry if OT but:

Does SPR Increase Foretell Iran Strike?

No it fortells this story - http://online.wsj.com/google_login.html?ur...Dgooglenews_wsj

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.

The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex.

Peak oil is here and seems to be unfolding faster than anyone thought.

The yanks obviously know about it.

[pricedout]

As i understand it the primary reason is due to an exceptionally cold winter sparking an increased demand for oil.

But I thought we were having an exceptionally mild winter?

[Wad]

Lets not get carried away here. 100,000 bbl per day is only 3 million per month and that is only one tanker load. At the moment the US consumes about 20 million barrels per day so Bush is only saying he is going to add 0.5% of daily consumption to the reserve. Frankly annual consumption is growing a quicker rate than that. In other words it is going to do nothing for US oil security except keep it in line with consumption growth.

In any case, it makes no sense to add oil to the reserve at $55 / bbl and it by no means certain that the Democrats will vote through the budget to actually pay for it.

Right on cue. The Brent price is down $1.63 in the front month from last Friday close and the story goes that having cleared out the hedge funds by running it up aggressively last week the oil market professionals are now increasing their short positions again.

[needle]

Right on cue. The Brent price is down $1.63 in the front month from last Friday close and the story goes that having cleared out the hedge funds by running it up aggressively last week the oil market professionals are now increasing their short positions again.

Interesting.

Any links Wad?

[Wad]

Interesting.

Any links Wad?

I think it was on a Bloomberg market commentary. Cannot remember where, I read so much in a day.

[needle]

Lifted from Tim Iaconos very excellent site @ http://themessthatgreenspanmade.blogspot.c...-cantarell.html

Mexico's Oil Output Cools

Slowing of Major Field May Pressure Prices,U.S. Import Diversity

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.

The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.

...

Mexico's troubles at Cantarell mirror the larger problems in the global oil market. Many of the world's biggest fields are old and face decline, which can be sharp and sudden. Like other big producers, Mexico is struggling to make up the difference because new big fields are in harder-to-reach places like the deep waters of the Gulf of Mexico.

The field's decline is expected to continue, if not worsen, this year, according to most estimates. That will subtract valuable oil from the world market, which is under pressure from rising demand by growing economies like China and India. It also means less oil headed to the U.S. from Mexico, which has long relied on Mexico as one of its top-three oil suppliers.

"This is bad news for Mexico. The field is declining faster than even the government's pessimistic scenarios," says David Shields, an oil industry consultant in Mexico City who has been warning about Cantarell's collapse for the past two years.

...

None of this is welcome news in a country that relies on oil exports for some 37% of government revenue. So far, relatively high oil prices have kept the country from feeling the effects of lower output. But prices could continue a recent drop, adding to Mexico's woes from a production shortfall. This year's Mexican budget is based on Pemex's official production targets as well as a relatively high oil price -- about $50 on the world market.

In many older oil fields, companies inject gas to keep the pressure in the wells high and the oil flowing. In the case of Cantarell, Mexico injected vast quantities of nitrogen in the past few years. But the gas can only do so much, and using it means the decline in production can be sudden and sharp. In the case of Cantarell, which lies in the shallow waters of the Gulf, experts say that seawater is fast invading the wells.

[Pluto]

I think the oil reserves have already been doubled - that is why we had the spike in oil last year.

Bush just confirmed what he already did, and that is why there is muted reaction in the oil markets.

You need to think out of the box when predicting what governments are doing.

[Warwick-Watcher]

Lifted from Tim Iaconos very excellent site @ http://themessthatgreenspanmade.blogspot.c...-cantarell.html

Mexico's Oil Output Cools

Slowing of Major Field May Pressure Prices,U.S. Import Diversity

Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability.

The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry.

...

Mexico's troubles at Cantarell mirror the larger problems in the global oil market. Many of the world's biggest fields are old and face decline, which can be sharp and sudden. Like other big producers, Mexico is struggling to make up the difference because new big fields are in harder-to-reach places like the deep waters of the Gulf of Mexico.

The field's decline is expected to continue, if not worsen, this year, according to most estimates. That will subtract valuable oil from the world market, which is under pressure from rising demand by growing economies like China and India. It also means less oil headed to the U.S. from Mexico, which has long relied on Mexico as one of its top-three oil suppliers.

"This is bad news for Mexico. The field is declining faster than even the government's pessimistic scenarios," says David Shields, an oil industry consultant in Mexico City who has been warning about Cantarell's collapse for the past two years.

...

None of this is welcome news in a country that relies on oil exports for some 37% of government revenue. So far, relatively high oil prices have kept the country from feeling the effects of lower output. But prices could continue a recent drop, adding to Mexico's woes from a production shortfall. This year's Mexican budget is based on Pemex's official production targets as well as a relatively high oil price -- about $50 on the world market.

In many older oil fields, companies inject gas to keep the pressure in the wells high and the oil flowing. In the case of Cantarell, Mexico injected vast quantities of nitrogen in the past few years. But the gas can only do so much, and using it means the decline in production can be sudden and sharp. In the case of Cantarell, which lies in the shallow waters of the Gulf, experts say that seawater is fast invading the wells.

I agree with the problem but the maths seems trivial (unless calculation wrong) -

500,000 barrels a day at $50 per barrel is only $25m per day lost. That is just $9 billion a year. For a country with 100 million people I can't believe that losing this makes such a huge difference.

[needle]

I agree with the problem but the maths seems trivial (unless calculation wrong) -

500,000 barrels a day at $50 per barrel is only $25m per day lost. That is just $9 billion a year. For a country with 100 million people I can't believe that losing this makes such a huge difference.

Its not the money, its the easy access to oil.

One of the biggest oil-fields in the world is in severe decline.

Its also one that supplies a good chunk of US oil and props up the Mexican economy.

Money can be printed if needed. You can borrow money, use it for a while, then pay it back.

You cant do this with oil.

Its peak oil, writ large.

[kenclarkesshoes]

Sorry if OT but:

Does SPR Increase Foretell Iran Strike?

Does aggressive SPR build-up foretell Iran strike?

Light sweet crude is down 20 cents at $54.80 per barrel, after Tuesday's $2.48 jump to $55.04 on reports that the US Dept of Energy will purchase 100K barrels of oil per day starting next spring. While the decision is part of the Bush Administration's latest commitment to reduce US dependency on imported oil, the aggressive approach on beefing up SPR may reflect heightened possibility of a US military strike against Iran as early as March or April, at a time when US navy ships are piling up in the Persian Gulf. Yesterday, markets were filled with chatter of a Kuwait-based newspaper article reporting that the US will launch a military strike on Iran before April 2007, citing "reliable sources". According to the article, the strikes will be launched from US ships with Patriot missiles guarding all oil-producing countries in the region. The attacks would be planned in April, the last month of British PM Blair in office. The immediate result of such an attack is a protracted run up in oil prices, which could reach the $70 per barrel mark in less than a week.

http://www.fxstreet.com/fundamental/market...2007-01-24.html

i guess they will need the extra oil for their nazi war machine.

[kenclarkesshoes]

If there's conflict with Iran, which is looking more than likely at this moment in time, then no doubt, the Iranians will seek to interrupt supplies from the ME.

i dont know wether to laugh or cry at that comment.

its the yanks who will disrupt Iranian oil exports as they have already stated they will.

thats why they have sent more ships to the gulf .. so they can blockade Iran,

next you will be blaming the Iranians for the mess in Iraq,

[adamUK]

As i understand it the primary reason is due to an exceptionally cold winter sparking an increased demand for oil.

East coast US is actually quite toasty-warm. Minnesota's had a very mild one in comparison to normal (not that there is a normal any more).

[needle]

As i understand it the primary reason is due to an exceptionally cold winter sparking an increased demand for oil.

You are so far off the mark here that its not funny.

Have you not picked up on the news - unseasonably warm weather and all that?

Do you live underground or something?

East coast US is actually quite toasty-warm. Minnesota's had a very mild one in comparison to normal (not that there is a normal any more).

Yes thats true.

The 'weather' story is just that. A story.

[El_Pirata]

You are so far off the mark here that its not funny.

Have you not picked up on the news - unseasonably warm weather and all that?

Do you live underground or something?

Yes thats true.

The 'weather' story is just that. A story.

No I'm afraid you are off the mark my friend. The weather in the US northeast has been cold in the last couple of weeks, and heating oil stocks have fallen, whcih has translated into higher prompt prices.

But what is more interesting that prices have shifted higher further down the forward curve. It seems that the market has built in a higher risk premium - ie it is pricing in a greater chance of a supply disruption in the next 18 months.

Add to this the fact that:

The US has massively increased jet fuel purchases in the Persian Gulf

The "surge" in troop levels

More aggressive rhetoric from US goverment on Iran

And you have a recipe for attack on Iran in summer 07.

[kenclarkesshoes]

No I'm afraid you are off the mark my friend. The weather in the US northeast has been cold in the last couple of weeks, and heating oil stocks have fallen, whcih has translated into higher prompt prices.

But what is more interesting that prices have shifted higher further down the forward curve. It seems that the market has built in a higher risk premium - ie it is pricing in a greater chance of a supply disruption in the next 18 months.

Add to this the fact that:

The US has massively increased jet fuel purchases in the Persian Gulf

The "surge" in troop levels

More aggressive rhetoric from US goverment on Iran

And you have a recipe for attack on Iran in summer 07.

yep and watch stock markets take off when it happens

[steve99]

yep and watch stock markets take off when it happens

Which way?, take off usualy means up. Most buinesses worldwide would not be able to cope with the interuption to oil supplies (or should I say the price of fuel)

as for whether/maybe they are planning this http://www.antiwar.com/pilger/?articleid=10452 may be worth a butchers.

[Son of Taeper]

If there's conflict with Iran, which is looking more than likely at this moment in time, then no doubt, the Iranians will seek to interrupt supplies from the ME.

However, even without the Iranian factor, America consumes roughly 20 million barrels of oil per day of which only 5 million barrels is produced at home. This figure is in long term decline I might add...

Furthermore, current estimates suggest that the US has around 70 billion barrels left in their wells which would only last them another 2 to 3 years. Hence, the dilemma or the desire to take over everybody elses stash...

Ok, you post for me. You have been doing it all day.....

[kenclarkesshoes]

Which way?, take off usualy means up. Most buinesses worldwide would not be able to cope with the interuption to oil supplies (or should I say the price of fuel)

as for whether/maybe they are planning this http://www.antiwar.com/pilger/?articleid=10452 may be worth a butchers.

i always watch the stock market in time of war and it always goes up much more than trend

gulf1, serbia (1000 pts iirc in a month) and gulf2 ( baghdad bounce) being the best examples recently.

us stock market was tanking in the run up to gulf2 , stood at 7700 and falling from highs of 10000. ftse was at 3300 and falling.;

capitalism was in a real crisis due to 2002 enron et all accounting scandals

in a few months us and uk financial institutions (big names ) would have gone bust.

cue Iraq war and cue BAGHDAD BOUNCE.

no reason to believe an attack on Iran will have anything other than a bullish effect on sentiment

ps

i was reading that pilger article when i read your post (the internet is a small place)

i had a letter published in the independent 2 years ago regarding the probability of an iran war

when i went on the anti-war demo in 2003 i was asked why i was bothering as the iraq war was a foregone conclusion.

my answer was i was there to make a war against IRAN politically impossible.

Edited February 3, 2007 by kenclarkesshoes

[needle]

No I'm afraid you are off the mark my friend. The weather in the US northeast has been cold in the last couple of weeks, and heating oil stocks have fallen, whcih has translated into higher prompt prices.

But what is more interesting that prices have shifted higher further down the forward curve. It seems that the market has built in a higher risk premium - ie it is pricing in a greater chance of a supply disruption in the next 18 months.

Add to this the fact that:

The US has massively increased jet fuel purchases in the Persian Gulf

The "surge" in troop levels

More aggressive rhetoric from US goverment on Iran

And you have a recipe for attack on Iran in summer 07.

yep and watch stock markets take off when it happens

You pair are complete fkn lemons - you have no dea what you are talking about.

For most of Q4 2006 the weather was unseasonably warm in the USA especially in the NE.

WASHINGTON (AP) -- Last year was the warmest on record for the United States, with readings pushed over higher than normal by the unusual and unseasonably warm weather during the last half of December.

The agency said 8,073 permits were issued last year, compared with 9,965 in 2005. But activity increased in December because of unseasonably warm weather.

Across the U.S., this winter has been unseasonably warm. According to the British Meteorological Office, 2007 will likely be the earth’s warmest year on record.

From bare chests in New York, to bare slopes in Vermont, this week record high temperatures left some parts of the country wondering if Old Man Winter had retired.

http://216.239.59.104/search?q=cache:UQhYA...cd=18&gl=uk

From a bulletin board where a US NE resident actually posted!!!

Albany International Airport hit 71 degrees, according to the National Weather Service. The temperature at Boston's Logan International Airport was 69 degrees at about 2:30 p.m. In New Jersey, records set in 1950 were broken in Newark, Trenton and Atlantic City. And in New York City's Central Park, the thermometer hit 72, tying January's all-time high. The city, and much of the region, has seen no snow this winter.

edited for annoyed with ignorant people language

Edited February 10, 2007 by needle