Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on November 11, 2015
The Biggest Threat To Oil Prices: 2-Mile Long Stretch Of Iraq Oil Tankers Headed For The U.S.
After some initial excitement, November has seen crude oil prices collapse back towards cycle lows amid demand doubts (e.g. sllumping China oil imports, overflowing Chinese oil capacity, plunging China Industrial Production) and supply concerns (e.g. inventories soaring). However, an even bigger problem looms that few are talking about. As Iraq – the fastest-growing member of OPEC – has unleashed a two-mile long, 3 million metric ton barrage of 19 million barrel excess supply directly to US ports in November.
Crude prices are already falling:
But OPEC has another trick up its sleeve to crush US Shale oil producers. As Bloomberg reports,
Iraq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show.
Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures.
The cargoes show how competition for sales among members of the Organization of Petroleum Exporting Countries is spilling out into global markets, intensifying competition with U.S. producers whose own output has retreated since summer. For tanker owners, it means rates for their ships are headed for the best quarter in seven years, fueled partly by the surge in one of the industry’s longest trade routes.
Worst still, they are slashing prices…
Iraq, pumping the most since at least 1962 amid competition among OPEC nations to find buyers, is discounting prices to woo customers.
The Middle East country sells its crude at premiums or discounts to global benchmarks, competing for buyers with suppliers such as Saudi Arabia, the world’s biggest exporter. Iraq sold its Heavy grade at a discount of $5.85 a barrel to the appropriate benchmark for November, the biggest discount since it split the grade from Iraqi Light in May. Saudi Arabia sold at $1.25 below benchmark for November, cutting by a further 20 cents in December.
“It’s being priced much more aggressively,” said Dominic Haywood, an oil analyst at Energy Aspects Ltd. in London. “It’s being discounted so U.S. Gulf Coast refiners are more incentivized to take it.”
So when does The Obama Administration ban crude imports?
And now, we get more news from Iraq:
- *IRAQ CUTS DECEMBER CRUDE OIL OSPS TO EUROPE: TRADERS
So taking on the Russians?
* * *
Finally, as we noted previously, it appears Iraq (and Russia) are more than happy to compete on price.. and have been successful – for now – at gaining significant market share…
Even as both Iran and Saudi Arabia are losing Asian market share to Russia and Iraq, Tehran is closely allied with Baghdad and Moscow while Riyadh is not. That certainly seems to suggest that in the long run, the Saudis are going to end up with the short end of the stick.
Once again, it’s the intersection of geopolitcs and energy, and you’re reminded that at the end of the day, that’s what it usually comes down to.
17 Comments on "The Biggest Threat To Oil Prices: 2-Mile Long Stretch Of Iraq Oil Tankers Headed For The U.S."
Plantagenet on Wed, 11th Nov 2015 11:34 am
How nice that our friends and allies in Iraq are doing their best to lower gasoline and heating oil prices in the USA just in time for the Christmas holidays.
Peak Oil Prognosticator on Wed, 11th Nov 2015 12:11 pm
“19 million barrel excess supply directly to US ports in November.” Don’t worry, we use that amount of oil every single day.
Plantagenet on Wed, 11th Nov 2015 12:30 pm
@peak oil prognosticator:
Do you really think the USA will stop producing and using its own oil for a day to use the Iraqi oil and then will return to using its own oil?
Sorry—markets don’t work like that.
Boat on Wed, 11th Nov 2015 12:30 pm
Peak Oil Prognosticator
Your numbers are a little off. Try the EIA. lol
Boat on Wed, 11th Nov 2015 12:33 pm
Plant,
The US will not stop producing but the trend is there. US drillers are shutting down while OPEC production is growing.
Boat on Wed, 11th Nov 2015 12:58 pm
I stand corrected. I found the post from bloomberg. One wonders if Iraq can keep up that kind of production.
Peak Oil Prognosticator on Wed, 11th Nov 2015 1:23 pm
@Boat
You mean like these statistics:
“In 2014, the United States consumed a total of 6.97 billion barrels of petroleum products, an average of about 19.11 million barrels per day”
http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6
Peak Oil Prognosticator on Wed, 11th Nov 2015 1:24 pm
@Plant
Obviously, I’m just pointing out it’s not a massive amount. It’s quite small in national terms of oil use.
rockman on Wed, 11th Nov 2015 1:48 pm
Understand those tankers are carrying 19 mm bo. But Iraq doesn’t produce 19 mm bopd. Right now they are shooting for record export volume of 3.68 mm bopd. So the 19 million bbls represent a tad more than 5 days of TOTAL IRAQ OIL EXPORTS…not just to the US.
The latest number for 2014: about 15% of total Iraq oil exports went to the US. So if the % will still hold the US will average about 550,000 bopd will be coming to the US on a regular basis. That would represent about 3% of current US consumption. In 2014 58% of Iraq oil exports went to Asia and 20% went to Europe.
And don’t misread that pretty chart: those columns are bbls per MONTH. So the Nov projection is 600,000 bopd. For 2015 it has average 200,000 bopd. So yes: that would represent a 300% increase: 1% of US consumption to 3%. Interesting but hardly a game changer IMHO. And be careful about using “monthly import” numbers: if all 10 tankers show up the first week Nov then then we’ll receive 19 million bo from that “fleet”. If 5 show up the last week in Oct and the rest a week later the Nov delivery from the fleet will only be around 8 to 9 million bo.
The future? In April 2014 the US received almost 19 mm bo from Iraq. A year later in April 2014 we got 4 mmbo from Iraq that month. Anyone wants to project how much oil the US will receive from Iraq during April 2016? Go ahead…make my day LOL.
Dredd on Wed, 11th Nov 2015 2:10 pm
Cursed are those who do the will of Oil-Qaeda (The Harm Oil-Qaeda Has Done).
Anonymous on Wed, 11th Nov 2015 5:54 pm
Good, we need to keep what remains of American oil in the ground for as long as possible.
The world will peak, and security threats from abroad will disappear due to the inability to access peoples territory from afar.
that being said, economies blood is energy, so we may have crashing economies the world over. Best to conserve and use sparingly the resources we have in the ground.
Davy on Wed, 11th Nov 2015 6:02 pm
https://www.youtube.com/watch?v=rY0WxgSXdEE
“Four US Firms With $4.8 Billion In Debt Warned This Week They May Default Any Minute”
http://www.zerohedge.com/news/2015-11-11/energy-credit-risk-spikes-back-above-1000bps-no-one-putting-new-capital-here
“The last 3 days have seen the biggest surge in US energy credit risk since December 2014, blasting back above 1000bps. This should not be a total surprise since underlying oil prices continue to languish in “not cash-flow positive” territory for many shale producers, but, as Bloomberg reports, the industry is bracing for a wave of failures as investors that were stung by bets on an improving market earlier this year try to stay away from the sector. “It’s been eerily silent,” in energy credit markets, warns one bond manager, “no one is putting up new capital here.”
idontknowmyself on Wed, 11th Nov 2015 8:04 pm
Decantation is explain below.
https://www.youtube.com/watch?v=VIjyNF3s26M
The oil left is crap with the wrong chemical composition and cannot be processed by refineries. The oil glut is in fact some kind of oil mixture that cannot be refined.
Look at it like water decantation. The top water is clean and bottom is crap.
These ships contain crap oil that will be added to the existing crap oil or oil glut.
BobInget on Wed, 11th Nov 2015 8:27 pm
Thanks Rockman for pointing out the obvious .
So obvious I missed it completely when reading this Saudi propaganda this morning.
I sensed it was cockeyed but was too dumb to figure out why.
tita on Thu, 12th Nov 2015 2:09 am
One-time event. Doesn’t change the global offer.
rockman on Thu, 12th Nov 2015 7:03 am
tita – Not necessarily although it wouldn’t be impossible for deliveries from Iraq to drop back to 200,000 bopd. What we don’t know is how much of that 19 mm bo was purchased on the spot market or if much/all of it is part of a longer tern purchase contract. But as I pointed out either way it still represents just a tiny bit of increased imports from Iraq to the US: an extra 1.5% increase of our consumption from last month. Interesting isn’t it: last month how many article did you see highlighting the fact that Iraq exported 8 million bo to the US? And do you recall headlines in June 2012 about Iraq exporting even more oil to the US then the 19 mm bbls heading our way now?
This story is just trying to hype a rather insignificant fact IMHO. Which is why they use the “19 million barrels of oil” hook instead of using 600,000 bopd in their story. Or pointing out that this sudden “flood of Iraq oil” is only about 370,000 bopd more than last month. So when we were importing 1.5% of our oil consumption from Iraq last month is WASN’T A FLOOD but this month importing 3.4% is now a flood? WOW!!! A 1.9% flood…run for your lives!!! LOL.
As they say in the MSM: “If it bleeds it leads”. And in this case: “If it doesn’t bleed try to make it look as bloody as possible so it can be used to lead the headlines”. LOL.
rockman on Thu, 12th Nov 2015 7:05 am
Bob – I didn’t figure it out per se either when I first read it. But like you I sensed the hype element. Then it just took a few minutes of web search to get matters into proper perspective.