[mefistofeles]

According to some sources Iran has 28 million barrels of sour crude parked on its shores.

Its amazing that the Iranians haven't found any buyers for it. So the question I have is this?

With a dislillate/diesel shortages in the US/Europe and Asia why doesn't someone want to buy this Iranian crude?

Is sour crude that costly and difficult to refine or is there shortage of refinery capacity for this type of crude oil?

The API has been saying that in a few years the world will have more than enough capability to refine sour crude. Yet according to OPEC the world's ability to refine gasoline has only increased by 1.2 m barrels/day while the world's ability to refine dislilates has only increased by 700K/barrels a day over the last five years.

So are the current prices being driven by a shortage of refining capacity therefore driving the price of light sweet crude to fantastic heights or do we have a true oil shortage?

Does this mean that oil prices will collapse if new refining sour crude refining capacity comes on line, and if so how long will it take for this capacity to be put in place?

[bobcart]

Well we dont buy oil from Iran, and right now the world is well supplied with oil, the recent run up is part speculation of future shortages, which is good, get us to start getting serious about alternatives, weak dollar and or course demand is now getting past supply but demand distruction has taken effect. Remember this is a good thing. Again right now there is no shortage. You will know when there is a shortage when you go to fill up and the station is out of gas like the 70's. Keep the prices high and you wont have a shortage for a long time.

[Mettezz]

$this->bbcode_second_pass_quote('bobcart', 'W')ell we dont buy oil from Iran, and right now the world is well supplied with oil, the recent run up is part speculation of future shortages, which is good, get us to start getting serious about alternatives, weak dollar and or course demand is now getting past supply but demand distruction has taken effect. Remember this is a good thing......

[bobcart]

Come on really! World demand for Oil has not increased so much in the last 5 months to cause a 50 dollar rise in oil, thats speculation. Granted its speculation that oil will be short in the future. Hell I jumped on the band wagon to, its become a way to make money in this slow market. If there is a shortage you would have to wait in line for gas and there would be rationing. Right now there is plenty of oil because speculators have ran the price up so much that demand distruction has taken place. Now there are shortages in China. Why? Because they subsidize the price of oil and the because of that there economy has outstripped the amount of oil they import. If you lowered the price of gas in the US tommorrow to 50 cents a gallon, yes their would be a shortage, because people would use more because its cheap. I use to drive all over the place 8 years ago because gas was cheap, now i dont becaue it costs more. Demand Distruction works. When China does not subsidize oil anymore, their economy will slow down alot. I dont believe Demand Distruction will go to the point where the world economy collapses but will it slow down, yes, until we get alternatives online. Any opportunity for return to robust economic growth will be heavily funded because the payoffs are big.

[HEADER_RACK]

I like you Bob. You're a funny guy
$this->bbcode_second_pass_quote('bobcart', ' ')and right now the world is well supplied with oil,

[bobcart]

Where is the Shortage? Tell me. I have not seen anything on the news that reported gas station closures due to no gas. If diamonds where sold for a dollar there would be a shortage of them. There are expensive, so there is demand distruction, you have to have a lot of money to buy them. Will there be a shortage of oil if prices dont rise? Yes, thats why the price is going up. when people change their habits it will stabilize, not saying we dont need to address the problem that oil is finite. It wont go down to a level where we return to our old ways though like we did in the eighties. I just saw a news video a few months ago of gas lines and shortages in China, why? Because the price is artifical due to government subsidization. They are not going to be able to eat that cost forever. Once the price starts to really effect demand, we are close but not there yet, someone will say I have an alternative that will cost you less, again we are not there yet. This situation right now is the best thing that could have happended, its forcing a change. You should be happy, unless your job depends on Cheap oil. The only shortage I saw was after Katrina in Atlanta when someone told a radio station that all of the gas stations where closing at 5pm, guess what? Everyone ran out and bought gas and the city was dry for a week. That was a shortage, and that was artificially induced. Any Country that Subsidizes Oil will have shortages, unless they are an oil producing nation. China is not a producer, hence the shortage there, but that wont last forever. The rest of the world that pays market price is well supplied because demand has gone down, I know mine has! If you want to say that there is a shortage of cheap oil then yes you are right

[arretium]

$this->bbcode_second_pass_quote('bobcart', 'C')ome on really! World demand for Oil has not increased so much in the last 5 months to cause a 50 dollar rise in oil, thats speculation.

[Windmills]

$this->bbcode_second_pass_quote('mefistofeles', 'I')s sour crude that costly and difficult to refine or is there shortage of refinery capacity for this type of crude oil?

[Alanintx]

Bob,
What is driving prices is not a shortage today, but what the long dated contracts tell you is going to happen, from 2009 to 2012. It is called contango, and it really is a growing and ugly picture.

Speculators are merely doing what they are supposed to do in a capitalist system. Is there a short term disconnect between the spot price and supply? Probably, but likely only a 15 per cent disconnect IMHO.

Brace yourself.

[Starvid]

I guess there just isn't anyone around who can refine the gunk. It should be easy to check, just look at the utilization numbers for refineries that can deal with this kind of oil. If they are about 100 %, there's your answer.

[DantesPeak]

Iran says it plans to use the oil in storage, while oil tanker tracker Oil Movements says what Iran is doing will not affect its exports.

I do agree that refining capacity is limited for low quality oil, and that taking oil off the market - intentionally or not - temporarily would increase the price of oil.
$this->bbcode_second_pass_quote('', 'O')sterDowJones
Copyright 2008 Dow Jones & Company, Inc. May 14, 2008

DJ UPDATE: Iran's NIOC To Clear Crude In Floating Storage
LONDON, May 14, 2008 (Dow Jones Commodities News via Comtex) -- Iran expects to shift the crude oil it has stored in tankers off the coast Kharg Island in the Persian Gulf by the end of the second quarter or early in the third quarter, an official from the National Iranian Oil Company said Wednesday.
The Executive Director for International Affairs at NIOC, Hojjatollah Ghanimifard, told Dow Jones Newswires that the seasonal slump in demand for crude oil, during the second quarter as a result of refinery overhauls, is the main reason for Iran storing its oil offshore.
"Refinery overhauls ... take between two weeks to 45 days, (therefore) a part of the demand would be shifted towards the end of the (second) quarter or early third quarter," he said.
Demand by term contractors will be greater during the later part of spring and early summer, he added.
Ghanimifard declined to comment on the amount of oil Iran currently has in floating storage or the number of vessels utilized for this task.
"Since the amount that is stored changes due to the exports requests on the spot market every single day, the exact amount can't be figured out unless the whole quarter is finished and the average of exports of each month is known," he said.
Iran's departing OPEC governor, Hossein Kazempour Ardebili, told Dow Jones Newswires earlier Wednesday that around 25 million barrels of its heavy crude oil is being stored in 10-12 offshore vessels in the Persian Gulf.
Ghanimifard said he was confident the stored oil will be sold swiftly by the end of the second quarter or early third quarter. "As far as I know, with the current amount we have in storage, there won't be any problems in selling the oil in the market by that time," he said. 05-14-08 1500ET

[sjn]

Seems to me it's likely to be a SPR. With all the recent noise again about attacking Iran it makes some sense. If the US started sinking tankers in the Strait of Hormuz it's only really helping Iran strategically and makes for bad PR.

[Dreamtwister]

$this->bbcode_second_pass_quote('arretium', '')$this->bbcode_second_pass_quote('', 'C')hina is not a producer, hence the shortage there, but that wont last forever.

[TheDude]

$this->bbcode_second_pass_quote('Dreamtwister', 'T')o be fair, this is China's idea of "oil":

[Denny]

Well, maybe Iran should get on the phone with Raul Castro, if they are looking for a market. They got this refinery in Havana harbor which seems to handle just about any oil mix thrown at it. Smells like it too. We went on a cruise hip into Havana harbor and were greeted by grotesque sulfurous aroma from this baby:

[MrBill]

I think it is a lack of refining capacity in general, and for heavy, sour crude specifically. Iran imports about 25-percent of its own domestic use due its own lack of refining capacity, and much of that comes from places like India. Of course, domestic subsidies encourage over-consumption, waste and smuggling, plus are a drain on Iran's budgets where unemployment is high in the first place.

[ROCKMAN]

Mr. Bill,

I've seen a report recently that Iran now has 20 of the largest crude tankers moored offshore. One theory floated was that it wasn't so much a shortage of buyers causing the shipping delay as it was their plan to inhibit the shipping throughput by pulling these transport off the market (at leaste for a while). Not a cheap plan by any means, if it's true.

You have an insight into this matter?

[DantesPeak]

I posted elsewhere that Iran is in the middle of a severe energy crisis (gasoline plus electrical shortages and that 200,000 bpd was intentionally cut from exports to help domestic demand.

While this article doesn't mention that, it does imply that some of the oil will be refined by Iran.

$this->bbcode_second_pass_quote('', 'I')ran Plans to Cut Oil Tankers, Clear Stored Crude by Mid-Summer

By Ladane Nasseri and Alaric Nightingale

June 9 (Bloomberg) -- Iran, OPEC's second-largest oil producer, said it plans to cut the number of tankers idling in the Persian Gulf and clear a backlog of crude stored on them by the middle of the summer.

The nation still has 14 tankers, capable of storing as much as 28 million barrels of oil, near the Kharg Island loading facility, according to AISLive data on Bloomberg. A 15th vessel, the Hengam, arrived June 5. Earnings from supertankers more than tripled from April to May, partly because of a shortage of ships.

The ``number of vessels will decrease by the end of June,'' Hojatollah Ghanimifard, executive director of international affairs at the National Iranian Oil Co., said in a telephone interview from Tehran today. ``The crude stored will be cleared by mid-summer apart from that which is kept for operational reasons.''

[cube]

I think bobcart is aspiring to become the next JohnDenver.

[joewp]

$this->bbcode_second_pass_quote('TheDude', '
')
Beats this:



Or this:



Quiz: Which is tar sands and which is oil shale?

Pencils down!