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When not if Oil reaches the 120 mark will start taking out my Visa to start shorting it, the higher it goes the more it goes on my Visa, if need be will use my Master Card!
I'm not so sure Egypt is all that strategic for world oil reserves, in fact, I found this graphic on Wikipedia.
Actually, once I saw where the US fit it, I couldn't resist posting.
Also, I heard that the Brent/WTI spread was due to transportation problems within the US. Necessity being the mother of invention, I betcha they get that sorted. In fact, in typical team A fashion, we may well overdo it. When I googled "OPEC" this was hit #4:
I think a footnote should be "and China says thanks" but that is another story.
Looking at Brent as a more accurate judge of value, I'm seeing it flat. I can't see a push higher, unless there is more unrest and it spreads. [Keeping in mind from a Machiavellian perspective, a little bit of trouble is good for business.]
Finally, I see the long dated contracts are trading lover, so tossing a slightly weighted coin, I say 90.
Boy, I hope someone who actually knows something about oil posts here.
Heard that besides the regional instability affecting oil Egypt has very little involvement in the production of oil. Sympathies for the Egyptian people who are informed by the internet yet the fink they voted for soon after being elected actively eroded their democratic rights and acted very unilateral and isolationist like a dictator while kowtowing to Muslim influence. The opec countries meanwhile may possibly find opportunity in the distraction to raise the price of oil again while big oil does their part in raising the price of gas and local state and city govt's continue to bleed more gas taxes.
this latest leg went up too much with relatively little volume. feels like the final thrust of the uptrend. it probably will attract a lot of bystanders to join the long. and experienced traders will either unload their longs to them or go short near the top. so it's more likely to go down. I guess :-).
I do not agree that the WTI/Brent spread has anything to do with Egypt.
The delivery for WTI is Cushing, Oklahoma. There was a growing surplus of sweet crude in that area, which could not easily be transported to the Gulf coast. Thus the price of WTI crude was kept artificially low compared to Brent, which better reflects world market prices.
This distortion had two major consequences.
(a) pipeline operators rushing to build new pipeline capacity to transport the surplus to PADD3 (Gulf Coast) or PADD1 (East Coast).
(b) hedge funds and index funds moving to IPE, as there was no permanent contango and risk of shortages
In terms of absolute prices, Egypt controls the Suez Canal, which is the major route from the Middle East producers to Southern Europe. If at all, an Egyptian crisis will increase the Brent/WTI spread, as Europe is much more affected than the US.
However, I believe that prices above $ 100 for crude oil are not sustainable. The US has halved its imports of light, sweet crude oil over the last year. It is likely that price will fall again. This is also indicated by the current backwardation, which could not be observed for at least 4 years.
Had to leave when I made the post above. Here are just some arguments in favor of the above comments:
(1) Pipeline capacity Cushing:
Inbound deliveries to Cushing have grown by 815,000 bbl/day over the last three years. Until mid-2012 only a single pipeline was able to deliver crude from the Midwest to the Gulf Coast, which is the 60-year old 96,000 bbl/day Pegasus pipeline operated by Exxon Mobil.
a) Pegasus
b) Seaway
In May 2012 the Seaway pipeline, which originally shipped crude from the Gulf Coast to Cushing, was reversed, adding 150,000 bbl/day to the capacity out of Cushing. This pipeline was expanded by an additional 250,000 bbl/day in early 2013.
The twinning of the Seaway pipeline should add another 450,000 bbl/day to the capacity, increasing it to a total of 850,000 bbl/Day.
Summary: Crude pipeline capacity out of Cushing is bound to increase by 1,150,000 bbl/day in 2013/2014.
As a result the NYMEX WTI contract should again trade at world market prices and the discount that could be observed during the last years should disappear.
It is all about logistics!
(2) Shift from NYMEX(WTI) to IPE(Brent)
Volume reported by CME (Source: Web-Volume_report_CMEG)
WTI, January - June 2012: 76,162 k
WTI, January - June 2013: 74,371 k - 2.4%
Volume reported by ICE (Source: Report Center - ICE Futures Europe Volumes for Brent)
Brent, January - June 2012: 75,754 k
Brent, January - June 2013: 81,162 k + 7.1%
Not sure, whether the absolute volume figures are comparable, but the percentages show a progression versus a decline.
(3) Backwardation, snapshot with current prices for the next 5 contracts
You can see easily see that the December contract (last line) is cheaper than the August contract.
Also you will notice that the political events of today have increased the slope of the forward curve, as the near contracts have shown a stronger percentage increase than the back months.
I'm going for gold. Black gold that is. I believe the shift in bonds will give boost to stocks but ultimately that money will begin to flow into commodities, oil among some of them excluding others, like corn, GOLD. Egypt is so unstable. 20% +- unemployment. Small businesses are being affected by this political upheaval. I don't think it will affect oil supply but will definitely encourage buyers.
