Oil Falls Off the Chart, Crushes Hopes

[marmar]

Oil Falls Off the Chart, Crushes Hopes
by Wolf Richter • July 6, 2015


Greatest oil glut in history exacts its pound of flesh.

The ugly data for oil – ugly for those who’ve been hoping for, and hyping, a quick rebound to Nirvana – keeps piling up. But for two months, the price of oil was immune to it, trading in a range of around $60 per barrel for the US benchmark West Texas Intermediate.

It stirred up false hopes that lured yield-desperate investors into plowing more money into the industry, which allowed companies to raise many billions in new debt and equity capital so that the permanently cash-flow-negative business model of fracking could soldier on.

But on June 24, reality did start to hit. From that day’s high of $61.50 a barrel, it has been one nasty ride. Currently, WTI trades for $52.67 a barrel, after a 7.5% plunge since Thursday (Friday had only limited trading) to settle at the lowest level since April 13, down 14.4% since June 24. This is what the swoon looks like in 5-hour increments:



OPEC, which is furiously fighting for market share, has no intention of cutting back production. While its limit has been 30 million barrels per day (bpd), reality has been making a mockery of it. In June, production rose 170,000 bpd to 31.28 million bpd, the fourth months in a row of increases, and the highest level since August 2012, according to Platts’ report released today. ..................(more)

http://wolfstreet.com/2015/07/06/oil-falls-off-the-chart-crushes-hopes/

[Renew Deal]

1. What happens when Iranian oil is fully on the market?

And more importantly, why is it still so expensive at the pump?

[yeoman6987]

2. Yes it is still to high to pump gas

It should be a buck fifty right now.

[dixiegrrrrl]

3. Isn't Iran selling to China and Russia???

"so expensive at the pump".......gasbuddy.com says regular is $2.41-45 in my area, which is the price it had been when oil was around 60 a barrel.

Some states have increased their gas taxes. They talked of same here in Ala. but have not done so yet.

[Renew Deal]

4. Not sure where they are selling now but...

If the embargoes end, Iranian oil will flow ot the US and Europe.

[Warpy]

6. One thing you need to understand about the awl bidness

is that a tanker full of oil can change hands ten times before it gets to its destination. While it started out in Iranian oil fields, the final seller might be a company in western Europe--or the US. It's even being sold and resold before it gets to the terminal in the Middle East.

Another thing is that refineries use a formula for calculating pump prices. Part of the product is from contract oil at a fixed price. Another percentage is from spot market oil and it's the latter that has been fluctuating pretty wildly. It's expensive now because spot market crude was $62/bbl. It has now dropped and pump prices will follow. The station owners have little to do with this, their cut is a fixed per gallon rate, so they don't make any more on a $5.00 gallon of gas than they do on a $2.00 gallon of gas. In fact, most make less on high priced gas because people curtail driving and don't fill up as often.

[Warpy]

5. Not quite off the cliff, but a significant drop

I was wondering why there was a bubble in the prices in the first place, the oil glut has been there all along.

The only hopes that got crushed were those of people and institutions who thought happy days were here again and got in late. That's what bubbles are all about: throw money in and start an upward trend, lure the suckers in, and get out fast before they know what's about to hit them.

[Fuddnik]

7. Well, that certainly sucks!

I bought a car that uses less gas than my lawnmower, and now I can't gloat!