Andrew Weissman of ECB Analytics sees Libyan production as basically making the difference between market being severely short for the balance of the year or balanced -- possibly even slightly oversupplied. He says that while supply could be disrupted again at any time he would expect the market to initially shrug that off on the assumption, given today’s experience, that would likely to be short lived. Also, he worries about the expectation that 60-70% of Syncrude production will be restored in August and weak distillate demand during the last four weeks. All of this having been said, once prices bottom out, could be a strong rebound sometime in September.
A potential driver includes continued declines in Cushing, Okla., stocks. The lowest level in the past several years was 18 million, and even that was before most of the pipelines to the Gulf were built. We may be close to the point where stocks fall below minimum operating needs of refiners. When this occurs, steep price increases are possible. About the same time, growth in Permian production in the Permian Basin is likely to come to an abrupt halt due to all the pipeline takeaway capacity reaching full utilization. This also is a huge potential catalyst, which I don’t think the market is currently considering adequately. Finally, I expect sanction waivers to be relatively small. Over the next few months, price swings could startle the market.
The International Energy Agency is warning about tight supply and no spare capacity. The large number of disruptions reminds us of the pressure on global oil supply, according to the IEA said. This will become an even bigger issue as rising production from the Middle East Gulf countries and Russia -- welcome though it is -- comes at the expense of the world's spare capacity cushion, which might be stretched to the limit. The IEA also reported that U.S. sanctions could reduce Iranian oil exports by significantly more than the 1.2 million barrels a day seen in the previous round of sanctions. In June, Tehran crude exports fell back by about 230,000 barrels a day, as European purchases dropped by nearly 50%.
There is nowhere to run, nowhere to hide. We warned about the massive drop in cap x years ago and now we are feeling the impact, Good news on that front. BlackRock Inc. raised $1.5 billion for its most recent energy and power infrastructure fund, pushing the world’s largest asset manager further into illiquid assets, according to Bloomberg. Now we only have a trillion dollars to go to get to where we need to be.