Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Major Breakthrough in U.S. Oil Exports May Be Coming

Commodities / Crude Oil Apr 10, 2013 - 12:18 PM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: As the crude market continues to show considerable volatility, price gyrations are prompting another round of concerns over supply and production.

There isn't a shortage to worry about right now.

But whenever we have some issues on the demand side, attention shifts to the supply currently available on the market. And it's in this repetitive exercise that one of the major errors by analysts always occurs.


I have noted this shortcoming on several occasions.

A poor jobs report (like last Friday), bank games in tiny Cyprus, an industrial sputter in China, or another misgiving about how long the Fed can retain its QE policies usually get the pundits chattering about a crash in the energy markets.

Remember, such kneejerk reactions don't tell us anything about what the market intends to do, since the data necessary to make such determinations are still three months away (or usually more) from being reported.

Rather, these become self-fulfilling judgments as additional lemmings join those already jumping off the cliff.

In the background, there's also something else to remember.

Most of these predictions are just fronts for someone's effort to short the market. Put simply, the more investors believe that the sky is falling with oil, the more profits these guys can make.

Such an approach has less value lately as two other basic tenets of the new oil market set in. First, the demand that these guys are attempting to deduce instantaneously is actually a global exercise.

They may be based on New York or London, but the demand drivers certainly are not.

And the worldwide demand projections from both Vienna-based OPEC and the Paris-based International Energy Agency (IEA) continue to trend upward with a spike developing over the past six weeks.

The second point, however, is of a much more recent origin.

And it's this one that could lead to a major breakthrough here in the United States.

The Rise of Unconventional Reserves
The U.S. is currently experiencing a major shift toward production of its unconventional oil reserves. This tight (or shale) oil has certainly revised estimates of the import-export balance in the U.S. market, has already done so in Canada, and is shortly to make an impact in basins from North Africa to South Australia.

However, it is the American market that attracts the most interest.

Here, the development is furthest along, and the new volume is already producing estimates of self-sufficiency within a few decades.

It also advances another major breakthrough. We may finally see Congress allow the exports of crude oil from the United States.

There remains adequate supply internationally. That has led some shortsighted (in both meanings of "short") to conclude that because there is potential for new sources, somehow that automatically means they show up immediately in a market that has no rise in demand.

In this line of thinking, oil prices collapse.

But not in our lifetimes.

The trading balance will be affected by the new volume, as it initially serves a local than a more expansive end-market. Remember, the end users of raw material crude are not retail consumers.

They are actually refineries.

And the progressively larger demand that needs to be satisfied is on a global scale.

So, will Washington start approving exports of new oil largesse to satisfy rising external requirements?

The Future of U.S. Crude Exports
At present, there are only two allowances for export.

The first involves heavy oil from California.

The argument here is that there is an insufficient domestic market for this is heavily discounted and provides an inferior grade. The second enables export if at least the same quantity of processed oil products are imported in return.

This is tolling, a process by which raw materials are made available for processing abroad with the finished product re-imported back. It has been used for years in metals (especially aluminum, steel, and specialty grades) as well as to balance oil cross-border refinery capacity and utilization.

Now there remains interest in procuring additional processed oil products for global resale from American sources. The U.S. trade in gasoline, low-sulfur heating oil, diesel, and high-end kerosene (jet fuel) has expanded considerably, with the last three seeing imports rise significantly of late. Providing the crude would improve the bottom line and profitability for the domestic companies on both ends.

Last week, the IEA commented on the subject. IEA Executive Director Maria van der Hoeven said that a Washington decision to allow oil exports would be "very helpful," as constraints on international spare production capacity emerge.

In so doing, the IEA head introduced the global supply side issue that the short artists on Wall Street would prefer you know nothing about. The IEA for some time has been warning that global oil markets face a "zone of tension" because of limited amounts of unused crude that can be tapped in case of supply disruptions.

That pressure would be reduced if the U.S. changes its policy, van der Hoeven said.

Simply put, while there is no shortage of oil overall, there are regional constrictions likely because of geopolitical and market events. Price actually reflects this balance consideration more than any other single factor. Prices are not based on what it costs to obtain crude or product today.

Rather, the focus is on the price of the next available barrel.

Over the next few weeks, I will attend several meetings that focus on this very subject. Don't be surprised if indications develop of widening U.S. interest in contracting domestic crude exports for additional oil product imports with some of that resulting volume finding its way into the re-export market.

It is going to be all about the balance, folks.

Source :http://moneymorning.com/2013/04/10/a-major-breakthrough-in-u-s-oil-exports-may-be-coming/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in