Pump Shock

October 28, 2014

OIL PUMPOvercast and chilly this Tuesday afternoon on California’s north coast with some rain sprinkles thrown in for good measure.
Another week in the wet — tonight is supposed to be the rain high point, then the cover of ‘showers’ the next few days.

And it’s gloomy, too. Weather to feel sad.

Yet even in gloomy skies, there’s a silver whatever — yesterday I put another $20 worth of gas in my old Jeep Comanche and the $3.57 a gallon for regular has to be the cheapest I’ve witnessed in years.

(Illustration: An oil pump ‘horse,’ found here).

Since June, a strange, confused kind of narrative coming out of the oil world — odd, too, when prices at the gas pump go down, like way down, not much news play, but when they go up, shit hits the fan — oil futures traded in New York lost one-quarter of their value since then.
And this bullshit caught the experts by surprise.
From the Wall Street Journal this morning:

For the past three years, oil production in the U.S. has been booming but Brent, the global oil benchmark, has largely held above $100 a barrel.
That’s because sanctions on Iran and unrest in Libya, Nigeria and elsewhere kept oil off the market, allowing supply and demand to stay balanced even as U.S. production grew.
Heading into this year, it looked like a pretty good bet to assume that supplies outside the U.S. would stay constrained, and many analysts called for Brent to hold above $100 again in 2014

But even Citi didn’t anticipate that prices this summer could fall so far so fast.
The price revisions have been embarrassing for banks, whose customers, including energy companies and traders, rely on these forecasts for their own deals and assumptions.
The U.S. Energy Information Administration was also caught by surprise.
The agency, which releases month-by-month forecasts, called for Brent to average $102 a barrel this month in the forecast released in December.
By July, the EIA was saying that Brent would average $110 a barrel in October.
In its latest forecast, released Oct. 7, the EIA settled on a $97 a barrel average for this month.

Big trend here is production — seems oil people are sucking it out of the ground at a ridiculous rate, and it’s not the Middle East anymore, the US is the biggest oil sucker on the planet — 11 million barrels a day the first quarter of this year, and no stopping a runaway train.
Add that shit to the shit now being sucked quicker from under Libya and Iraq, coupled that with a slacking demand in China and Asia, and we have a glut-like thingy.
Yet from what I can gather through the Googling-research method, it seems Saudi Arabia is allowing its production to flourish unabated, despite the slipping prices. Shit to be seen.

Via Reuters this afternoon: ‘Brent had settled up 20 cents at $86.03 a barrel. U.S. crude finished 42 cents higher at $81.42 a barrel, after hitting a more than two-year low of $79.44 on Monday.’

And the recipient of those little numbers — US drivers (via ABC): ‘The weekly national average was $3.06 for regular on Monday, according to the U.S. Energy Information Administration, down 6 cents from last week and 24 cents from a year ago.’
Tweet-photos of gas station price boards appear to reflect something crazy, like aliens have landed, or something.

Of course, we can’t get into the environmental hazards presented here, that’d be just too-shitty gloomy.

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