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Do our eyes deceive us?
Did someone actually read and understand our rant in the Weekly Energy Report of April 23, 2010 a mere three weeks ago? To refresh your memory, we claimed that an $85/bbl crude oil price was in fact a crude joke and that the real-world pricing should be $73 to $75/bbl. Psychology101 says that when you’re right let them know it. Here goes. Crude on Thursday, April 29 closed at $85.17/bblwhileat the time of this report, Thursday, May6, crude closed at or near $77.11/bbl, which is suspiciously close to our ceiling of $75/bbl. So why the swing of over $8/bbl in one week? There are three reasons: the Gulf, the Euro and Supply Glut.
The Gulf: Prices spiked late last week in fear that the crude oil spill would interrupt supply of crude to the refinery complex. Let’s get this straight. The drilling platform was on fire so they poured millions of gallons of water on it to put it out but at the same time sank the entire platform. This allowed crude to flow from the sea bed at what they now claim is 5,000 barrels per day. (More on this in the coming weeks). They then tried to burn off the crude as it sloshed toward the distant shore line, as well as dumping dispersants to try to breakup the mess. Hind site suggests to me that putting out the fire was the first mistake. Once the speculators regained their sanity and realized that the refinery and pipeline infrastructure had not been compromised, prices of crude, gasoline and distillates began to retreat. How long will this spill go on? No one knows but let’s look on the bright side.
What possible bright sides could there be to the Gulf Coast Oil Spill? Find out in this week’s Energy Report. Sign up at info@en-pro.com.
By: Roger McKnight, Senior Petroleum Advisor