krugerandsmith Posted May 14, 2015 Report Share Posted May 14, 2015 So why are prices at the pumps still rising? Quote Link to comment Share on other sites More sharing options...
panoma1 Posted May 14, 2015 Report Share Posted May 14, 2015 Because we are being ripped off! ......same with gas and electricity! and many more commodities, they dont call the UK treasure island for nowt! Quote Link to comment Share on other sites More sharing options...
AVB Posted May 14, 2015 Report Share Posted May 14, 2015 It is rising not falling at the moment. $47 in January. Now $60 Quote Link to comment Share on other sites More sharing options...
Dave-G Posted May 14, 2015 Report Share Posted May 14, 2015 If I understood the price drops a few months ago correctly they were more about giving Russia a hard time as its economy relies heavily on export of energy etc. Perhaps tensions have eased somewhat now. Quote Link to comment Share on other sites More sharing options...
AVB Posted May 14, 2015 Report Share Posted May 14, 2015 If I understood the price drops a few months ago correctly they were more about giving Russia a hard time as its economy relies heavily on export of energy etc. Perhaps tensions have eased somewhat now. Less about Russia and more about giving Shale a kicking. The Saudi's have been keeping the crude price low in order to stop people investing in shale. And it seems to be working for now. Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 The oil price is being driven by OPEC and they are squeezing the shale oil producers in the US. You need to look at long term oil buying habits of the US and how much they have been reliant on middle east oil previously. The US traditionally managed to supply around 70% of their energy needs from domestic drilling so relied on Saudi in the main to give them the other 30%. With the shale oil boom they are as high as 95% self sufficient and could take that to 100%, so there was a huge drop in requirement for middle east oil from the US. Which triggered the fall in price as demand dropped off, there is a global over supply problem as OPEC didn't slow down production. Some shale production is really cheap, but some is expensive and OPEC have held prices low to squeeze out the more expensive producers in the US to increase US demand on external sources again. To complicate it further US producers are not allowed to sell their oil overseas due to legislation in the US stemming from the 1970's oil crisis so the market for the expensive shale producers is limited to domestic market only. Oil is globally traded as a futures market too, so now there is huge over supply people are buying millions of barrels and storing it, that is then sold to refineries at a futures price as well, so the pump price which is post production doesn't necessarily reflect the current raw supply price. It is the same with the energy companies. Long term storage in the US is at around 90% capacity currently. All this backlog of supply makes investment in O&G a scary place to be for many investors so as AVB said OPEC holding production levels high causes high uncertainty in pricing so makes investing even more scary. Quote Link to comment Share on other sites More sharing options...
FalconFN Posted May 14, 2015 Report Share Posted May 14, 2015 Thanks AVB and Grr, very eye opening. I freely admit I know next to nothing about commodities trading (if oil and gas are counted as commodities?) so from the outside looking in it appears to be incredibly unwise to allow 2 or 3 countries/cartels to control the global supply and price of such a universally crucial product. I think I preferred blissful ignorance.... Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 I know little about commodities trading too, but shall learn just out of interest. Recently I have been doing a bit of strategic work with an O&G exploration business and it is a really interesting market for all sorts of reasons. The costs involved can be astronomical, but the rewards are potentially very rich too. Through that work I am paying way more attention than I might normally. As for the cartels, yep I agree, never a good thing unless you are the cartel. Venezuela has tanked because of the oil price decline and they are part of OPEC, Canada is going through a difficult time with the oil sands, Norway is seeing fractures in its socialist ideology funded by state oil as the North Sea gets increasingly expensive and Russia is being beaten on a number of fronts. There is also some thought that as OPEC is essentially driven by the Saudi's that they are happy to allow the South American and African members to struggle which is helping Iraqi oil to recover more than it may have and with more international tolerance toward Iran then they benefit more too, so very much a middle east biased agenda. Like most things though if you put 50 different oil analysts in a room and told them to come up with an answer you would still likely get 50 answers, same as economists. Quote Link to comment Share on other sites More sharing options...
AVB Posted May 14, 2015 Report Share Posted May 14, 2015 One of my good mates (well as close as they get, I don't really do the mates thing) is Head of Global oil strategy at J.P Morgan. He says "our view back in January was that the build in stocks was really going to weigh on the crude market and depress the front end of the crude curve. We've seen upside surprises in demand, which have allowed refiners to run harder and absorb that crude". I'm not sure what that really means but he says that it translates into a prediction that crude will bounce around at the $60-$65 mark for the rest of the year. Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 That's an interesting insight. I know a lot of traders were doing some sort of short selling at around $55 prior to the market hitting the low point, but there doesn't appear to be anybody brave enough to take that sort of punt just now, which suggests that we have seen the bottom of the market. A complete guess on my part was the market levelling at around $65-$70 Your mate will know a huge amount more though so I will believe him Quote Link to comment Share on other sites More sharing options...
aris Posted May 14, 2015 Report Share Posted May 14, 2015 (edited) To complicate it further US producers are not allowed to sell their oil overseas due to legislation in the US stemming from the 1970's oil crisis so the market for the expensive shale producers is limited to domestic market only. I thought that the reason they could not sell was their LNG terminals were configured purely for import - as that was all they were doing at one state. They have been slowly converting them to be able to EXPORT LNG - but as you can imagine, high energy industries in the US have been lobbying hard to prevent this or at least slow it down as they were addicted to cheap shale energy. I think that not opening their gas to export would be against WTO (or someother agreement) rules. There was a programmed on Radio 4 a year or so ago on this very subject. Edited May 14, 2015 by aris Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 (edited) They can sell LPG/LNG, but there are restrictions on oil, or so I believe, I will see if I can confirm. I am almost certain that there are mutterings within congress to change it, but they have some pretty fundamental rules around domestic energy security. There may well be other physical challenges alongside that such as loading terminals. Edited May 14, 2015 by grrclark Quote Link to comment Share on other sites More sharing options...
aris Posted May 14, 2015 Report Share Posted May 14, 2015 They can sell LPG/LNG, but there are restrictions on oil, or so I believe, I will see if I can confirm. I am almost certain that there are mutterings within congress to change it, but they have some pretty fundamental rules around domestic energy security. There may well be other physical challenges alongside that such as loading terminals. Looks like LNG exports start in 2016 - but will they be viable? http://www.ft.com/cms/s/0/34c90b6c-419f-11e4-b98f-00144feabdc0.html Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 Looks like LNG exports start in 2016 - but will they be viable? http://www.ft.com/cms/s/0/34c90b6c-419f-11e4-b98f-00144feabdc0.html Can I defer to AVB's mate I am sure it will be viable, but what impact globally will they have i don't know. The UK really needs to get around this negative image of fracking and benefit from home supply. Quote Link to comment Share on other sites More sharing options...
grrclark Posted May 14, 2015 Report Share Posted May 14, 2015 As per comments above here is a link to some recent comments on the US oil export ban. http://uk.businessinsider.com/what-would-it-take-to-free-us-oil-exports-2015-5?r=US Quote Link to comment Share on other sites More sharing options...
casts_by_fly Posted May 14, 2015 Report Share Posted May 14, 2015 On top of the price of crude rising, the exchange rate to dollars is getting worse over the past 6 weeks. So both going in th wrong direction mean the prices go up. On top of that, we are running into summer demand season when prices normally go up a couple cents at the pump. Eventually one of those will give. Rick Quote Link to comment Share on other sites More sharing options...
krugerandsmith Posted May 15, 2015 Author Report Share Posted May 15, 2015 On top of the price of crude rising, the exchange rate to dollars is getting worse over the past 6 weeks. So both going in th wrong direction mean the prices go up. On top of that, we are running into summer demand season when prices normally go up a couple cents at the pump. Eventually one of those will give. Rick Gentelmen. Lets not forget .... Oil prices are low. The last time they were so low we were getting gallons not Litres at the pumps. Quote Link to comment Share on other sites More sharing options...
aris Posted May 15, 2015 Report Share Posted May 15, 2015 One thing I have noticed is that the differential between petrol and diesel is unusually small - 2 or 3p. I'm putting this down to lower demand for heating oil due to the time of year - but I can't be sure. Quote Link to comment Share on other sites More sharing options...
keg Posted May 15, 2015 Report Share Posted May 15, 2015 Can I defer to AVB's mate I am sure it will be viable, but what impact globally will they have i don't know. The UK really needs to get around this negative image of fracking and benefit from home supply. +1 Quote Link to comment Share on other sites More sharing options...
AVB Posted May 15, 2015 Report Share Posted May 15, 2015 Looks like LNG exports start in 2016 - but will they be viable? http://www.ft.com/cms/s/0/34c90b6c-419f-11e4-b98f-00144feabdc0.html My mate says "LPG exports already happening to a limited degree. LNG will come online early next. Both will ramp up considerably next year." Quote Link to comment Share on other sites More sharing options...
Dave-G Posted May 18, 2015 Report Share Posted May 18, 2015 Thanks for the education guys. I was naively thinking that some of the press about fracking in the UK was all about bluffing traditional oil producers to lower their prices. Quote Link to comment Share on other sites More sharing options...
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