Oil Tumbles Nearly 5 Percent To New Lows; Analysts Warn Of $20s

[Purveyor]

Source: Reuters

A brutal new year selloff in oil markets deepened on Monday, with prices plunging as much as 5 percent to new 12-year lows as further ructions in the Chinese stock market threatened to knock crude into the $20s.

On Monday, China's blue-chip stocks fell by another 5 percent and overnight interest rates for the yuan outside of China soared to nearly 40 percent, their highest since the launch of the offshore market.

Morgan Stanley warned that a further devaluation of the yuan could send oil prices spiraling lower still, extending the year's nearly 15 percent slide.

While China's ructions are spooking traders over the outlook for demand from the world's No. 2 consumer, drillers in the United States say they are focused are keeping their wells running as long as possible, despite the slump, executives told a Goldman Sachs conference last week.

Read more: http://www.reuters.com/article/us-global-oil-idUSKCN0UP01P20160111

---

Gas Prices Could Drop Toward $1 A Gallon

In some gas stations around the country, the price of a gallon of regular has dropped below $1.42. AAA and GasBuddy, two organizations that follow gasoline prices, say that gasoline prices below $2 will not be unusual in most of the United States. As oil prices fall, and refinery capacity stays strong, the price of gas could reach $1 a gallon in some areas, a level last reached in 1999. As a matter of fact, the entire states of Alabama, Arkansas, Missouri, Oklahoma and South Caroline have gas prices that average at or below $1.75.

Gasoline prices are driven mostly by four factors: oil prices, proximity to refineries, refinery capacity and state taxes and levies. Oil prices have dropped below $33 a barrel and continue to collapse. The recent decision by Saudi Arabia to continue to keep its oil exports high essentially has dissolved the OPEC cartel. The decision also has forced the kingdom to chop its 2016 budget. This ongoing supply glut guarantees oversupply of crude. At the same time, slowing national economies in the largest countries, including China, will lower demand. China now tops the list of oil importers, according to the Financial Times, having moved ahead of the United States.

The cost of producing oil from shale deposits, particularly in the United States, is greater in some cases than what it can be sold for. Nonetheless, parts of this industry continue pumping, increasing supply, while others go bankrupt because they cannot survive with crude prices so low.

Several states house large refineries or are close to those that do. This is particularly the case near the Gulf of Mexico, including the massive refinery operations south of Houston. Some owned by Exxon Mobil Corp. (NYSE: XOM) process several hundreds of thousands of barrels per day. Proximity to refineries is a factor in gasoline prices, if the refineries are running at or near capacity and produce gasoline instead of other petroleum products.

more...

http://www.reuters.com/article/us-global-oil-idUSKCN0UP01P20160111

[TygrBright]

1. Hopefully we're topping up our reserves and looking at alternative power sources. n/t

Because this is the "bait" in the sting.

And the "tip" is going to be a kick in the gut.

wearily,
Bright

[Purveyor]

2. Nope. Just the opposite. See this: U.S. Plans to Sell Down Strategic Oil Reserve to Raise Cash

The U.S. plans to sell millions of barrels of crude oil from its Strategic Petroleum Reserve from 2018 until 2025 under a budget deal reached on Monday night by the White House and top lawmakers from both parties.

The proposed sale, included in a bill posted on the White House website, equates to more than 8 percent of the 695 million barrels of reserves, held in four sites along the Gulf of Mexico coast. Sales are due to start in 2018 at an annual rate of 5 million barrels, rising to 10 million by 2023 and totaling 58 million barrels by the end of the period. The proceeds will be “deposited into the general fund of the Treasury,” according to the bill.

The sale is the second time the U.S. has raised cash from the reserve, created as a counter-balance to the power of Arab producers after the first oil crisis of 1973-74. The U.S. may sell also additional barrels to cover a $2 billion program from 2017 to 2020 to modernize the strategic reserve, including building new pipelines.

The White House on Tuesday urged lawmakers to support the budget deal, including the proposed partial sale of the SPR, saying it was “a responsible agreement that is paid for in a balanced way.”

http://www.bloomberg.com/news/articles/2015-10-27/u-s-plans-to-sell-down-strategic-oil-reserve-to-raise-cash

[TygrBright]

3. Oh. Of course. I was forgetting: "Sell low, buy high." Isn't that how it sposedta work? n/t

[Purveyor]

4. Crazy isn't it. Never felt so helpless in my life as to want is happening to my country. eom

[Kelvin Mace]

11. Which will further depress prices

creating a spiral in the oil industry.

Of course, once it bottoms out, does all massive economic damage it will snap back the other direction and do even more economic damage.

[SoLeftIAmRight]

17. Trump is correct when he says - we are goverened by fools

i am going to take a long bath now - it will take a while to get this stink off

[no_hypocrisy]

34. Trump also predicted $10 gas when Obama was elected.

Who's the fool?

[former9thward]

38. That was also predicted when Bush was elected.

Oil's price is set by world markets not by any president. The fool is the person who think someone in a back room can set oil prices.

[Hassin Bin Sober]

44. The fool is the person that doesn't realize two wars, started by Bush, wouldn't cause.....

..... the worlds largest single consumer of oil and gas (The Pentagon) to drive up prices.

[flamingdem]

5. ructions?

typo?

[Purveyor]

6. Don't think so. It kind of works. eom

[pampango]

7. ""The firm push for normalization with Iran has taken the last shred of geopolitical risk out of

"traders' minds."

The European Union said on Monday that the lifting of sanctions on Iran could come soon, following a deal last year to curb the Middle East nation's nuclear program. Many market participants that Iran's return to the oil markets would add more pressure to the global glut that has knocked prices from more than $100 in mid-2014.

Even so, many big investors are still shifting more of their bets to the bearish side of the market. Speculators cut their net long position to the small since 2010 in the week to last Tuesday, with short positions rising in a sign that they are losing faith in a price rise any time soon.

Interesting how the Iran nuclear deal is playing into oil prices. Reducing the risk of war seems to be driving oil prices down. Big Oil and its supporters must be working behind the scenes to undermine the deal.

[Spitfire of ATJ]

8. Only on Wall Street is cheap gas considered to be "bad" news.

[The2ndWheel]

12. Cheap energy in human hands?

It's got pluses and minuses all over the world. Sort of bad news environmentally.

[Spitfire of ATJ]

13. Only if people stupidly decide it's time to buy a Hummer.

[The2ndWheel]

16. Then it's not only on Wall St?

Cheap energy has had its downs, as well as its ups, for a lot longer than cars have been around. Certainly before Hummers made an appearance on the interstate highway system. Which, by the way, I would think, is one of the worst things we've managed to do where the environment is concerned. The interstate highway I mean.

Any cheap gas that gets consumed is part of the equation, and adds that much more to the issue. Hummer or not.

[Spitfire of ATJ]

18. I take it you own a Hummer.

[Bernin]

22. I used to

think this way.
Then I witnessed $4/gal gasoline give rise to the shale oil industry.

I no longer think that way.

[Kelvin Mace]

21. Well, it is bad news for the environment

since as long as carbon-based fuels are cheap, renewables are priced out of the market.

[Spitfire of ATJ]

26. That's where government policy steps in....

If it's policy to go solar than you make solar cheaper for consumers.

Here in Nevada we had NV Energy raise prices on solar customers because they want to eliminate the competition from solar. The problem is they waited too long. There are ten homes on my block alone that had panels installed. They're EVERYWHERE.

There is a massive public outcry over their actions to the point where local politicians are jumping in.

There are actually conservatives arguing that utility companies should be able to charge whatever they want and the government should stay out of it.

[Kelvin Mace]

40. Same kind of problem here in NC

The tax credits for solar expired Dec 31, and the current GOP controlled state government has ZERO intent of restoring them. They also levy a road tax on EVs, which I would have no objection to, if they actually used the money to fix the roads. They are also trying to do away with net metering, which isn't flying due to the installed solar base in homes and businesses.

[Spitfire of ATJ]

43. We need FEDERAL laws to prevent the Republicans from doing things like this at a state level.

[Kelvin Mace]

45. Unfortunately, not likely with the government

we are stuck with. The game will be over in a few more decades.

[Spitfire of ATJ]

46. Eventually fossil fuels will go the way of whale oil.

[Kelvin Mace]

52. True, but

if we burn it down to that point, we will be moving back to an 18th century tech level.

[Spitfire of ATJ]

53. That's a false choice that the oil industry has repeated since the 80s....

The idea that we either burn their product or go back to the horse and buggy.

[Kelvin Mace]

54. No, I am saying that if we burn the oil

we will go back to the 18th century, due to catastrophic climate change. Leaving as much oil in the ground as possible and building green power sources is the only hope for the future.

[yeoman6987]

27. Good news for working poor and poor

Since they never get a break, I'll take it. Our environment is better with our better cars not dumping emissions. An emmissiond test should be mandatory annually in every state.

[Kelvin Mace]

39. As long as we keep burning carbon

we are screwed.

Your average ICE vehicle produces 6.6 tons of carbon per year, and as long as we keep putting off EVs (which currently cost twice what the average ICEV does) the planet is going to get more hostile toward human life.

And it is the poor who will bear the brunt of that suffering.

I would just as soon seen a realistic gasoline tax, with the money used for mass transit and switching to green power.

[MosheFeingold]

25. Wall Street bets on the future

Construction, shipping, etc, all runs on diesel.

Weak oil (and weak copper, wood, and other such fundamental items) means the economy is slowing.

A stable oil price in the 70ish range is actually the best for growth in the USA.

Odd from the consumer perspective, I agree, when just thinking about your gas tank.

But consumers consume because they have jobs that does something.

So less work and growth means less consumption, tax revenue, etc.

[Spitfire of ATJ]

28. Actually, if consumers aren't sending too much money to a single sector of the economy....

If you have more money available you will use it for other things spreading it out and creating jobs elsewhere.

The oil companies have been swallowing up far too much of the nation's wealth for far too long.

The jobs they produce are roughnecks in the fields and minimum wage types trained to ask what pump number.

[MosheFeingold]

33. Roughnecks

Make upwards of $100,000 starting out.

I should know; I moved (part time) to live in Odessa, TX. I've seen their toys.

(I am old and moved to live near my daughter, a doctor.)

[Spitfire of ATJ]

41. Exactly. It's the extremes....

However the economy as a whole does better if a big chunk of the wealth isn't concentrated in a single industry.

You would think the same if a big chunk of the economy was going into the manufacturing and consumption of chocolate.

Okay,....maybe not chocolate....

[PersonNumber503602]

47. I recall reading a news story about Odessa around two years ago

They were having huge housing shortages because of oil industry bringing in so many highly paid people. The highly paid oil worker were able to get by, but the regular folks were pretty much screwed 'cause they were still making their lower wages that the area was used to. I heard Alberta up in Canada has/had similar problems too.

[MariaThinks]

9. makes you wonder what's happening. if the thought of the economy slowing down

drops the price so much, we're obviously paying speculators and not for the true and fair cost of the oil.

[Bernin]

24. I have always had

a quick fix for the speculator problem.

If you want to speculate on a commodity, any commodity, then you need to physically house it and pay the property tax on it.

[Spitfire of ATJ]

30. Now imagine that with pork bellies.

[NickB79]

10. And in the meantime, people are gobbling up SUV's and trucks like mad

Because what global warming, right?

[Strelnikov_]

15. . . . and what peak oil?

The bumpy plateau is quite a bit bumpier than anticipated. But the overall dynamics have not changed.

I have always thought the 'oil age' will end due to geopolitical events. And the vast majority of remaining reserves, particularly cheap oil, is located in a region about to go pop. As 'quickly' as the price has dropped, we can be back to the previous high in a few days.

Now would be the time to make a deal on a Prius.

[PersonNumber503602]

48. At least now it seems most of the SUVs are smaller ones that are more inline with minivans.

Although I still see people driving around giant tanks, there doesn't seem to be as many.

[SoapBox]

14. And yet, in Los Angeles, the price of gas just keeps climbing.

I live in the cheap area...and at out el cheap station last night...$2.99/gallon.

It's over $3 at name brand places.

Scam and rip off.

[dixiegrrrrl]

20. I remember in the SF area when gas went UP to 3.00.

2000's, if I recall correctly.

Down here, just hit...1.69.
I had filled up at 1.73 a week ago.

[Spitfire of ATJ]

31. Gas Buddy shows that BIG time....

http://www.gasbuddy.com/GasPriceMap

[Marty McGraw]

35. Energy co's have always

Hated the hippy left coast.

went into high gear with Enron showing how to hate us the most.

[Spitfire of ATJ]

42. I got a $300 gas bill in the summer when I lived there....

I figured it HAD to be a mistake.

It wasn't.

It was greed and a government that applauded it.

[PersonNumber503602]

49. Any idea how much of that is from higher gas tax?

I also heard that California has higher environmental standards for cleaner burning gas add to the cost. I'm not sure how true that is, or how much it adds to the overall price though.

*hmm looks like the tax difference is only about $0.20 between California and Texas. http://www.api.org/Oil-and-Natural-Gas-Overview/Industry-Economics/Fuel-Taxes/Gasoline-Tax I'm tired though, so maybe I am looking at this wrong..

[Sunlei]

19. low gasoline price puts cash in my pocket every week. Open more refineries -let them compete for

customers. Obvious Gas stations are STILL price setting.

[Kelvin Mace]

23. We have Sheetz staions here

and the price between locations in the same city can vary as much as $0.20 a gallon.

[Sunlei]

29. someone should open for $1.00 a gallon. Accept less profit and corner the market.

[betterdemsonly]

32. Russia is weathering this well. It is selling to China

Last edited Tue Jan 12, 2016, 12:59 PM - Edit history (1)

Printing debt free rubles and employing people in arms production to fight Isis. This is mostly hurting texans, and north dakota frackers, so they can't afford to invest in anymore fundamentalists bible schools. The Saudis are also going slowly bankrupt, which is good because they won't be able to afford supporting those madrasas or mosques, in the neighborhoods of the worlds poor.

[ChairmanAgnostic]

36. what a perfect parable for weather and climate.

Here in Chicago, gas prices seem to go up each weekend, and down on mondays. Big holidays always see an increase. Any rumor in Iran, Iraq, or Syria drives up the price, even though what we use in chicago is all domestic oil based. Every change in season causes a rise.

Even when there was a huge drop in oil prices a few months ago, those geniuses in Joliet managed to contrive a faux problem with their production plant, requiring "emergency repairs" and cutting supplies by 30%. So, when prices across the country fell by 20-25%, Chicago's prices grew by 15%. Only when an attorney general started poking around did they realize that the BP plant was working perfectly and gas supplies eased up overnight.

The gas price in Chicago is like weather. Weird, bizarre, unconnected with oil prices.
Oil prices are like climate, with trends that can be predicted.

[Sunlei]

37. ROAD TRIP, good for the soul and the local cash economies. Thanks Obama :P

[nitpicker]

50. As of 5 am EST 12 Jan

WTI: 30.95
Brent: 31.27

[nitpicker]

51. My local no-name station yesterday

1.77

Within 10 miles of DCA.