It's so exciting!And I just can't hide it! I know that I like it! Oil demand can actually go higher! No seriously it can. The EIA in its Short Term Energy outlook raised its expectations for global oil demand for the first time since last September. Yippee!! All right maybe I am over doing it a bit. And10,000 barrels a day isn't anything to get excited about but at least we are not falling! Let's get pumped up about the fact that world demand is now expected to top 83.68 million barrels per day this year, up from 83.67 million barrels per day forecast in May. Wow!!! Yet demand will still fall short of last year's 85.43 million barrels per day. All right maybe it is not all that exciting but let's face the fact that it does not take a lot to get the oil market excited. Oil is already very excitable especially with the backdrop of a very depressing dollar and now big drop in crude supply reported by the American Petroleum Institute and news that BP has lowered its estimates for world oil reserves this market won't be able to contain its excitement.
The API blew away market expectations by reporting a drop in crude supply by a whopping 5.96 million barrel drop in weekly supply. They also said that gasoline inventories increased by 27,000 barrel and distillate increased by 19,000 barrels but who can see beyond that black hole drop in oil. Now think about this, if the DOE Energy Information Agency reports a similar drop in supply as dollar continues to struggle, it will be hard to imagine a scenario where oil won't make new highs.
Not exciting enough for you! Well this will wow you. BP announced the first drop in global oil reserves in 10 years! Peak Oil guys are going crazy now!Bloomberg New reported that BP, the oil giant, in their annual Statistical Review of World Energy said, Global proved oil reserves fell last year, the first drop since 1998, led by declines in Russia, Norway and China. BP said that, Oil reserves totaled 1.258 trillion barrels at the end of 2008, compared with a revised 1.261 trillion barrels a year earlier.That means that according to BP the world has enough reserves for 42 years at current production rates.
Bloomberg says that, BP and other oil companies are struggling to replace reserves as access to deposits becomes harder and older fields in places like the U.K. and Mexico are depleted. Russia passed a law last year that limits foreign ownership in some of the country's biggest energy and metals deposits. Middle East countries, which hold 60 percent of global reserves, restrict access for international companies. They quote BP CEO in the BP introduction as saying that Our data confirms the world has enough reserves of oil, natural gas and coal to meet the world's needs for decades to come. The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground. They are human, not geological.
What he is saying that the world if it is going to meet peak oil it will be a government imposed peak. If the oil companies are going to go out and replace reserves the governments have to get out of the way. That threat is growing in the US obviously with new carbon taxes and increasing lease rates with shorter durations to places like Russia and Venezuela that use their oil reserves for political purposes. Ok the U.S. Senate Energy and Natural Resources Committee as Reuters reported did adopt an amendment to an energy bill that would allow drilling within 45 miles of Florida's Gulf coast yet over all the Obama administration anti-petroleum policies will lead to less production and the lack of enthusiasm to look for more reserves.
What about this off shore drilling deal? Reuters reports that,The U.S. Senate Energy and Natural Resources Committee adopted an amendment to an energy bill that would allow drilling within 45 miles of Florida's Gulf coast. Florida now bans oil and gas drilling within 125 miles of its coasts in the Gulf of Mexico with the aim of protecting its tourism from pollution and ruining views from its beaches.The new language offered by Senator Byron Dorgan passed by a 13-10 vote and would also open the Destin Dome area 24 miles south of Pensacola to drilling.
The American Petroleum Institute estimates the Destin Dome area has at least 2 trillion cubic feet of natural gas, enough to heat 2 million homes for 15 years.The agency said the entire area in the eastern portion of the Gulf of Mexico that would be opened to drilling under this legislation could contain 3.7 billion barrels of oil and 21.5 Trillion cubic feet of natural gas. Reuters says that the Senate panel is expected to approve the entire energy package later in the week. But the bill may face a rocky road on the Senate floor as both Democrats and Republicans on the committee had objections to certain proposals.Democratic Senator Mary Landrieu made an impassioned plea for revenue sharing for states, offering a second degree amendment.Her proposal, which was defeated, would have given 37.5 percent of the revenues the government receives from oil and gas leases to coastal states, specifically Alabama, Florida, Louisiana, Mississippi and Texas.
Senator Jeff Bingaman pointed out that the proposal would, over the life of offshore drilling, take some $653 billion to $790 billion away from the U.S. Treasury Department, already struggling to handle a massive deficit.Florida Democratic Senator Bill Nelson, though not a member of the committee, said the amendment would cut into the U.S. military's largest testing and training area in the world.We will have a bunch of senators filibuster this if we have to protect the interest of the U.S. military, he told reporters. Who said that drilling was ever easy?
As far as the dollar it is screaming for an exit strategy. How are we going to exit these inflationary policies? Whether it is quantitative easing or the biggest budget deficient in history, the market wants to know what the end game is. When we saw increasing chances of a rate increase after the jobs numbers and the dollar rallied. Now with those odds decreasing and another ten year auction today the market is not so sure and the dollar is getting pummeled.Obama pushing Pay as you Go did little to calm the fears of a market place that lacks the confidence that this Congress can show any signs of fiscal discipline. Until we do then the dollar is vulnerable. Isn't that exciting?
We're long July crudefrom apprx 5959 - raise stop to 6690!!!
Buy July heating oil at 16200 - stop 15700.
Buy July RBOBat18500 -stop 16900.
Buy July natural gas at 330 - stop 290.
The Dan Flynn Corn & Ethanol Report
The U.S. Dollar hits another bear push.
The continuation slide only furthers bullish sentiment in the commodity sector.
With the reports due out today in the Grain and Energy Sector look for a wild ride.
It should be a good trading session.
The July Corn settled at 448 which was up 4 cents.
The range was 449 to 442 1/4.
My friends at AG Resources concur that the current price will hamper exports.
Stay Tuned !
On the Energy Front we continue to rally with the fading U.S. Dollar and early stregth to the Stock Market look for rallies.
Have a Great Trading Day !