Mish's Global Economic Trend Analysis |
OPEC Blames Speculators, Non-OPEC Countries, US Frackers for Oil Price Crash Posted: 21 Dec 2014 02:21 PM PST OPEC is pointing the finger at speculators as well as Non-OPEC countries, but especially US shale producers for the crude price crash. Let's explore that idea in a series of charts. But first let's take a look at the allegation. The Wall Street Journal reports Gulf Oil Exporters Blame Non-OPEC Producers for Glut. Gulf oil officials on Sunday defended OPEC's decision last month to keep its production ceiling intact, blaming producers outside of the group for the glut of oil on the market that has depressed prices.OPEC December Monthly Oil Market Report Are US shale frackers really to blame for the price crash? Let's take a look using OPEC's own data. Please consider charts and other analysis from the OPEC December Monthly Oil Market Report. OPEC vs. Non-OPEC SupplySingling Out US and Speculators is Ridiculous Let's dismiss the notion speculators are responsible. Speculators, don't take delivery of significant amounts of oil (if any at all) and they don't set prices, but they can swing day-to-day volatility and perhaps exaggerate trends in both directions for a while. Ultimately this is a supply-demand issue. US production is up by 1.45 million barrels a day since a year ago. Total world supply is about 93 million barrels a day. The increase in US production amounts to 1.56% of global supply. Singling out the US is absurd. There are 12 OPEC countries vs. the rest of the world. Those 12 OPEC countries represent 32.4% of global supply. In total, there are over 200 countries that produce oil according to the US Energy Information Administration (EIA). An EIA chart (2012 data) will help put things in better perspective. Countries and Producers Act Independently It should be pretty easy to spot the problem. Countries as well as oil producers in those countries act independently. Thus, Saudi Oil Minister Ali al-Naimi's statement "Non-OPEC producers will realize that it is in their interests to cooperate to ensure high prices for everyone" is laughable. Every country in the world wants the other countries to be the ones to cut supply. Cooperation is not going to happen. OPEC cannot even agree among its own members. For further discussion, please see What's Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 21 Dec 2014 02:10 AM PST If you don't have the money, spend it anyway, says the Ukrainian government. Of course, that's no different than the philosophy of any other country, including the US. In this case, however, Ukraine borders on default. Please consider Ukraine Can't Scrimp on Military Spending as S&P Rating Cut. Ukraine's president, speaking a day after the nation's junk credit rating was cut further, said next year's budget mustn't cut corners on military spending and should account for the possibility of an invasion.War Has Made Us Stronger Ukraine president says "War has made us stronger". That lie is so stupid my dead grandmother knows it from the grave. The evidence is a CCC- debt rating, a step or so above above default, with default imminent. The story gets even stranger. To avoid default, Ukraine needs a "Russian contribution to the package" according to Pierre Moscovici, the economic policy commissioner for the European Commission. Amazing Irony Europe and the US have crippling sanctions on Russia for the conflict in Ukraine, yet the EC wants Russia to bail out Ukraine while accusing Russia of invading Ukraine. Icing on the wonderland-cake is the Russian Ruble has plunged nearly 50% this year, but Ukraine needs money from Russia to fight Russia. Is this complete lunacy or what? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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