|
[What baffled many of us was how the markets could have signaled a rally this morning when the damage from Rita had not been fully assessed yet, let alone that from Katrina. Oil industry figures show 97% of all Gulf of Mexico oil production is now shut in. What I suspect is that both hurricanes have thrown the timetable of the powers that be off. I suspect they had serious short positions (put options or short sales) that would have needed covering and that would have been a disaster for them if prices had risen too quickly. Cornered and/or caged beasts are both more dangerous and more likely to make mistakes. So it’s quite likely that the Plunge Protection Team and other market manipulators had to make oil and gas prices drop a bit today so that the real money could back out before allowing oil and natural gas prices to hit the markets. Thus we have seen stories in one 24-hour period saying that oil might drop to $25 next year in the morning and stories saying that futures were swinging markedly upward by the closing bell.
None of that had anything to do with damage assessments from two major hurricanes which haven’t really even begun yet. As one astute observer noted, “A couple of months ago if there was one small refinery fire, crude oil futures went up $2 a barrel. We have two major hurricanes taking all refineries offline and oil prices fall. What’s up with that?”
Market manipulation is up. That’s what’s up. And I suspect the move is now on around the world to suck as much last minute “sucker” cash into play as possible before pulling the plug this winter. My guess is that we will not have a clear picture of actual damage to oil and gas infrastructure for at least ten days to two weeks. And even then what we get might not be honestly reported. Rita was either a Cat 4 or a Cat 5 when it went through the offshore facilities in the gulf. We’re all still waiting to hear what happened there. Are the platforms there? Are they damaged? Are the pipelines damaged? The list of questions that need answering is a long one.
Make no mistake, the long term issue is about supply. There are many reasons for this but the main one is that, even assuming all the infrastructure gets repaired and once all the undamaged refineries get started up again – a process which may take as long as two weeks for each refinery – every drop of production that has been lost so far is going to have to be made up. With Bush opening the Strategic Petroleum Reserve conveniently for a second time today, all that oil is going to have to be replaced on top of normal (growing) demand.
All the while, now-documented decline is taking about a million barrels per day out of the global pipeline. So where is all the “make-up” oil going to come from? -- MCR]
Crude oil prices rise after Rita
Oil prices have risen as the industry continues to evaluate the damage caused to facilities in the Gulf of Mexico by Hurricane Rita.
http://news.bbc.co.uk/2/hi/business/4282030.stm
Last Updated: Monday, 26 September 2005, 20:58 GMT 21:58 UK
Prices initially fell on Monday after Rita did not prove as damaging as initially feared.
Yet with 16 Texan oil refineries still shut down following the tropical storm, the sector remains jittery.
US light crude closed up $1.63 to $65.82 a barrel after Monday trading, while Brent gained $1.49 to $63.93.
Rita temporarily closed all offshore oil output in the Gulf of Mexico, but the storm veered east of the main US oil refining region around Houston, limiting the impact on refineries there.
President George W Bush said the refining capacity shut by Rita would be back on line soon, but urged US motorists to limit their petrol consumption in the meantime.
"A lot of our production comes from the Gulf [of Mexico] and when you have a Hurricane Katrina followed by a Hurricane Rita, it's natural, unfortunately, that it's going to affect supplies," he said.
Supply pressure
The Federal Emergency Management Agency said it believed the long-term damage to refineries would be minimal.
Several drilling platforms in the Gulf of Mexico have been damaged, but Texas Governor Rick Perry said that offshore oil facilities appeared, in general, to be in "relatively good shape".
Analysts said that disruption caused by Rita would inevitably put more strain on already tight supplies of gasoline, diesel fuel and heating fuel.
However, they said that the US government and international agencies would release supplies from stockpiles in the event of any shortages.
"There's still crude out there that can make up for any loss in production," confirmed Doug MacIntyre, senior analyst with the US government's Energy Information Administration.
|
