Locator: 49865WTI.
Question: on the margin, what is the #1 driver for the price of oil? All things being equal, the marginal price of oil (reflected in daily / weekly / monthly changes in price of Brent / WTI) is China's imports. From where was it alleged that China was getting a lot of its oil; and if not necessarily now, in the future? Answer: Venezuela. So, if the Chinese have lost access to Venezuelan oil what does that mean for global price of oil?
On another note: someone is reading the blog. Every time I point something out, hours later, someone posts that note on x. Exhibit A, link here, this was "discovered" about an hour after my initial post:
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Price Of Oil
WTI: huge jump at end of week. Now at $59.12.
Two major events right now:
Venezuela:
- short term:
- huge amounts of Venezuelan heavy oil being re-directed to US
- heavy oil makes up very small proportion of US oil requirements
- huge advantage for some US refiners
- Venezuelan heavy oil will simply displace Canadian heavy oil
- all things being equal will have little effect on price of oil / gasoline in US (short-term)
- pressure from Trump
- with price of oil where it is, and headed lower, there's no way US companies are going to commit billions of dollars to Venezuela -- no matter how much pressure they get from the president
- and the president has said he wants the price of oil be lower -- thus making it even more unlikely that US oil companies would commit billions to Venezuela
- right now, there's already talk that US oil companies may have to decrease their dividends
- long-term (10+ years)
- could make a difference for Venezuela
- will make little difference for rest of the world
- "wrong" kind of oil
- more than enough oil in more politically stable countries
- Saudi Arabia effect:
- Saudi Arabia will do what it can to prevent Venezuela from upsetting the apple car
- Saudi Arabia can export five grades of oil, from heavy to light, depending on demand
- right now, demand is for light oil and that represents the majority of Saudi export oil
- some oil companies could benefit but the golden era of oil is over
Iran:
- exports a lot of natural gas
- exports less than two million bopd
Lesser issues:
- Guyana: probably less concern now about Venezuela's intentions;
- Permian: different type of oil entirely;
- Russia: could be negatively impacted - but again 10+ years from now
- China: will need to look for other sources of oil --- which could provide floor for price of oil
