362. MORE SURPLUS OIL PROBLEMS
Inconsistencies are appearing in the "not enough oil" theory of the recent price rise. We've previously seen that Iran has been accumulating unwanted oil in tankers, as reported by Bloomberg:
June 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, increased the number of tankers idling in the Persian Gulf to at least 14, indicating it may be storing more crude, ship-tracking data show.Now the surplus crude problem has expanded to Kuwait and Saudi Arabia:
Iran has at least 14 very large crude carriers, or VLCCs, floating near Kharg Island, a loading facility. In April, there were 10, holding at least 20 million barrels of oil, people familiar with the situation said at the time. Shipbrokers also reported that Iran hired three more tankers, which have been near Kharg Island for at least two weeks.Source
Kuwait and Iran on Wednesday joined Saudi Arabia in slashing the price of their heavy crude exports to the deepest discounts in at least nine years, seeming to support OPEC's view that the world has enough of its supplies.SourceIt turns out that we've got a heavy oil glut. The physical oil is being discounted, to make it move.
Saudi oil minister Ali al-Naimi said last month Saudi Arabia had boosted oil output by 300,000 barrels per day and would achieve 9.45 million bpd in June to meet rising demand and to compensate for lower output from other producers.So it's clearly a distortion to call the current situation an "oil shortage". It would be more accurate to call it a shortage of refining capacity. Why is there a refinery shortage? Well, in the U.S., this will give you a clue:
The kingdom's state oil company Saudi Aramco is due to inform refiners how much crude they can lift in July later on Wednesday or on Thursday, refinery sources say.
But refiners expressed little interest in additional crude supplies, especially if these were of the heavy type.
"We just asked for full term volumes, not for extra volumes," one trader with an Asian refiner told Reuters. "Supply is not tight anyway. Heavy sour crudes are under pressure this month."Source
Refiners faced with rising prices for premium grades of crude oil are rushing to expand their ability to process less expensive, dirtier crudes, but their efforts face concerns about pollution and global warming.Yup, NIMBYs and global warming activists are jacking up the price of oil. "Not enough oil" is just the cover story. LOL.
Several expansion projects in the U.S. are being slowed by worries that the processing of heavier crudes produces more air pollutants and greenhouse gases that contribute to climate change. While environmentalists have long been critical of heavier crude, government officials responsible for signing off on expansion projects are echoing that unease and demanding countermeasures to reduce the amount of pollution.Source
-- by JD