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Inside, confidential and off the record

Oil: Libya and supplies

CRUDE OIL IS WEAKER; NAT-GAS IS STRONGER and the term structures are moving… and that sums up what has happened to prices, with the world still trying to figure out just how badly served have the Japanese people been by their government and by TEPCO, the owners of the nuclear reactors that are still causing enormous problems there in Japan. Too, the world is trying to understand what is happening in Libya and how badly have oil supplies there been diminished.

The problem for the world is not the supply of crude. There is indeed plenty of crude available, but there is a very real shortage of the right kinds of crude oil.
Venezuela’s high sulfur heavy crude is available anywhere and everywhere, and Saudi light…which is reasonably light crude, with an API gravity of approximately 33 compared to Venezuela’s Bachaquero crude with an API of 17 [Ed. Note: For the uninitiated, the higher the number, the lighter the crude, with 16 as the heaviest of all crude types.] and which does, however, have a much lower sulfur content than does Venezuela’s at 1.9% compared to 2.4%... are readily available. But the world’s refiners do not want or need those crudes. They want and need very light and very low sulfur crude oils such as Malaysian Tapis, or Nigerian Bonny Light, or Libyan El Sider. These the refining world is short of.

We are told by our friend and mentor in the oil arena, Dr. Philip Verleger, that the Saudis are trying to “blend” a crude type that will meet refiners needs and that may do much to alleviate the shortage of the crude type required to get low sulfur diesel from the cracking towers. Further, we note that the Japanese have released some crude from their national strategic reserve and that too has alleviated… somewhat… the shortage. But the reality is that there is an abundance of poorer, or lesser quality, crudes in the world, while there is and shall be a shortage of the high quality crudes. That, we fear, shall be with us
for a rather long while more:

MayWTI down 89 104.79-84

Jun WTI down 81 105.34-39

Jul WTI down 66 105.85-90

AugWTI down 61 106.08-13

SepWTI down 52 106.27-32

Oct WTI down 40 106.40-45

OPEC Basket $111.09 03/23

Henry Hub Nat-gas $4.27

Finally, we looked at the data for the US’ imports of crude from abroad noted below in our discussion regarding the upcoming elections in Nigeria and as a result we note here the imports for the year to the US from the 10 largest suppliers of crude. It is really rather interesting and the numbers are for the average barrels of crude exported to the US per day for the year:

Crude Oil Imports
(millions of barrels/day)

1. Canada 1.972 million bpd

2. Mexico 1.140 “ “

3. Saudi Arabia 1.080 “ “

4. Nigeria .986 “ “

5. Venezuela .912 “ “

6. Iraq .414 “ “

7. Angola .380 “ “

8. Colombia .338 “ “

9. Algeria .325 “ “

10. Brazil .254 “ “

Firstly, Libya is nowhere to be seen, although Libya remains one of Europe’s most important suppliers of crude oil (and very high quality crude oil at that) so those on the Left who ignorantly argue that the US decision to join the forces against Col. Qaddafi there was motivated by oil are simply and bluntly wrong. That may be Italy’s excuse for joint action with NATO: that may be France’s excuse, but it is not the US’ excuse. Secondly, the Middle East supplies 1.494 million bpd of crude per day from these Top 10 suppliers, of a total of 7.463 million bpd last year, or 20%, while exporters of crude here in the Americas export 62% of the crude from abroad to the US. Thus, whenever we hear Congressmen and/or Women, and Senators say that it is their intent to “End the US dependence upon Middle Eastern crude” we laugh aloud and respond,” That was done years ago!” The reality is the US is “dependent” upon Canada, Mexico, Venezuela and now Brazil for crude oil and the influence of the Saudis and others in the Persian Gulf wanes by the hour, by the day and by the month.


-Dennis Gartman/ The Gartman Letter / 03/28/ 2011

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