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Re: Are commodities topping?
AKHalea
06-24-2008, 6:15 AM | Post #2531828
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MP : A few answers to your question. - Saudis do not have much light sweet crude production. 95% of their production is "sour", a less desirable (lower sulfur) grade. Of that 95%, about 75% is light sour, meaning not as difficult to refine. The rest is heavy sour. Until recently, this was the pattern, but it might change this year in Sep when they bring in some more light sour production.
- Most refineries can run some sour crude, some can run more than others. However when we run refineries at 90+% utilization, most refineries generally have used up their sour crude capacity (because sour crude is cheaper). Thus, at current ~87%+ utilization, many refiners would prefer the light sweet variety that is easier to refine, but more expensive.
- Thus, Saudis may have a problem of not enough buyers for their additional production. This will hopefully bring down the price of heavy sour grads in relation to lighter grades. That. hopefully is how we may get a start towards lower crude prices.
The title of my post was meant to stimulate discussion - as you say, we may just be taking a breather or may be starting a true decline. However, in view of many fundamentals, I feel that we may be in the 8th or 9th innings of this oil bull run, rather than 5/6th inning. So, we must decide which way to go when we come to that unevitable fork in the road. Cheers .... Anil
Topics
Oil
Sep
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