The US Oil Slick is Getting Wider: Oil Boom Going Bust
By David Haggith
GoldSeek.com
Friday, 26 February 2016
Only about a week ago, one reader scoffed at me because oil prices had stabilized (or so the market theory d’jour went). The big stock market crash I had predicted had run its course, he thought. The Saudis and Russia had entered a deal on oil, and Iran was coming on board; the stock market was back up as a result. Everything was normalizing again. Whew! He could write off the doom-and-gloomers.
It was a wet, oily dream — a dream I listened to with detached amusement as oil prices and stock prices rose to support his hopes. How silly, I thought, that these investors all hear exactly what they want to hear. What a bunch of lemmings.
Here is what they should have heard as I would have written the news last week:
The Saudis and Russians agreed this week not to reduce production of oil for months to come but to freeze in place the current high production rates that are crippling the US fracking industry. They also conditioned their freeze at these high production rates on all other suppliers keeping their production rates frozen. In so doing, the Saudis and Russians implied that, if others like the US continue to boost production, they will, too. The price war continues full force.
Iran this week said it might become a party to this deal after it gets its own production rates up to the market share it enjoyed before sanctions. For now it is concentrating on boosting production and sales back that old level.
That was the upshot of all parties agreeing “to talk.” The real news was clear for anyone with ears to hear if people would just start to listen to things they don’t want to hear: No one is budging. Oil producers are going to keep pumping supplies up at the same high rate for as far as the eye can see, and Iran is going to continue to ramp up production until it gets back to where it was in its pre-sanction days.
There was no good news there at all — not a drop — but people lapped it up as if there was because that’s what they wanted to believe. It’s strange to see so many people crowded around pools of spilled oil surplus, lapping it all up like it tastes good.
The Rest…HERE
