Long Run Explor Ltd Ord WFREF

Brentq

[JohnJBond]

As I write this, Brent oil is trading at $61+ in US dollars.

That is inspite of the US dollar strength against most other global currencies.........ie, Brent is higher in local currencies.

Brent shows the global oil price (WTI is for those who can't see outside the US).

The oil price slide was prompted by Saudi Arabia protecting its market share by lowering its oil price to various customers.    ie - external to the US.

This was prompted by less oil being imported into the US (as a result on increased US domestic production), thus Brent priced oil that previously went to the US, needed to be placed elsewhere........and that required price incentives (aka lower price).

The fact that the Brent oil price has now increased significantly indicates the "extra" Brent supply has been absorbed...........moreover, it means buyers are having to raise their bids to get the Brent they need (thus the higher prices paid).

Inside the US, all you hear is about in the press is the global glut of oil.............Americans are easily confused, and have a bad habbit of mistaking their domestic circumstances with global events.   Canadian media tends to repeat what they hear on American TV.

If the US did not have a law prohibiting export of unrefined crude, the US would likely have its "surplus" sucked up by international consumers.

The US is now a large oil producer, but it still needs to import about half its needs...........some comes from Canada (at about the lowest global price around because Canadians have been blocked by American influence from buidling the export facilities needed to access the Global Brent world), but some is priced at Brent numbers.  

If you were a refinery in the US, would you rather buy WTI at $51 per bbl or brent at $61?    In many cases, geography and pipelines don't allow the choice, but where it does, the US WTI will be bought first.

The gist of this ramble is the oil price decline was caused by international demand/supply adjustment........which was reflected in the price of Brent............as Brent fell, it dragged down WTI.    Brent fell until it was at par with WTI.     Then a funny thing happenned, Brent recovered...........and it did so in US$ at a time when the US$ was globally strengthening.....ie Brent at US$60 today is like US$70 a few months ago.     To me, this means the demand/supply oil balance everywhere exept the US is no longer in surplus.