Some interesting developements today. There were two rumors that caught my ear. One, the Asians were in buying North Sea grades all over the place. The N.Sea 80k tons were flying. Then a blurb crossed the wires about the Iranians selling 9 million barrels of their floating barrels to Japan. Couldn't confirm it, but heard it crossed the wire. You can never tell with these stories though. Sometimes it's just some limp ass reporter trying to make a story. We'll have to see if their's follow through on Monday. Yeah, I know what you're thinking WTI closed down. .14 Who cares. It's going higher before this is over. We haven't seen the pop that I'm waiting for in the freights yet but I smell it around the corner. It will be noticeable. We may be close as the avails must now start to be nailed down firm for Dec and people have to look hard at Jan. It's gonna be a fun time for sure. Also, here's another "all's well article from the IEA this time. My comments in (parentheses).

Here's some stories that make me think that it's going higher. For educational and panic measuring purposes only: > WASHINGTON, Nov 4 (Reuters) - World crude oil deliveries > should increase by an extra 17 million barrels during the > fourth quarter as refineries and other end-users stock up in > case Year 2000 (Y2K) computer problems disrupt oil supplies, a > U.S. government energy agency said on Thursday. (where in God's name did they get this number? I can only imagine. Some analyst sat down and said to himself, hmm. What kind of number would appear plausible but not doomeristically crazy. Hmmm....how bout two days worth of imports. Yeah, perfect. Enough for them to think it's real, but not enough to worry about, 17 million bbls.) The U.S. Energy Information Administration said about > 200,000 barrels per day of oil that would normally be supplied > in the first quarter of next year will be made available during > the current quarter in order to prepare for Y2K. (by whom? where in God's name did they get this crap. And what exactly does it mean. This is really a stupid article. As if there's some central warehouse that distributes extra oil in times of need. Duh.) > Many computers have software programs that could read the > year 2000 as 1900, causing computer systems to make mistakes or > shut down. (Ohhhh....now i get it) > The EIA, which is the statistical arm of the Energy > Department, said it expects some small disruptions in global > oil supplies due to Y2K computer problems, which should be > fixed over January and have no long-term effect on supplies. (except for the two days worth of imports) > Because of expected above-normal oil inventory drawdowns in > the current quarter, the EIA forecasts a rise in world oil > prices in November and December to $23.50 a barrel, with prices > remaining at that level through January and then falling after > the global oil supply situation eases. (if these guys knew what they were doing, they would be trading, not sitting in some lameass think tank) > Last month, industry officials said oil companies plan > extra gasoline shipments to service stations in December just > in case drivers fill their car tanks due to Y2K fears. (this is mostly true) > There is normally a 30-day supply of gasoline available, > but oil firms are planning an extra seven-day supply of fuel > shipments to handle expected higher demand, according to Ron > Quiggins, chairman of the American Petroleum Institute's Y2K > task force. (this on the other hand is complete shite. Unbelievable shite from Ron Q. proving that bad quotes never die, they just keep on coming back, sorta like syphillis.)

Iran charters Sea Giant ULCC for floating storage LONDON, Nov 3 (Reuters) - Iran has chartered a 555,000 dwt ULCC for floating oil storage to replace two VLCCs, tanker brokers said on Monday. The 1979-built Sea Giant would be delivered in mid November for stationing off Kharg Island to replace the VLCCs Mountain Cloud (285,000 dwt) and Union (275,000 dwt) which would be redelivered, brokers said. The Sea Giant has been taken by the National Iranian Tanker Company (NITC) at around $15,750 a day on a monthly basis for up to 150 days, they said. After chartering a number of vessels over the summer NITC now has a fleet of 14 vessels, four of which are its own, with a combined storage capacity of around 5.24 million tonnes. Iran is storing oil to comply with OPEC production cutbacks because it is difficult for it to reduce production at its ageing oilfields, according to analysts. At an average charter rate of about $15,000 on the 29 million barrels stored in ten hired ships, Iran would be incurring storage costs of about $1.5 million a day. The Union was redelivered at the beginning of this month and the Mountain Cloud would be redelivered on November 15. Iran's floating storage is currently as follows in deadweight tonne (dwt) capacity: Hired by NITC Owned by NITC Marine Pacific 405 Dona 372 Somerset 274 Alamoots 317 Stavros 357 Khark 231 Marine Atlantic 405 Koohrang 284 Kapetan Michalis 516 Kapetan Giorgis 457 Jahre Ventura 393 Arcadia 337 Metrotank 339 Sea Giant 555 Total assuming tankers filled to 95 percent capacity -- 5.0 million tonnes or 37.0 million barrels. ((Paul Berrill, Reuters Shipping News +44 171 542 4087 fax +44 171 542 4453)) > > Singapore (Platt's)--4Nov1999/1017 pm EST/317 GMT > Taiwan's Chinese Petroleum Corp is seeking 92 RON reformate in > addition to its usual 95 RON unleaded reformate in its buy > tender because of new government rules on minimum fuel stocks to > be maintained on possible Y2K glitches, company sources said > Friday. CPC earlier this week issued a buy tender for at least > 250,000 bbl of 95 RON unleaded reformate and a combination cargo > of 92 RON and 95 RON unleaded reformate. "CPC's stocks for 92 > RON are currently low and these will have to be built up in line > with government requirements," said the source, but declined to > give the minimum inventory levels required, or CPC's current > stocks. The 250,000 bbl combination cargo will comprise half of > each grade. Cargoes are set to arrive Dec 1-25. The tender will > close Nov 8, with validity for two days. >

PS if your looking to conver tons to bbls. multiply by 7.39 rough est.

-- Gordon (g_gecko_69@hotmail.com), November 05, 1999

Answers

Very interesting reading Gordon, thanks.

Keep 'em coming.

-- snooze button (alarmclock_2000@yahoo.com), November 05, 1999.

Gordon, So what dose all this mean? I'm having a hard time trying to figure out how bad things are going to be in the oil industry. You may have answered this already but, what percent of oil shortages do you estimate we will be short? DD1 estimates anywhare from 65% to 70% shortages. Is she or could she for the most part be correct? And at what percentage would you say would be catastrophic impact on the U.S.? By the way I always look for your post's. Very informative, thank you.

-- Gambler (scotanna@arosnet.com), November 05, 1999.

The total percentage of disruptions that can reliably be predicted is a troubling issue to say the least. I have been batting it around for some time now. The difficulty of determining an exact percentage is a showstopper. However, I am willing to hazard some guesses, albeit handicapped by the enormity of the oil industry complexity and geography. At the current time, I am willing to state publicly that I'm predicting a minimum of 10% of the world's crude oil production will be taken out by Y2K for at least a month, probably two. That equates to 7.4 million bbls per day approx. That is my BEST CASE scenario for Y2K. In other words, I would be quite happy to see that happen and I give it a 70-80% probability of happening. Please note that I said 70-80 percent, not one hundred. Anyone that offers you estimates that are concrete is lying. Anyone who tells you they are certain of the outcomes of Y2K is by default lying.

My worst case scenario has us losing 30% or more of the world's production. This scenario has some pretty scary implications. That would leave us 20 million barrels per day short. I give this a 10-20% chance of happening.

There are many caveats and what I call accelerators to this problem. They will be determinants of the final oil outcome as much as the problems which occur at the platform.

They are: Utilities, Gas (natural), Refining, Pipelines, Telecommunications and Banking

Any one of these issues can have an impact on the supply demand balance. For example, if we lose 10% of production and 5% of refining worldwide, and the issues are confined to say Russia and Venezueala, then the net loss would be horrific in those countries, but not so bad here. In other words in that scenario, the Saudi's (and see here's where we have to assume firstly that they're ok, if they're not, then FUBAR) would bring on some of the millions of bbls in spare capacity that is lying around over there to fill the gap. On the other hand, if banking and telecomms go, but only 3% of production disappears, it really won't matter. Crude oil is a highly capital intensive operation, as is refining etc. It can't survive long without it's lifeblood, money. If on the other hand, the Vens and the Saudi's are FUBAR for a month or to, and some other problems crop up in domestic pipes and utilities, Mad Max will look like Lassie Come's Home in some theaters where supply is already constrained.

I hope I've made your day with this happy analysis. I look at my little daughter every time I think of it and I say to myself, no matter what I'm taking my family all the way through this. Somehow, someway.

-- Gordon (g_gecko_69@hotmail.com), November 06, 1999.

Gordon, Thank you.

-- Gambler (scotann@arosnet.com), November 06, 1999.