Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
not surprising.  Typically cold weather production systems like those in the North Sea do their maintenance in June/July.  Therefore a lull in production then.

Then we had the hurricanes that knocked 1-2% off the total.  

What is interesting is that even with the 1.5 MM off the market in the USGC, OPEC didn't produce as much as in May and the price still fell.   Demand destruction is real.

by HiD on Tue Nov 22nd, 2005 at 04:45:26 AM EST
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  1. Very amateurish question. Could the demand destruction have happened at the same place as the supply destruction? I.e., could the destruction of New Orleans and environs have meant as big a reduction in US car traffic etc. as the shut-in production?

  2. I'm not familiar with US usage pattens, but I recall buzzwords like "summer driving season" and "winter heating season". Could this have played a role too? Won't real problems start now if winter turns colder? (Tough long-term predictions I read somewhere, possibly Wunderground, say this winter will be mild globally.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Nov 22nd, 2005 at 05:22:11 AM EST
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 Sept-Nov is a low demand period as we are between gas and heat seasons.  A refining system well stretched in summer/winter catches it's breath and stockpiles for winter.  That's probably the main effect as to why margins are dropping like a stone, esp. on mogas.  There is enough slack in the system in this period to cover for the 4 downed refineries. (the biggest is back)

NO + the surrounding areas are only about 2 million people.  That's less than 1% of US population.  We've already seen many of them were too poor to have cars and use much fuel.  Also just because people were displaced doesn't mean less driving a priori.  Where ever they went, they'll still be driving once they find work.

As for real problems in winter, I doubt it unless we have a terrible winter (which always causes price spikes).  We had 131 million bbls of heat in storage when Katrina hit.  That was what we had in Dec the year before.  Mogas season had been good and margins stayed up on heat as well so refiners made lots both as a byproduct of mogas production and just because they could hedge in a nice margin.  Nat Gas is more worrisome although stocks there are reaching reasonable levels again.

by HiD on Tue Nov 22nd, 2005 at 02:39:41 PM EST
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I am not sure you can conclude that there was demand destruction. There was oil demand destruction becuase the refineries were offline, and gasoline supply was provided by the European emergency storage. That took care of the last weeks of the driving season.

Now what will happen this winter is still an open question.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Nov 22nd, 2005 at 05:56:20 AM EST
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I would hope that, if for any reason the EU finds itself with a shortage of crude oil, the US will open its oil reserves for us like the EU-mandated gasoline reserves were tapped to help the US.

Idle hopes, I know.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Nov 22nd, 2005 at 06:02:26 AM EST
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