Aren't a lot of people's lives changing for the worse? (warning .pdf!)

Update [2005-9-27 1:41:53 by Prof. Goose]:Here's today's document (change the number in the date for tomorrow...

Browse through this interesting pdf from the DOE that the MSM seems to completely miss the point lays out explicitly refinery damage, oil shut in, and other interesting energy stats (found this at

100% of GOM oil out (and look at the percentage figures for the past month below), 20% of the country's refineries down, NG Henry Hub down, lots of lives displaced, things feeling a nutshell, virtually 3/4 of the script for the 'Oil Storm' is playing out, and prices go down...must be one hell of a recession looming one wonders...

just to make the point:

Date         Percent of GOM Oil Shut-in Percent of GOM Gas Shut-in
August 30    95.20                      87.99
August 31    91.45                      83.46
September 1  90.43                      78.66
September 2  88.53                      72.48
September 3  78.98                      57.80
September 4  No data reported No data reported
September 5  69.57                      54.13
September 6  58.02                      41.06
September 7  57.37                      40.36
September 8  60.12                      40.20
September 9  59.88                      38.29
September 10 59.84                      38.21
September 11 No data reported No data reported
September 12 57.38                      37.84
September 13 56.45                      37.20
September 14 56.25                      35.18
September 15 56.14                      34.11
September 16 56.06                      33.84
September 19 55.84                      33.75
September 20 58.49                      34.82
September 21 73.16                      47.13
September 22 91.93                      65.95
September 23 99.13                      72.04
September 24 100                        74.88
September 25 100                        80.47
Update [2005-9-27 0:28:18 by Prof. Goose]:September 26 100                        78.43

Update [2005-9-28 0:28:18 by Prof. Goose]:September 27 100                        78.56

I'll say this the easy way: WTF?

(perspective: The GOMEX produces 1.5 MBOPD (oil) and 10 BCFPD (NG). Overall US consumption is 20ish MBOPD for oil and 62.4 BCFPD for NG. (thanks marek))

Something is terribly awry. Technorati Tags: , , , ,

The Bush admin is extremely concerned about high gasoline prices.  Polling data shows that expensive gasoline makes Bush  more unpopular, to a degree unmatched even by the Iraq mess.  Karl Rove is acutely aware of this, and the admin is doing whatever it can - straight or devious - to keep prices down, with some success.  (e.g. loaning/selling out of the SPR)  In an environment where crude is soaring on speculation, and geopolitics can make it spike higher, short sellers had been reluctant to take any short positions.  

But when it becomes obvious that the admin has declared war on  all factors leading to high gasoline prices, including the price of crude feedstock, this emboldens the short sellers.  I think this is why crude is now cheaper than it was before Katrina, in spite of reduced supply.

On 9/6, Rebecca Watson of Interior Dept. also predicted (to Congress!) a fast recovery of GoM production, barring problems with shore facilities, when IMO she didn't have enough data to make such a claim, which implied no undersea pipeline problems.  Another manuever to squelch speculation & rising crude prices...  

This is a speculative comment, for which I have no proof that it is occurring. But say, for example, that the government sold gasoline futures contracts short (that is it did not have the gasoline to deliver).  It would have to make delivery or buy those contracts back.  Since it doesn't have the gasoline to deliver, it would have to buy the contracts back by the end of the month - this month it would be September 30.  

Last month we had an enormous rise the last few days of month in gasoline futures.  Let's see if we have another one this month.

Charles - nice to always question the powers that be, but I think that a highly implausible explanation. The futures went up at the end of last month because thats when the hurricane was coming. If the govt wanted to manipulate markets to give confidence theyd get more bang for buck in SP 500 futures.

If there is 20% less refinery capacity and we refine the 20ish million barrels per day that we use, and 100% of GOM production is shut in, and this is 1.5 mbd. 20% of 20 is 4 million barrels of refining capacity offline so we would in theory have plenty of 'oil' and not enough refinery. This would be a clever explanation for why crude is down overnight except for the fact that unleaded gas is down as well....

Charles, you could be right.  Your prediction of a squeeze prior to contract close would apply regardless of the short seller's identity.

I also noticed that there was quite an uptick in crude just about when petroleum inventory data came out last Wednesday.  Reality can be an ugly shock for the shorts that depend on fear & price momentum.  If that's a trend, low crude price could be quite "short-lived".  The next few Wednesdays should be interesting.

Also, easy-to-restart offshore stuff got fixed in 8 days post-Ivan, 9-10 days post Katrina, and ?? days after Rita. Afterwards, MMS figures for decrease of shut-in oil & gas went flat, eg almost zero rate of production recovery, for oil, for about a month (post-Ivan) and 14 days (post-Katrina).  In latter case, recovery was halted by Rita, and likely would have taken longer than from Ivan, absent Rita.

Watching MMS shut-in data for next few days & weeks should also be quite interesting.

That rise was due to Katrina approaching, but on the Friday before, there was selling pressure... on the expectation that Katrina wouldn't be bad. Clearly that was wrong... just like the reactionary push higher Rita caused almost a  week before it hit!

There's another flaw in your thesis... energy futures contracts terminate three days before the end of the expiry month, but there is very low volume in the expiring contract (generally less than 1/10th normal) starting from a week prior to termination.

If one wanted to manipulate prices that mattered, you'd do it in the following month contract.

This is a speculative comment, for which I have no proof that it is occurring. But say, for example, that the government sold gasoline futures contracts short (that is it did not have the gasoline to deliver).  It would have to make delivery or buy those contracts back.

There was little reason for the Government to sell short unless they believe prices are headed lower, and except for a couple of down days in mid August, there was precious little obvious selling pressure in the commodity. A couple of down days do not give one license to short with abandon... those that do generally end up being 'fuel' for  another move... up!

I do remember the time ... roughly in mid-August there were technical setups on the charts that suggested a potential top was forming, but it was never confirmed and the trend remained intact.

(a point of clarification - in my comment above I speak to the NG contract termination process; my poor choice of words 'energy futures contracts expire' implies that all energy contracts are on the same schedule, and they certainly are not.

Crude terminates not three days before the end of the contract month but three business days prior to the 25th day of the month before the delivery month, unless its a non business day in which case... well, you get the picture.

the main flaw with your argument, mw, is that you think the govt is expecting to make a profit by selling short. they are not. they are only trying to stave off panic. they will take a short term loss to calm the markets.

see charles' that comment that i quoted lower in this thread.

the govt is willing to risk exposure of its control of markets to calm the markets. they expect that most traders have already figured out that the whole lashup is a pig-in-a-poke, and will play along.

Actually I never assume the government is in anything for a direct profit motive. ;-)

I suppose the govt could lean on the sell button and drive prices down for awhile, but I don't suspect them of it at this time. The IEA and releases from SPR and various noises from OPEC and -egads- a friendly word from Hugo Chavez or two could do more to bring down price in a lasting way.

Leaning on the sell key for a day or two merely gets others in the hert short too, and unless a seller with no profit motive (to use your thesis) stays in there selling, forever, eventually price will stop going down and those who tagged along for the ride start to cover... et voila, a move up is born. Eventually all things that go down, come up and vice versa.

This is not to say that an organized scheme to sell short the market could not be done, but it would leave a paper trail that eventually would become noticable. 1.5 billion in crude oil is consumed each and every day in the US - it wouldn't be long before a large hole in the "ESF" or other such funds were noted.

It would be nice if we could rely upon the government of the day to live up to its ideological underpinnings, all of the time, for then they'd be predictable - but lets just, for now at least, assume that the free-marketeers are still in control (Energy Secy Bodman certainly fits the mold by all appearances) -- mucking about with the price of oil here goes quite contrary to such folks.

The other not so small consideration we should make here is how oil companies, a well represented lobby group in every national capital, would react to such manipulation.

Nope, I'm not a big fan of price manipulation theories, not at present. I do believe there is a concerted effort to talk up the situation, and suspect its only because the reality is about what we expect - its even worse than it appears.

A couple days up or down is irrelevant in the big picture.

"the govt is willing to risk exposure of its control of markets to calm the markets. they expect that most traders have already figured out that the whole lashup is a pig-in-a-poke, and will play along."

Proof, please.

(I'm not saying you're wrong, I'm not saying you're right.  But extraordinary claims require extrordinary proof.  I am a strict empiricist; show me proof and I'll agree with you 100%.)

yeah, i dont have any proof, but it fits in with the moral climate of the day and it makes sense.

look, i'm just as hopeful as anyone that we can get out of this mess without killing millions of people, using ethical, truthful means to do so. but the deeper i dig, the more ugliness i find. sometimes i have a hunch, and have to quit digging for a couple days to drink beer and let the confirmation of that hunch settle in before i can go back to digging.

i suppose i am being naive to expect there are any rules left at all when an empire is fighting for its life.

that doesn't fly here wadosy.
Thanks all for considering my roughly outlined hypothetical situation concerning the possible manipulation of energy futures by the government.  Some good points above, even from those I do not entirely agree with.

Kunstler, in today's missive, also suspects government intervention:

Like I previously implied, the energy markets won't be fooled my short term manipulation.  Let's see how these October energy contracts settle in the next few days.  No I don't have nay proof, but wild last minute fluctuations in the closing days of a contract may indirectly reveal what can not be proved.

If they intervened on Friday and Sunday, where then, pray tell, are they today?

NG, CL both rallying quite strongly, setting up the stage for what is known as the "piercing line" candle reversal pattern at a point where price could be said to have found "support" (thus implying the ability to rally higher).

Sometimes Occam's law makes sense.

Given two equally predictive theories, choose the simplest.

In this case, the simplest is that regular traders are the principle drivers of energy markets whether energy markets go up or down.

I've mentioned a number of times over the weekend that my expectation was for a short covering rally if not a "common sense" rally ... and here it is.

Long energy, short broader markets I remain.

Guess what?  There were wild last minute price changes as October natural gas contracts expired today.  What changed from yesterday?  The NYMEX did extend its force majeure to October contracts.  So you may want to believe today's skyrocketing NG prices reacted to that news, but its seems more like short covering of a very big trader to me.

If we don't hear of any major trading firm with losses, then who has the deep pockets to lose so much???

How about instead of getting a hunch, stopping digging, and then going on with (self) confirmation, maybe dig to try and see if the hunch is likely to be right with available evidence (someone else having the hunch isn't evidence). Some hunches might not be able to be confirmed right, or confirmed wrong, and those you can hang on to. But hang on to them as hunches; don't let them become confirmed in your head, and don't talk about them without specifically labeling to the world that this isn't fact based.
so far, coffee17, you have given no indication you are able to refute any of the hunches i've confirmed.

in my short time in this forum, i have posted maybe a billion urls. nobody has been able to refute them. if you object to a position of mine, you are certainly encouraged to post urls that contradict mine.

maybe we'd both learn something, on the off chance that anybody wants to learn anything that gores an ox or two, or threatens a sacred cow, or mentions a prominent but ignored elephant in the room.

that's the biggest problem with this whole operation: it was conceived by armchair warriors whose arrogance and hubris are much greater than their wisdom. they figured they could pull it off, and they figured they could cover it all up, and they figured they had enough juice to bull on through no matter what. the official conspiracy theory will hold, by the grace of god, the washington post and the new york times.

the problem i have to think about is this: what caused such desperate, reckless, foolhardy behavior? is peak oil much closer than we think? or can we simply write the whole thing off to egomania...?

i wish i knew. but the bones of it are out there, all you have to do is dig.

Right on!  Those who are capable of lying to the U.N. to  start a war, are capable of manipulating the markets to keep it going.  

The least we can do in an open forum is to question, and to respect those who ask.

Diamond Offshore Drilling, reported that the drilling rigs Ocean Saratoga and Ocean Star broke free from their moorings as Hurricane Rita passed west of both semisubmersibles. Both of the units and their well operations were secured and personnel were evacuated well in advance of the storm.

Rowan Companies reports that, in the aftermath of Hurricane Rita, its jackup rigs Rowan Odessa and Rowan Halifax were not at their pre-storm locations. In addition, the hull of the jackup Rowan Louisiana apparently detached from its legs and is aground offshore Louisiana.

Kerr-McGee reports that an initial flyover of its Gulf of Mexico facilities indicates all of its major operated facilities are intact, with no structural damage from Hurricane Rita observed.

Initial assessments have revealed that the Typhoon tension leg platform (located in 2,000 feet of water in the Green Canyon area approximately 165 miles south-southwest of New Orleans) was severed from its mooring and suffered severe damage during the storm.

Gulf Coast Hurricane Situation Report - Sept 26 (PDF)
The U.S. natural gas consumption is approximately 62.4 bcf per day, so we have 16% of our consumption shut in.
NYMEX light sweet went below $63 today (Sunday), a level it was last at in late July/early August. People here and elsewhere have mentioned lower crude as a reaction/over-reaction to the earlier over-reaction that tok it up $4+ a barrel in one day. But it is now below the level it sold at before 2 hurricanes and all the shut in production mentioned at the start of the post.

That makes no sense unless you believe usage will drop by more than the amount that's shut in. (Even if that is the case, then lower prices could quickly inspire greater use.)

Maybe 2 more hurricanes and we'll get below $60 a barrel?

Under 62 for more than a day or two and then we can start to make a case for a trend change.

At the moment, provided price generally holds the 63 level (CLX5), all we can say with certainty is that the longer term up trend is at best (depending on perspective) in a pause.

Should 63 hold and price start to rise again in the coming weeks or months, the 62/63 to 71 area level will become the upper most trading range in the commodity. I can't speculate here and now whether the upper end will be again tested this year, but while 62/63 holds, it remains a distinct possibility.

Natural gas is in a more bullish position - so far its managed to hold above its last major trading range - provided 11.50 generally holds up, its still in an uptrend technically, having barely paused... so far.

Bottom line: Crude is in "chop" but supported > 62; NG is not in chop, but is in a downswing that has however not invalidated its still intact uptrend.

Price movements up or down all in themselves are less meaningful than trends.

This is purely a guess, but look at the table PG posted, and see how quickly the numbers improved after Katrina.  My hunch is that many of the traders lack a deep understanding about how the energy industry works, and they're taking that recovery as a sign that things will again improve quickly.

Traders tend to fear uncertainty so much that they'll latch onto just about any empirical information and read too much into it.  Right now, there's an incredible amount of uncertainty about the energy market, and the numbers in that report are one of the few sources of (seemingly) reliable facts.

I have no way of judging if they're right or wildly wrong in their collective guess that Rita was not a big deal, and I don't mean to imply that I've formed an opinion or that I agree or disagree with them.

Right now, I'm reduced to hoping that Rita was the last major storm the Gulf Coast will see this year, and that the energy supplies hold up this winter.  I'm not sure which of those wishes needs the most help from Lady Luck right now...


Glad you posted.  There has been MUCH discussion at TOD in the past about how markets are rational, and over time, in agregate, fine tune prices and modulate supply and demand.  

This market is NOT behaving rational to me.

People with little knowledge are moving the price all over the place.  How is this supposed to feedback into the real world of supply and demand?  

The markets are saying there is over supply, when we have concrete numbers that supply has been reduced.  Even assuming this will recover over time the market should be raising prices now so they can drop in the future.  The only other explanation is that prices will drop further when supply starts to recover.  I am assuming demand is constant because there is no indication that demand (at consumer end) has dropped.  And we need a high price signal now because we want to dampen consumption - the markets are supposed to do this because our government (under this administration)  doesn't believe in calling for conservation

This is supposed to be a world market.  Even if U.S. refineries are down (lower need for crude - loss of demand) the rest of the world should be refining at maximum and buying crude because the huge U.S. market is going to need the refined products.  As Prof. G. says if the markets are already pricing in a reduction in demand that is a LOT of demand destruction occuring right now.  Or the rest of the world can't help us.

I do not see how the market is actually linked to the real world of consumed refined energy and cost of a scarce raw material to make these goods.

I've studied energy and economics since I was in college (not quite) during the Lincoln Administration, and I sure can't figure it out.  The prices on the markets as I type this don't seem to line up with the damage/shut-in reports and the level of uncertainty we're seeing.

I'm not convinced that anyone (like Bush and his buddies) is manipulating the market, but given what's at stake, I sure wouldn't rule it out, either.

I'm hoping that we get a lot more hard information and a more "normal" market response in the next day or two, but that might be my optimism getting the better of me again.

I think the biggest problem at the moment is a shortage of reliable information which compounds the fear that is present in the markets now. Much of the inventory and consumption data after Katrina seemed downright contradictory to me, and I am sure we will be in for another bout of the same phenomenon with Rita. Assuming the situation on the Gulf Coast stabilizes  (and nothing else happens in the world to shock either supply or demand) I would say it will be around Thanksgiving before the market can truly be said to be acting on reliable information again. Until then, it may be more similar to shooting craps than investing.
And I had thought it was the Coolidge Administration! ;)

Having read this post and the one above, Lou, I would put forward these factors:
  • Everybody is in a let's not panic mode
  • Gasoline demand is down (September/October lull)
  • No one knows the real damage yet
  • New releases from the SPR are coming
Still, as PG said its a WTF situation so its a matter of waiting for the market "correction". I am constantly amazed by the lack of foresight reflected in the daily prices. What worries me is that at some "tipping point" in the near future there will be a panic.
I think Dave's assessment is pretty accurate. It is my general observation that markets of all types tend to react slowly to bad news and then panic ("correction" being the more politically correct description). You could see that in stocks in the late 90s when P/E ratios were sky-high and everyone knew it was unsustainable, you can see it in housing now, and I believe it is also happening in oil supply.

Markets don't want to believe that their fantasies can't be maintained, and when the emperor is revealed to be naked, there is inevitably a stampede for the door.

Actually more often than not, markets react quickly to bad news (panic) and then slowly come back to their senses

Case in point: Hurricane Rita.

If you look at energy prices and Rita from the wrong perspective you'll place the panic button at the wrong inflection point.

Panic did not hit the market on Friday and Sunday, as many here seem to feel... no, panic hit the market early last week when energy opened up strong and rose in a day of historic proportion.

Then, whatever limited information drifted in and prices ground lower. I would call that the unwinding of panic; if one was long the sector and didn't have nerves of steel, it would be easy to feel like the sell off was the panic spot but in fact its the other way around.

Panic buying is always more entertaining to watch, because fast declines are commonplace...price almost always falls faster than it rises, which is what makes a day like today somewhat unusual. A quick trip up with very little in the way of intraday retracements = "panic" buying.

Will it last? No idea, but we shall find out soon.

Will it last? No idea, but we shall find out soon.

Ahhh, someone who's trading prediction I can truly respect!  Indeed we shall...


The market is rational but is also fearful... but one needs to fully appreciate that fear works both ways...

... short sellers believing a market has topped out
... long holders selling positions for similar reasons
... buyers holding off believing prices are coming lower

Last week we saw the market jam up big when nothing was known about Rita's impact. That caused

... buyers panicing, believing prices would be much higher in the days and weeks to come
... short sellers panicing (turning into buyers to cover recent shorts done prior (and there were many)) for similar reasons
... long holders NOT selling positions, believing prices are headed lower

These camps trade positions all the time, some acting on gut, some acting on marginal, good, or excellent information and understanding.

One also has to realize these "investments" are highly leveraged. You can have conviction and still be forced to buy or sell (go long, short, cover, sell) simply because the rest of the crowd doesn't share your views or hasn't got your information.

Being "right" doesn't mean you make money, unless you are right, at the correct time.

Its rational alright... but also packed with fear, risk, greed, quants and pocket protector types, you name it... emotion.

No different from any other high stakes market.

I understand your statements about shorts and longs and trends.

But if it is not connected to real world data, what is driving the fear of being on the wrong end of a trend?

My point is that if they can get it this wrong in the short term, on supply distruction, how the heck is the market going to respond correctly when demand exceeds supply (or tries to) under peak oil when the signals are not going to be nearly as clear?

While looking for "rational" factors - what most would call fundamental factors for analysis - to explain why price is what it is and what direction it is headed in, almost everyone forgets one basic truth:

Price, itself, is a fundamental factor.

Whether someone is willing, or even able, to hold a position open has a lot to do with price. When a highly leveraged position is running against you, at some point you break down and bail, or the would-be futures trader becomes an ex-trader. Even the big houses have their limits. A 10% loss from top of market means a lot more in an instrument which is highly leveraged.

Price moves to extremes all the time without benefit of additional information to drive it, but eventually price drifts back to the norm. Consider Friday and today's trade as an extreme. Unless the news becomes awfully rosy, we'll very likely see price recover at least 1/2 of the cumulative losses over the past few days.

Whether someone is willing, or even able, to hold a position open has a lot to do with price. When a highly leveraged position is running against you, at some point you break down and bail, or the would-be futures trader becomes an ex-trader.

As someone who's been gritting their teeth holding their long positions on gasoline, saying 5%, let alone 10% or 15% lost refining has to mean SOMETHING - I can testify to mw's statement.  I came within a whisker of bailing today, and if I had, I would have just exagerated (in my small way) the (now past?) downward trend.

<from the practical into the arcane...>

Short term, it's chaotic, and price seems fundamental as a postive feedback in establishing the flutualtions around and away from the chaotic attractors; longer term, price in and of itself becomes less significant perhaps, and the trends, the 'deeper' fundamentals take over - however, chaos still reigns, and violent fluctuations eclipsing what has gone before, (and making paupers of the likes of me perhaps) can still be expected based on price alone.


well, let's see here, all you free marketeers..... (and why am i reminded of mouseketeers?)

 looking at this from a long-term, big picture, dick cheney, likud lunatic, mad scientific economist, psychohistorical kinda way......

what if pre-hurricane energy prices had already been boosted way out of free market whack to start socking money away for the estimated 20 or 30 trillion necessary for the hydrogen conversion?

that would give us plenty of slop to absorb temp setbacks like the hurricanes.

remember that senior whitehouse advisor's remark: "we're an empire now, and when we act, we create our own reality."

Whatever it is that makes prices being so low right now, the real question is: How long can it last?

Won't these little things called "facts" catch up with the market and make prices jump, or is it possible for them to stay low despite all the supply problems?

ve-e-e-e-ry interesting stuff posted by charles mackay on another thread: exchange stabilization fund

comments from charles:

'The secret Exchange Stablization Fund, jointly run by the Fed and Treasury, has $50 billion in assets.  The Fed even voted itself the ability to borrow money to buy another $25 billion in foreign exchange if it wants.

Selling short a few energy futures for a loss wouldn't even put the smallest dent in the ESF balance sheet.

I think you guys need to think outside the square, or rather, outside the US.

As you all know, the US is usually one quarter of all oil consumed globally.  But if internal US consumption is reduced because of shortages or voluntary conservation by US consumers, then the net imports into the US will be down.  Also, refinery outages will mean that the US will not be able to take as much crude from overseas.

All in all this would result in more oil for the rest of the world, easing demand pressures and the fears associated with the demand/supply mismatch.

My guess is that when US consumption is back to normal, the price of crude will fly because we will be in an even worse position (lower SPR, and other country reserves) than we were before the hurricanes hit.

What do you think?

Hasn't there been some recent demand destruction? Nigeria? Nicaragua?

How about trading volumes, both contracts and on the spot market? Are they perhaps down right now?

It could be that some traders have decided to hang back for a day or two before they decide which way to go. I know I would want to do that in their place if at all possible.

It's gotta be pretty scary for the traders right now, with so much guessing and uncertainty about the GOM data. Then we have special shipments of refined products coming in... and the SPR... Very confusing.

I suggest refraining from any big conclusions for another few days.

I'm not a fan of conspiracy theories. However, I think it is not difficult to reasonably justify market intereference in times of disaster and crisis. IMO, if market moves interfere with the smooth function of society, there should be government intervention, even if they want to maintain the rhetoric and ideology of "free markets". The most interesting info i've come across for market interference lately is:

I'm not sure if I buy their argument in total, or believe all of their sources (including them), but it is an interesting read if you tend, like I do, not to believe in conspiracy theories. For those of you requesting evidence and sources, this should give you a good link to inquire further as the report links to numerous press and fed documents.

Does this explain why for the first time since WWII the Dow is still lower than it was over 5 years ago?
Hm... this claims that the 1987 recovery was kicked off by market manipulation (specifically, someone bought enough Major Market Index futures to raise the index). But the Plunge Protection Team wasn't created until later. And the 1987 crash presumably came as a surprise to everyone.

So we're asked to accept that in one day, the government--with no infrastructure in place yet, and no funding allocated, and confronted with an unexpected crisis of an unfamiliar kind--figured out what to do, and did it, and it worked.

If they could do that in a day, why did they send 500 buses to New Orleans... a month late?

Price of crude is up again (+$0.51 @ 1:45 PM), I don't know why exactly. Maybe traders need time to crunch the numbers in particular the loss of refining capacity. Last year, hurricane Ivan triggered a "super-spike" up to $57.0 until election day in the US (and the SPR has also been used). I don't understand why this is not the case for Katrina which was more damaging than Ivan. It seems that there is a lot of resistance to go beyond $70.
Re: "It seems that there is a lot of resistance to go beyond $70"

Good point. It seems like $70 is some kind of magic number beyond which prices hikes are felt to be unconstrained. After Katrina, during that brief interval when one market hit that number, traders started backpedaling like crazy -- though it didn't look justified at the time -- just like now.
price of crude actually ended the day up a buck (i think).  i believe this is another case of traders over-reacting to news that refineries will down longer than expected and a lot of oil rigs are down too.  this is a far different tune from sunday when people are saying the oil industry dodged a bullet!  so i think it's a short-term over-reaction to somewhat bullish news.

in the medium short term, there exists a refinery bottleneck and a coming up release of the SPR.  these forces will fundamentally drop the price of crude.  just like post-Katrina, the price of crude dropped from $70-$63.  we will see something similar but don't expect crude to traverse below $60, more hurricane is on the way.

would like to hear mw's analysis!  love the discussion on the energy futures.

Numbers for Monday, 09/26:

Today’s shut-in oil production is 1,527,630 BOPD.  This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 7.843 BCFPD.  This shut-in gas production is equivalent to 78.43% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-9/26/05 is 34,811,397 bbls, which is equivalent to 6.358 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-9/26/05 is 163.869 BCF, which is equivalent to 4.490% of the yearly production of gas in the GOM (approximately 3.65 TCF).

Our beloved leader weighs in on energy problems today.

Remarks by President Bush on Energy Supply (transcript)
Pity no-one asked him about peak oil...
Oh, i think our leader knows more than we will ever know about peak oil.

then you will see why we are in Iraq, and why our immigration problem will never get resolved.
I am not defending him, i am only trying to understand why things are as they are.

The MMS numbers for the 27th are the same, except shut-in NG went up slightly.

So all of the reports of "minimal damage" mean what, exactly?  The storm hit Friday night / Saturday.

Link to report for 27th

Interesting to note that the SPR information has been removed - probably just a policy issue and nothing more significant than that.