An analyst at the National Australia Bank said he was targeting $88 if crude prices could break the resistance ceiling at $83. Crude prices closed on Wednesday at $82.93 and just 25-cents below the 14-month settlement high reached in January.
Gordon Manning said there was far greater risk to the upside if resistance breaks. Manning said oil was holding support despite numerous negative news items.
Obviously anyone and be an accurate predictor of the price if they qualify the predictions correctly. Saying, "if support holds and resistance at $83 breaks we could see $88" does not mean we are going to $88. The two qualifications were support holding and resistance breaking. If it does run to $88 he will brag he called it correctly. If resistance holds and support breaks then he called that correctly as well.
I wrote on Iran last night and how they were going to magically produce another 14 million liters per day of gasoline to fill existing demand. Today they took a step to reduce that demand. They currently have an 80 liter per vehicle per month subsidy. A consumer pays only the equivalent of 10-cents per liter for the first 80 liters. Any amount over that is sold for 40-cents per liter. That is still a bargain price since Iran has to pay more than that for the gasoline it imports. Iran has to import 35% of its current usage of 65 million liters per day.
Today Iran announced it was cutting that subsidy to 60 liters per vehicle. The general of Iran's fuel management committee told agencies the rationing was only for three months and it could be reduced further it needed.
Iran heavily subsidizes food and fuel in order to stimulate its economy and keep the citizens dependent on the government. Iran's parliament approved a bill this week to remove $20 billion of those subsidies. The revenue starved government of President Mahmoud Ahmadinejad wanted to cut twice that amount so the government would have more money for its military projects. Parliament members claim removing the subsidies would increase the inflation rate, which is already 11.3%.
Iraq is already planning ahead for the imposition of an OPEC quota. OPEC assigns the quotas based on the countries production capabilities and their reserves. Iraq said it was going to revise its reserves higher than the 115 billion barrels it has claimed for the last 20 years. In OPEC you don't have to prove your reserves. You just claim whatever you want to and that impacts your quota. When OPEC went to the reserve:quota system back in the 1980s the quoted reserves for most OPEC countries jumped by 30-50% almost overnight without any new exploration.
It is all a sham and this "name your own reserves" process gives the world a false indication of how much oil is really left in the world. Since the 1980s no OPEC country has cut its reserves without being forced to by the reality of falling production. It is going to be a rude awakening when these countries start producing less and less oil and their huge reserves are proven to be fictitious.
The API said gasoline demand in February rose +2.2% year-over-year to 9.0 mbpd. This showed that refineries were keeping pace with demand despite running at only 80% utilization. The API also said U.S. oil production rose to 5.5 mbpd in February and the highest level since June 2005. That was also 3.9% higher than Feb-2009. The USGS said rig counts in North Dakota topped 100 for the first time in three decades to 102. That is the highest level since October 1981. On the bearish side total distillate stocks were the highest in February since 1981 and distillate deliveries were 6% below Feb 2009.
The U.S. Minerals Management Service said 77 companies submitted 642 bids on 448 tracts offshore of Louisiana, Mississippi and Alabama totaling $1.3 billion. The winning bids totaled $949.3 million. The highest bid was for $52.6 million for the Walker Ridge Block 795 in 6,500 feet of water. Anadarko (APC) and Mariner Energy (ME) submitted the joint bid.
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