Is there something to “peak oil” after all?
Per the latest WikiLeaks dump, Sadad al-Husseini, a former geologist for the Saudi state-owned oil company, Aramco, stated in diplomatic cables dated between 2007 and 2009, that the oil kingdom may have overstated its oil reserves by as much as 40 percent.
In an article in the London Guardian, al-Husseini is reported to have stated “…the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray.”
This revelation provided evangelical peak oilers with fresh new ammo.
So how did the oil markets react to this potentially explosive rumor? It depends on how you spell "rumour."
The oil market in New York finished the day down 23 cents, while the market in London jumped by $1.90. Thus, either New Yorkers are skeptical (go figure!) or Londoners are excitable (when is the last time you saw an Englishman excited?).
Either way, WTI is now trading at 85 cents on the dollar to Brent. Furthermore, spot WTI for March delivery settled last night at 96 cents to the April dollar.
The weakness in the New York market has been exacerbated by the start of the Keystone Pipeline flow in to Cushing. Fair enough. Yet as highlight in today’s issue of The Schork Report, more importantly, re the latest revelation of peak oil, last night the discount on spot oil relative to a year from now in London (the alleged proper global marker) narrowed 24% from $2.74 to $2.09.
That is a significant tell!
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.