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Title : There It Is: WTI With A "64-Handle" -- February 26, 2018 -- 11:33 A.M. Central Time.
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There It Is: WTI With A "64-Handle" -- February 26, 2018 -- 11:33 A.M. Central Time.

Lots of reasons for $64-oil, of course, but headline news suggests it is due to:

• Libya; and, 
• Venezuela

Nope and nope. It's due to speculators. LOL. Other reasons:

• cheap dollar
• inventories at Cushing plummeting
• Saudi says it will keep cuts in place despite better prices
• experts say we are now supply/demand balanced
• US driving season is almost here
• US economy firing on all cylinders
• Uber, Lyft pulling folks from public transportation

Having said that, the US has placed new sanctions on Venezuela and the Venezuelan president has said, in the past, he would ban his country's crude oil exports to the US if more sanctions were imposed.

My hunch: Venezuela will export oil to Mexico (rather than the US), and Mexico will export that oil to the US for refining into gasoline, which Mexico will then import back into their own country. Think about it this way: Boston imported natural gas from Russia (despite sanctions) when the Marcellus/Utica were located in Beantown's backyard.

By the way, US refiners need heavy oil; that's why the Keystone XL from Canada (home of heavy oil/oil sands) was so important. With the loss of heavy oil from Canada and Mexico and Venezuela, the US refiners are in deep doo-doo. LOL. Nope. But we're going to hear more stories of Canadian CBR. 

No, I am not making that up. See this post from December 31, 2016:

The original story was at this post.

Now, additional data is provided, from Platts. Data points:

• Mexico's record-low refiner production and growing consumer demand: pushed US gasoline exports there to a new high in October
• gasoline exports to Mexico climbed 1.86 million bbls to 12.08 million bbls in October
• the previous peak was 11.42 million bbls in December, 2010
• Mexico is by far the largest importer of US gasoline; take 46% of the 177 million bbls of finished gasoline exported by the US in October, 2016
• exports push the price of gasoline higher
• outright price of Gulf Coast pipeline-delivered conventional gasoline, $1.71, highest price since August 18, 2015
• prime reason for increased exports to Mexico: chronic underinvestment in downstream investments over the years
• Mexico's refined product production is at its lowest point since Pemex started tracking data in 1995
• this, despite domestic sales climbing to a record high
• Mexico is expanding its main import terminal, the port of Tuxpan on Mexico's east coast

This won't be the top energy story of 2016, and it may not even make the top ten list, but it's a huge story and it's going to get much bigger.  

What makes this incredibly important and timely is this: in July, just a few months from now, Mexico will elect a socialist who has said his top energy priority is to re-look at all energy "dealings" between the US and his country. Andres Manuel Lopez Obrador (who looks a bit like an older Jamie Dimon) wants to turn his country into a refining country, instead of simply producing oil.

Good luck. My hunch: Obrador is sending his energy minister to Venezuela to see how to do things the "left" way.

As I've said earlier: after the July, 2018, Mexican presidential elections, California will be begging to have the wall built.

By the way, the market is up almost 300 points. See this post for a bit of misguided analysis. 

http://ift.tt/2dZyQXu

Thus Article There It Is: WTI With A "64-Handle" -- February 26, 2018 -- 11:33 A.M. Central Time.

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