The Energy Report: John, In your last interview, you were pretty optimistic about much higher oil prices. What can you attribute the oil market's recent weakness to? Did everyone just get spooked?
John Stephenson: There was a rumor that the U.S. was going to release strategic petroleum reserves, which would lower prices at the pump and also lower prices in the world market. It would be a temporary fix, because the actual total volume of the reserve is only about a month's worth of U.S. consumption. Nonetheless, it would definitely lower prices. There's some waning of geopolitical risk, and some of that risk rhetoric was positive for oil prices.
The European ban on importing Iranian oil has had a pretty dramatic impact on tightening supply. It's roughly equivalent to when Libya was offline because of its revolution. That same level of production, about 1.5 million barrels (MMbbl) is off the global market now, creating a fairly tight supply picture. Then there is the Israel/Iran nuclear confrontation, which has also driven oil prices higher. Realistically, there's very strong support for oil prices in the $9095 per barrel (bbl) range because one of the big sources of demand for oil has actually turned out to be the Middle East itself, where the producers are becoming their own best customers. They're like drug dealers getting hooked on their own supply, and their consumption growth rates are double those of China. Continue reading "Why My Portfolio Gained 30% This Year: John Stephenson"