Oil is not a monolithic commodity
Most people (and I include myself) tend to lump things in generalities. But as Floridabuilder would say: "It pays to make a few distinctions". Everybody knows that the housing market is 'doomed' (yes I am being tongue in cheek), yet there are smart Chimps who can navigate desirable submarkets, and knows how to value builders who can do the same. Same with zzlangerhans. If anybody can look through a pile of biotechs and pharmas and separate the wheat from the chaff, he can.
And so in that vein, I have been listening to a lot of commentary about potential oil shocks. The question being that if Libya cuts production due to governmental instability, can Saudi Arabia step in with excess capacity and fill the gap? Seems like a reasonable proposition, except it assumes that all oil is the same. And that is most certainly not the case.
Assuming there are instablities and supply disruptions from Libya, this has serious implications for not only oil, but also producers and especially refiners. I am sure that other players (TDRH, Greenmycon [haven't seen him around in awhile though], etc.) can shed more light on this topic than I can. But I think this excerpt from David Rosenberg's morning comment is worth sharing
....this emerging view that Saudi Arabia can just step in and replace Libyan
oil seems totally off base, as a loyal subscriber informed us yesterday, it is not
so simple. The reason: Libya’s crude is a perfect feed for ultra low sulphur
diesel. The oil Saudi Arabia would supply to replace, it is not. Apparently you
need three barrels of Saudi crude to get the same number of barrels of diesel
you could get from one Libyan barrel. Further, the Saudi crude is very high in
sulphur. The refineries that process the Libyan crude cannot remove the
sulphur. The question is what happens if we lose Libyan crude and if strategic
stocks are not released (1.6 billion barrels I believe) — then $150/bbl is
certainly not out of the question and that is before we start talking about Algeria.