Oil price discussion and analysis

[Sdajii]

There seem to be two major opposing forces at work here.

One one side it’s China Vs USA trade war threatening demand.

On the other side it’s trouble in Iran, Venezuela and elsewhere threatening production.

Then throw issues with contaminated oil from Russia into the mix and if all gets complex.

My main thought is that the strength of forces involved this is going to end with an earthquake, the only question being whether that’s up or down (or one then the other)?

I'm tipping one then the other. Up first.

 

[Ann]

Slowly the transition starts? How long does it take to recharge an EV?

Oil Giant Chevron Offering Electric Car Charging at Stations

Big oil is shifting, ever so slightly, toward the electric car business.

Chevron Corp. is offering electric car charging ports at a handful of gasoline stations in its home state of California, according to a statement Monday. The fast-charging spots, located at five stations in the Los Angeles and San Francisco Bay areas, are being installed by EVgo, which has a car charging network that spans 34 U.S. states.

While Chevron’s focus clearly remains on oil and gas, it’s following a trend of sorts in the industry as the price of battery-fueled cars shrinks. In January, Royal Dutch Shell Plc agreed to buy Greenlots, which will make it the first oil major to own a U.S.-based charging service, according to BloombergNEF. More...

 

[Smurf1976]

Oil down heavily at the moment to $57.80 so seems the answer for the short term direction at least is down.

 

[Sdajii]

Oil down heavily at the moment to $57.80 so seems the answer for the short term direction at least is down.

I'm tipping it like this: small swing down (I doubt it will go below $55, we may not go below $57, I'd be very surprised by sub $50) then big/huge spike up then big/huge crash down. All within a short time. Over $70 next month.

 

[Ann]

I'm tipping it like this: small swing down (I doubt it will go below $55, we may not go below $57, I'd be very surprised by sub $50) then big/huge spike up then big/huge crash down. All within a short time. Over $70 next month.

It has smashed down through the all important 200dsma, I have a support line a few cents under $55. If it falls below $55 it will then have to battle back up through a $55 overhead resistance, the 200dsma and then there is the rising overhead resistance line at around $66. IMO $70 would be a big ask from the POO. I will try to put up a chart after tomorrow's trade and see how it is going. My thoughts are it could bounce back up off $55 and then get smacked down by the 200dsma. Interesting to watch.

Energy Stocks on Pace for Worst Day in 5 Months as Crude Sinks

Energy stocks were poised for their worst day of the year, with the S&P 500 Energy Index extending its two-day loss to as much as 5%.

The sector has been battered by plunging crude prices, as futures in New York fell below $60 a barrel for the first time since March. Hess Corp., Concho Resources Inc., Cimarex Energy Co., and National Oilwell Varco Inc. were among stocks which slid more than 6%. More...

 

[Sdajii]

It has smashed down through the all important 200dsma, I have a support line a few cents under $55. If it falls below $55 it will then have to battle back up through a $55 overhead resistance, the 200dsma and then there is the rising overhead resistance line at around $66. IMO $70 would be a big ask from the POO. I will try to put up a chart after tomorrow's trade and see how it is going. My thoughts are it could bounce back up off $55 and then get smacked down by the 200dsma. Interesting to watch.

I agree, June will be a very interesting month to watch.

The whole global system is so precarious at the moment, I think we can all agree on that. Tensions are high in the middle east, sure this is nothing new or unusual, but we are seeing push likely coming to shove in the near future from Iran, we have Saudi Arabia needing an average of over $80 in 2019 and so far we've seen way under that (we haven't even touched $80 all year!) with H1 2019 getting near to the end, we have some low level acts of sabotage which could well be taken further in the near future (it wouldn't be difficult and it wouldn't need to be much more extreme at all to cause a huge impact), we have Venezuela, Libya and others outside the middle east with the potential of throwing a spanner in the works, there are plenty in the middle east who would not be upset to see one of Russia's major pipelines have an explosive mishap (it's actually surprising this doesn't happen more often given the nature and proximity of the middle east and the motives to do it). Trump has literally tweeted threats of putting an end to Iran, and Iran is certainly a crazy nation under extreme pressure.

While oil prices were steadily increasing as they were from the start of the year until recently, it was easy for those nations wanting oil prices to just allow it to happen. Even if it wasn't as much as they would like, as long as things are going in the right direction for them there is low incentive to upset the apple cart. If prices are not only too low but have also taken a turn from up to down, there will be a greatly heightened tendency for them to take action to push it up, and given the 'tinder box' nature of the oil producing world at present, I think we're likely to see some extreme action which will bring an answer to that 'big ask'. I'm not as sure about it as I was 6 months ago, but I still think $100+ in the near future (mid 2019) is a very real possibility, and $80+ is highly likely, I would still say probable.

If any of the many potential catalysts for skyrocketing oil prices is realised, well, that's what oil will do, and technical analysis will have little to do with prices in that scenario. I think given the number of big players with such strong interests in setting one or more of these off, and how easily many of them can be set off, we are likely to see it happen.

 

[Ann]

If any of the many potential catalysts for skyrocketing oil prices is realised, well, that's what oil will do, and technical analysis will have little to do with prices in that scenario. I think given the number of big players with such strong interests in setting one or more of these off, and how easily many of them can be set off, we are likely to see it happen.

I would hate to try and guess at the POO simply using fundamentals, it is so chaotic and reactive to a variety of tensions. I like looking at the chart, not that the chart influences the price but it offers a potential area where activity may occur. I am very happy for people to think it is akin to reading tea-leaves in a cup as in cross-my-palm-with-silver-and-I-will-tell-you-your-future, kind of thing!

This article illustrates the current tensions in the POO....
Trump Sparks Oil Rally With Iran Tension, Then Rout With Trade War

Then we have further complications of possible supply restrictions or in the future a possible glut coming from Russia....

Russia’s Dirty Oil Crisis Is Worse Than Almost Anyone Predicted

Or the POO may simply be in the hands of profoundly influential price manipulation who use the various news announcements to cover their games. I truly would have no idea other than to trust what my charts tell me. Easier that way, it is less stress on the brain!

 

[Ann]

Oil Rig count down five this week to 797.

Looking at the 6 month daily chart you can see how the POO has really pulled down away from that red overhead resistance line quite dramatically.


Then looking at the weekly chart we can see it has fallen out of the rising wedge a second time, it was so desperately trying to climb back on board, I will be astounded if it can get back up a second time...

 

[Parse]

This is an interesting article https://oilprice.com/Energy/Crude-Oil/The-Oil-Market-Isnt-As-Weak-As-It-Appears.html

It's the kind of thinking I agree with.

 

[ducati916]

Well for the moment, trade war trumps all. Yield curve inverts on 3mth/10yr, 1yr/10yr and very close on 2yr/10yr.

Inversions [prolonged] = recession, which = less demand for oil on an economic contraction.

jog on
duc

 

[Ann]

Oil rig count up 3 to 800 this week.

Let's look at the daily chart for POO...

It has fallen through that old support line of around $55 after making a very valiant effort to overcome the rising red line of the old rising wedge pattern. Now I am wondering if it will manage to get back above the $55ish support/resistance line or will we see it moving down to retest the green support line of $42 again?



Let's look at the Weekly POO....

It is slamming down out of that rising wedge. It did well to get back into it after the previous fall, now it is just blasting down with no hesitation. There feels like a lot of down impetus happening.



Now let's look at the weekly with the very long term view. After an appropriate fall I think the next leg up will see POO trying to fight through the very, very long term falling overhead resistance. It will be beyond the resistance of the rising wedge by then.
The POO tends to have massive drops when it falls. I wouldn't be surprised if $30 or near was a floor but I could be very, very wrong!

 

[Smurf1976]

I wouldn't be surprised if $30 or near was a floor

Looking at other fuels on an energy content basis (all prices in USD):

US natural gas is equivalent to oil at about $14 per barrel

Australian export coal is equivalent to oil at $20 per barrel

EU natural gas is equivalent to about $28 per barrel

Japan LNG import spot price is equivalent to oil at about $30 per barrel

Australia south-eastern states natural gas is equivalent to oil at $38 per barrel

So anything for oil below about $30 would see switching of fuels, primarily for power generation, from gas to oil noting that Japan in particular does have the ability to fire raw crude oil in power stations if the economics warrant doing so and between Japan and the EU that's a significant amount of potential additional oil use if it became cheap enough. Either that or the gas suppliers will need to cut their prices to remain competitive.

 

[Ann]

The Bastion of Oil-Market Bullishness Is Starting to Crack

For much of May, nearly each and every time that oil prices tanked amid concerns about the deepening U.S.-China trade war, one corner of the market held up: timespreads.

The spreads -- the price difference between contracts for immediate delivery and forward ones -- reflected tightness in the physical market, with refineries willing to pay large premiums to secure barrels straight away. As such, the oil curve was in a steep backwardation, where spot crude trades above later contracts.

For most of May, oil refiners bid up the front of the oil curve to keep North Sea crude in north-west Europe in order to replace Urals crude from Russia that was lost due to an unprecedented contamination inside the Druzhba pipeline. Now, as Urals flows slowly restart to some parts of Europe and a plan takes shape for a wider resumption, the tightness in the physical market is starting to ease -- and timespreads are following suit. Refinery cuts in Germany are also helping to reduce demand. More...

 

[Smurf1976]

Down heavily again on US markets - now $51.63

This step-like movement seems to be becoming a pattern. Sudden drop, sideways, another sudden drop of a few %, rinse and repeat.

It doesn't seem to be having much difficulty falling straight through anything that might be expected to act as support so down it goes.

 

[ducati916]

Down heavily again on US markets - now $51.63

This step-like movement seems to be becoming a pattern. Sudden drop, sideways, another sudden drop of a few %, rinse and repeat.

It doesn't seem to be having much difficulty falling straight through anything that might be expected to act as support so down it goes.

Would seem to be correlated to the US 2yr Note currently.

jog on
duc

 

[rederob]

Would seem to be correlated to the US 2yr Note currently.

Was better correlated with my wood pile .
I have a practice of ignoring ephemeral correlations.

 

[PZ99]

Down heavily again on US markets - now $51.63

This step-like movement seems to be becoming a pattern. Sudden drop, sideways, another sudden drop of a few %, rinse and repeat.

It doesn't seem to be having much difficulty falling straight through anything that might be expected to act as support so down it goes.

It's a beast of a bear at best > https://www.marketwatch.com/story/o...-market-heres-why-2019-06-05?siteid=rss&rss=1

 

[ducati916]

Was better correlated with my wood pile .
I have a practice of ignoring ephemeral correlations.

Indeed.

However, because the 2yr has not yet inverted, but is very close to it, the fluctuations in the 2yr are [possibly] relevant to a recession through an inversion and reduced demand for oil.

jog on
duc

 

[rederob]

Indeed.
However, because the 2yr has not yet inverted, but is very close to it, the fluctuations in the 2yr are [possibly] relevant to a recession through an inversion and reduced demand for oil.

Anything is possible.
However the logic of the idea suggests previous declines may have aligned with possible recessions, and none seem apparent in the past 10 years.

 

[Ann]

Oil rig count down to 789 from 800 this week.

Oil Drillers Scale Back U.S. Activity as Crude Falls Into Bear Market

U.S. crude explorers reduced drilling to a 15-month low as oil dipped into bear-market territory.

Working American oil rigs fell by 11 this week to 789, according to data released Friday by oilfield-services provider Baker Hughes. More than half the decline happened in the Permian Basin, the biggest source of American crude.

Crude futures traded in New York fell into a bear market on June 5 as they dropped to levels not seen since mid January. The slump comes as the Organization of Petroleum Exporting Countries and allied suppliers prepare to discuss output controls in a matter of weeks. More...