Oil price discussion and analysis

[rederob]

Oil rig count down to 789 from 800 this week.

Maybe this is a partial explanation:


"The larger universe of fracking companies suffered even worse results, as a wave of corporate bankruptcies (not captured in this sample) wiped away billions of additional dollars in debt and equity. Since 2015, 174 North American oil and gas producers have filed for bankruptcy protection, restructuring nearly $100 billion in debt, largely through write-offs."

 

[CanOz]

Oil failed to even get into the upper value area. Now a test of the value area low is probable....monthly chart

 

[Ann]

Oil appears more like a weapon than a commodity, good luck to the FAers I say!...

Iran has no plans to leave OPEC despite tensions: oil minister

GENEVA (Reuters) - Iran has no plans to leave the Organization of the Petroleum Exporting Countries despite being treated like an enemy by some fellow members, Oil Minister Bijan Zanganeh said in an interview published on Saturday.

“Iran has no plans to leave OPEC...and regrets that some members of OPEC have turned this organization into a political forum for confronting two founding members of OPEC, meaning Iran and Venezuela,” Zanganeh told the Iranian parliament news site ICANA. More...

Looking at the chart this week I am wondering if that $55 ish level will become a resistance line for further rises or a point to hook onto in order to stop the free fall.

I see the RSI is in oversold but in the past during really big falls it has been happy enough to bounce around oversold for quite a while. I don't believe it has the strength to get back up and challenge that red resistance line. I think its next rise will see it challenge the very, very long term falling resistance line (not shown in this chart).

 

[Ann]

Bulls Beware: The 2020 Oil Market Is Quickly Turning Ugly

Oil bulls thought 2020 would be their year.

After half a decade of lower spending on new projects, oil production growth was supposed to slow to a trickle just as demand was supercharged by a once-in-a-generation shake up in the shipping fuel market. Many market commentators predicted that if $100 a barrel-oil was going to make a come back, it would happen in 2020.


Excitement is fading fast. The first official assessment of 2020 comes from the International Energy Agency on Friday, but a first look at forecasts from consultants and traders for supply and demand balances show persistent surpluses, not the deficit that was expected to underpin rising prices. More...

 

[Smurf1976]

I'm thinking of how to interpret the market's response, or more to the point the lack of any real response, to the tanker attack.

Focusing on the price rather than politics I'm thinking that the lack of any real response to what would seemingly be a trigger for prices to rise is itself further evidence of market weakness? Price went nowhere when it would reasonably be expected to go up.

Just a random thought really.

 

[Ann]

I'm thinking of how to interpret the market's response, or more to the point the lack of any real response, to the tanker attack.

Focusing on the price rather than politics I'm thinking that the lack of any real response to what would seemingly be a trigger for prices to rise is itself further evidence of market weakness? Price went nowhere when it would reasonably be expected to go up.

Just a random thought really.

I agree Smurf, it was a very lack-luster bounce given the problems for supply if there was any sort of blockage in that area. Looking at the Brent this week for a change, it just looks like it was having a bit of a bounce related to the 61.8% Fibonacci level. As you can see in the past, it has been an area where the price has paused for a bit of a jiggy-jig dance.

 

[Ann]

Oil Rig count down 1 to 788 this week.

Oil Short-Selling Surges as Global Demand Outlook Deteriorates

Oil skeptics are gaining ground fast as the outlook for global demand worsens.

Hedge funds boosted their bets that West Texas Intermediate crude will fall by 46%, the most since August, according to U.S. Commodity Futures Trading Commission data for the week ended June 11. The balance between bullish and bearish wagers was the most pessimistic since February.


“Outside the United States it’s unmistakable world growth is slowing down,” said Bill O’Grady, chief market strategist at Confluence Investment Management LLC in St. Louis. “The more trade tensions arise, the greater the likelihood that growth is slow, and if Chinese growth slows, it’s not good for oil." More...

 

[Smurf1976]

China's using a lot less diesel it seems:

https://www.cnbc.com/2019/05/28/falling-diesel-fuel-demand-in-china-paints-bleak-picture.html

Diesel demand in China fell 14% and 19% in March and April respectively, reaching levels not seen in a decade, according to data compiled by Wells Fargo.

If correct then it would suggest a much deeper economic slowdown is underway with consequences extending far beyond the oil market. 14%, 19% in a month - that's massive by any definition.

 

[Ann]

China's using a lot less diesel it seems:
If correct then it would suggest a much deeper economic slowdown is underway with consequences extending far beyond the oil market. 14%, 19% in a month - that's massive by any definition.

Right at the bottom of that last article I put up was this line...."the net-bearish position on diesel jumped by 46% to the most pessimistic in almost two years."

Made me raise my eyebrows slightly, although I have noticed a downturn in the Baltic Dry Index over the last few sessions.

 

[Kryzz]

Lets see if oil can have a bit of a run like gold...good risk for reward trade on offer.

 

[Smurf1976]

Lets see if oil can have a bit of a run like gold...good risk for reward trade on offer

The chart looks interesting but what worries me is the politics of it all.

Apart from central bank interest rates, it's hard to think of a market more prone to political goings on right now than oil given the tensions with Iran and the USA plus a few other situations globally.

 

[Kryzz]

Lets see if oil can have a bit of a run like gold...good risk for reward trade on offer.
View attachment 95593

One week on, still holding. Not looking to hold for close to a month like last time. Limit order in around prior swing low at $60ish. A political tweet or two might help get this one across the line.

 

[Parse]

These "experts" really don't have a clue do they. We just had the oil price up a fair bit at the beginning of the month and on oilprice.com we had an article that started like this:
"Oil prices jumped to their highest point in more than a month, pushed higher by an OPEC+ deal and the ceasefire between Trump and Xi"
Of course, overnight oil has dropped a few percent so now it's:
"OPEC+ Fails To Reassure The Oil Market"

Wish they would make up their mind.

 

[Sdajii]

These "experts" really don't have a clue do they. We just had the oil price up a fair bit at the beginning of the month and on oilprice.com we had an article that started like this:
"Oil prices jumped to their highest point in more than a month, pushed higher by an OPEC+ deal and the ceasefire between Trump and Xi"
Of course, overnight oil has dropped a few percent so now it's:
"OPEC+ Fails To Reassure The Oil Market"

Wish they would make up their mind.

Both titles are accurate. The price did hit that high and the reasons given were accurate.

However, the price then dropped, and it is correct to say that those things which pushed it to the highs were insufficient to hold them.

It is not the fault of the people reporting what is happening that what is happening is happening. If anything can't make up its mind it's the market. The folks at oilprice.com are just telling you what is happening, and at least as far as the titles go, they are correct.

Incidentally, it's now July and we can see I got my predictions wrong for H1 2019. I put my money where my mouth was too, very painful. It's possible that what I was expecting may still play out, just on a slightly different timeline and likely less extreme (or maybe still just as extreme), but I definitely got at least the timing wrong.

 

[Smurf1976]

Oil supply exceeded demand by 0.9 million barrels per day (MMbpd) in the first half of 2019, according to the International Energy Agency’s (IEA) latest oil market report.

https://www.rigzone.com/news/oil_supply_exceeds_demand_in_1h-12-jul-2019-159290-article/

On the other hand, it seems growth in production in the USA, or parts of it at least, is set to slow:

The promise of the Permian is shrinking

https://www.bloomberg.com/news/arti...permian-s-promise-as-shale-producers-retrench

 

[PZ99]

Down around 7%. Will be topping up on the OOO etf today. LOL

 

[Kryzz]

Smashed through the recent July pivot low, all eyes on any potential short opportunities. Wednesday last week worked out well, interesting viewing here at the moment too:

 

[ducati916]

Looks like WTI headed towards that $40 again.

jog on
duc

 

[Sdajii]

Surprised no one commented here on the very obvious head and shoulders which has just finished playing out (unless it drops further in the very near future, which seems possible). If it has indeed just finished, we may see a recovery in the immediate future. Actually, despite how obvious it looks on the chart I don't think I've seen anyone comment on it anywhere.

Left shoulder around late June, head around mid July, right shoulder late July, nasty downward sloping neckline. If you just look at the chart and ignore all else (which I'm not inclined to do, but some would) it's certainly possible to see it crashing much further, and I do see it as a possibility.

 

[Smurf1976]

Surprised no one commented here on the very obvious head and shoulders which has just finished playing out

I think the lack of comment is probably due to not having spotted it and/or not seeing it as having played out fully yet?

If I'm seeing it correctly, and I sure don't claim to be an expert on this pattern then (all prices in USD):

Neckline seems to be about $46 reached in June 2017 and December 2018.

Head peaks at $74 in June 2018.

If I've understood correctly this then gives us a target low of $18.

If that's correct and we're going to have $18 oil then I think we're going to be in "interesting" times more broadly than just the oil price. In that context I'm thinking:

*$18 oil is cheaper than coal or gas as boiler or furnace fuel in most places so that will force coal and gas prices down. Not good news for countries which export coal and gas and Australia is number 1 globally for both.

*To have $18 oil does imply some broader goings on outside the purely financial aspects of the oil market. Specifically, I'm thinking that it means either a lifting of sanctions on Iran and/or Venezuela so more oil production, a substantial collapse in the "real" economy and thus physical oil consumption, or a major release of stockpiles so as to intentionally flood the market. Any of those has broader implications well beyond the oil price itself.

*The last time we saw prices close to that level was at the end of 2001 so rather a long time ago. Allowing for the effects of inflation etc, rather a lot of oil producers would be seriously unprofitable at that price today particularly those in Western countries.

On the point of storage release, if anyone did it then it would almost certainly be the USA - everyone else either doesn't have a sufficient volume in storage that's surplus to own needs or has an economy substantially based on oil exports such that they've no incentive to be flooding the market.

*Changes in other markets. In a world of $18 oil it seems hard to believe that any major share index, bonds or the AUD would be trading at about the present level. There will be impacts on other markets almost certainly either due to the price of oil or due to whatever other circumstances surround a collapse in the oil price.

Or am I completely misunderstanding how this pattern's supposed to work?