Oil price discussion and analysis

[IFocus]

could the Australian position be a reflection of policy trends..no fracking, bad Australia stealing Timor resources, fossil fuel is bad, big us corporation taking over or have we really exhausted all our resources?

Australia's current position is a complete failure of planing and policy all sides complicit a great example is the Eastern Seaboard issues with Nat Gas supply and prices complete and total failure this extending to all thing energy generally IMHO.

 

[ducati916]

Still more risk to the upside than the downside.



Not heavy buying...but just enough to keep prices at or about current price. Again, indicating probably more risk to the upside than downside.

jog on
duc

 

[ducati916]

Technically (which can change quickly in the face of news) setting up nicely for a move higher. A number of indicators are demonstrating a divergence, which often (technically) portends a move against the divergence...in this case higher prices.

jog on
duc

 

[Smurf1976]

The US rig count continues to fall which should curb production going forward:

https://oilprice.com/Energy/Energy-General/The-Oil-Rig-Count-Collapse-Continues.html

Meanwhile Russia could gain control of Venezuela's oil, notable since if extra heavy grades are included (the Orinoco bitumen) then Venezuela has the largest oil reserves of any country.

https://oilprice.com/Geopolitics/In...ntrol-Of-The-Worlds-Largest-Oil-Reserves.html

 

[ducati916]

Two charts: (i) refining and (ii) price



As can be seen, refining at the lowest point for the 5yr average. POO, also at the low end, but it has reduced its volatility in the face of increasing evidence of weak demand.

So demand could either: (a) increase or (b) decrease.

If it continues to decrease, then, POO will also decrease, but probably not in a linear response. To the downside, volatility could well remain muted as the Commercials (COT) have plenty of spare capacity to support prices.

On the other hand, if demand starts to uptick, POO will move higher, but again, possibly not in a linear manner, but this time volatility could well be higher as supply is still constrained, but has not yet been discounted by the market, as the story (so far) has been slowing demand.


Imports are far below the 5yr average.

Which, if demand starts to uptick, where will supply come from? True the US is now (probably) self sufficient, but, it will still require time for those shale supplies to be supplied, this supply is still being developed (as far as I can tell...I am available to be corrected on this point however).

Bottom Line.

If demand picks up (and geo-political forces always push for expansion) then there is more upside risk than downside risk unless demand falls into a deep recession and even then, if POO falls too low, producers simply do not sell at a loss and supply falls quicker than demand, stabilising (at a lower) POO.

jog on
duc


* OPEC commits to reduced supply into 2020

https://www.reuters.com/article/us-...op-up-prices-as-economy-weakens-idUSKCN1TW1LF

 

[ducati916]

Commercials continue to support POO



Still trading in a tight range. The move, when it comes, will reflect that volume caught on the wrong side of the move, adding to it.

jog on
duc

 

[Smurf1976]

Up a bit over 56 USD now. Not a big move but it's up nonetheless.

 

[ducati916]

I would say that there is a higher probability of touching $60 than $50 currently.

If it does touch $60, then, the probabilities will start to favour a lower price, possibly back the the $55 or even lower if there is more 'bad' news (new supply or old supply coming back). Essentially I think POO is going to be rangebound for a while, at least until the 'growth' meme resolves.

jog on
duc

 

[ducati916]

Latest COT



Continued Commercial support. POO moving higher. Nothing to get too excited about currently. POO would need to break out of this range before anything exciting might happen.

However absent any real news, $50 would seem to be a fairly stable support price going forward.

I'm guessing that either $60 or $65 will be the resistance point going forward and POO will chop inside that range for a while. If that (turns out to) be true, then lots of money can be made in that range.

jog on
duc

 

[ducati916]

Latest COT. Commercials still (buying) providing support to POO. But their buying support is weaker (lower). Suggesting that the closer to $60, the weaker their support will be.



POO could inch higher. $60 is when I lighten up a bit (assuming it reaches $60).

jog on
duc

 

[ducati916]

POO still inching higher.



Commercials still providing some buying support.




Rigs are falling, indicating the lack of profitability (largely) in shale.

There are other issues, some production, some political, but the sum (so far) seems to be even in the face of 'Peak Demand' rhetoric, that price continues to inch higher.

https://finance.yahoo.com/news/offshore-oil-peak-2020-then-113000831.html

jog on
duc

 

[Smurf1976]

Rigs are falling, indicating the lack of profitability (largely) in shale.

There are other issues, some production, some political, but the sum (so far) seems to be even in the face of 'Peak Demand' rhetoric, that price continues to inch higher.

The great problem with shale is that as one observer put it, it has done the opposite of what the oil industry has traditionally done.

Traditional sources effectively turn oil into money whilst shale has thus far involved turning investors money into oil. Ignoring the physics and just looking at the financials that's close enough to the truth to be a fair comment.

Shale has certainly flooded the market with oil but what it hasn't done is flooded anyone's bank account with profit. Well, not the investors in the shale companies at least - to the extent there's a profit it seems to have largely ended up in the hands of drilling contractors, steel companies (pipelines), rail and road haulage companies, workers, hotels and basically everyone doing anything involved with extracting the oil except those who invested their capital into it.

As the shale companies come under pressure to pay dividends and as the best spots have to considerable extent already been drilled, that necessarily crimps production growth.

Meanwhile a lot of other oil projects, deepwater and tar sands, aren't particularly attractive financially at current oil prices. Then there's the political situation in places like Venezuela.

On the demand side, it seems pretty clear that there's going to be a move away from oil especially as a means of powering road vehicles. That's only a very minor thing at present however since whilst electric vehicles are a thing, the total consumption of petrol and diesel is still going up and the majority of vehicle sales globally still use oil-based fuels.

My thinking is thus that there's more chance of the price going up rather than down at this point unless the real (as distinct from the financial markets) economy falls in a heap and kills consumption.

 

[qldfrog]

I think the idea we are going to use less oul because we start having a few ev on the road is a pipe dream
That is what bhp was saying 2 days ? Ago..from memory

 

[Smurf1976]

I think the idea we are going to use less oul because we start having a few ev on the road is a pipe dream

A practical observation about all things relating to energy supply is that everything tends to evolve rather slowly. The sheer physical scale and capital requirements of it all tend to ensure that's the case.

Pick any past major change in energy and at the global level none of them were particularly quick. In the context of oil, well we've had mass production of hybrid cars for over 20 years now but they're still a minority of what's on the roads.

 

[ducati916]

Commercials not as enthusiastic. Their buying support is waning.



POO is in a very tight range and very choppy. Essentially going nowhere atm. Shown more clearly on the weekly chart.



I would (guess) that there is a slightly higher chance of prices moving lower (without buying support of commercials) than higher.

jog on
duc

 

[Smurf1976]

POO is in a very tight range and very choppy. Essentially going nowhere atm.

Agreed although my thought is "this can't last forever surely" since it does seem to be a very tight range at the moment.

 

[ducati916]

POO jumping around. Mostly just on news.

https://www.reuters.com/article/us-...gn=Feed:+reuters/businessNews+(Business+News)

jog on
duc

 

[ducati916]

Just in...

"The weekly inventory report was more supportive of prices than it appeared at first glance," Again Capital's John Kilduff tells CNBC. "The overall rise in crude oil inventories was distorted by 2M barrels of oil that came out of the SPR. Inventories at the Cushing, Okla., delivery hub actually fell, markedly, by over 2M barrels. Exports of crude oil also rebounded back above 3M barrels per day."

jog on
duc

 

[qldfrog]

As the result, poo is up significantly in a falling market where even gold is down..weird

 

[ducati916]

Looking at the last 20 days intra-day, the last big expansion of intra-day volatility took us to the tight range that we have been in for the past couple of weeks intra-day.

The current volatility expansion is starting from a slightly higher low. As such, it could break POO through to the $60 mark. The sharp reversal on the news over the last couple of days potentially trapped some shorts the wrong way.

Daily, at resistance again, but the constant pressure against this resistance will give at some point, unless there is news that changes perception/reality.

Weekly, POO just moving off of low end into mid-range. Plenty of 'technical' room to reach $60. It is (usually) the longer time frames that play out.

My feeling, this breaks to $60+ this time of asking.

jog on
duc