Oil price discussion and analysis

[DeepState]

DX up, CL down....Risk off?

Thanks. More sellers than buyers!

I'm trying to deflate the oil prices by something which makes sense (to me). Does anyone know where I can source a decent history of World GDP PPP adjusted into USD? The Economist EIU has something as does Haver Analytics. The IMF should. I can find forecasts of such, but not history.

:1zhelp:

 

[CanOz]

Or maybe this RY....

Here's why crude oil could get even cheaper

Oil prices are near their four-month lows. But could they get even lower than that?

With recent tensions in large oil producers Iraq and Libya plus natural gas powerhouse Ukraine, one would expect the price of oil to spike. Instead, a barrel of West Texas Intermediate (WTI) crude oil is trading at $98 per barrel, a price not seen since March.

According to two oil-watchers, the price of oil may be headed even lower.

“The fundamentals would support a much lower oil price,” said Gina Sanchez, founder of Chantico Global. “We’re looking at a very well-supplied if not potentially oversupplied market.”

Although Iraq is facing a wave of political violence, the country has actually been turning up the pumps, notes Sanchez, a CNBC contributor. And they’re not the only ones. Libya, another country in turmoil, is also upping its output. Plus, there’s the United States ratcheting up its oil production.

“We have an oil shale boom going on in the U.S.,” Sanchez said, adding, “Iraq is up to their 30-year high after they’ve been rebuilding.”

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But trading oil has been a difficult proposition since the start of 2014, according to Richard Ross, global technical strategist at Auerbach Grayson.

“It’s flat on a year-to-date basis,” said Ross, a “Talking Numbers” contributor. “There’s really no trend in WTI.”

Ross notes that oil has traded more or less in a range between $98 and $105 per barrel since the start of 2014 with one exception.

“Back in June, we had a false breakout above that resistance on some of these geopolitical fears,” Rosssaid. “But somewhat counter-intuitively, we’re right back at the low-end of that trading rage testing this key support. If we break down below this $98 level with a little authority, I think we’re look at low $90s - $92, maybe even $90 a barrel.”

Yet Ross believes it’s just a little too early to get bearish on crude oil. “We’ve gotten burned before,” he said. “You don’t want to lean too heavily when any instrument – a stock or a commodity – is sitting right on this key support.”

But Ross’ $90 price level isn’t beyond the realm of possibility as far as Sanchez is concerned. “We’re looking at a potential glut here,” she said. “That mans that oil prices should be quite substantially lower than they are today. So I think $90 is very reasonable.”

 

[Stratanu]

WTI Crude Oil threatens a more bearish turn in its broader multi-year range. WTI has come under increasing pressure in its multi-year range. Removal of trendline support at $97.30 would see a deeper sell-off to the $91.24 low, below which would aim at $85.61. Resistance shows at $105.25 then $107.73/75. with the top of the range at $111.20/$112.24 expected to cap.

 

[MARKETWINNER]

As I expected oil prices are in down trend now. NZD, AUD and CAD should follow oil next. Oil could go down to around $80 per barrel. This is good news for the global economy.

http://www.forbes.com/sites/thomasl...comes-cheaper-oil-why-prices-are-set-to-fall/

Here Comes Cheaper Oil: Why Prices Are Set to Fall

My ideas are not a recommendation to either buy or sell any security, commodity or currency. Please note that I do not endorse or take responsibility for material in the above hyper-linked sites. Please do your own research.

 

[Sean K]

Long term short signal for fossil fuels?

Rockefeller family to sell oil investments to reinvest in renewables
Updated Tue at 11:45amTue 23 Sep 2014, 11:45am

The heirs of the Rockefeller family, who made their vast fortune in oil, have joined in a pledge to divest more than $56 billion of fossil fuel investments to reinvest in clean energy on the eve of a major climate change summit in New York.

http://www.abc.net.au/news/2014-09-...-oil-investments-to-reinvest-in-renew/5761966

 

[Smurf1976]

Long term short signal for fossil fuels?

Or a recognition by those who know more than most, that there simply isn't much opportunity left to invest profitably in oil?

The US is awash with tight oil (aka "shale" oil") right now but there's plenty of reports coming through to the effect that even at $100 per barrel, there's no real money to be made in it. And at $80 per barrel, it's just not worth drilling wells that have truly horrendous decline rates. They flow rapidly at first, but within months that sharply declines. So you have to keep drilling more and more wells just to maintain production. Hence even the official US government reports predicting a peak and decline in output just 3 years away. The companies just don't have the cash to keep drilling faster and faster.

And it's even more telling if you take out the US shale boom. Without that, global oil production has gone nowhere since 2005. Take out the Canadian tar sands too, also a high cost source of production, and production would be down in total. Then there's what looks to be an imminent peak in Russian output.

I think we've reached a point where (1) the economy can't withstand higher oil prices but (2) production can't continue growing, or possibly even be maintained, without prices going up. That leaves us with a decline in output in the years ahead - peak oil....

The problem isn't that there's no oil left in the ground, there's still plenty of that. The problem is that there isn't much left which isn't already being extracted and which could be developed at a price that's low enough for the economy to afford it. There's still oil to drill for, but not enough at $90 per barrel to keep the game going.

My prediction? Price falls, the drilling of new shale and other high cost projects falls in a heap, production stagnates, then the price goes up until it kills demand. Then a few have another go at shale, but probably not enough and not quickly enough to bring about a major rise in total production. Rinse and repeat the cycle.

 

[DeepState]

Anyone know, or want to hazard a guess as to, why this relationship broke (as in opposing directional movement rather than magnitude) in 2013? It compares WTI price with US Oil and Petroleum stocks (ex SPR). Please note that right hand axis relating to stocks is inverted.



Thanks.

 

[Trembling Hand]

Anyone know, or want to hazard a guess as to, why this relationship broke (as in opposing directional movement rather than magnitude) in 2013? It compares WTI price with US Oil and Petroleum stocks (ex SPR). Please note that right hand axis relating to stocks is inverted.

View attachment 59766

Thanks.

Was it due to the start of the Shale boom. US stock piles were the indicator for world stock piles but as the shale production increased the US stockpile it didn't increase to the same degree the worlds stock piles thus the disconnect between the historical link.

 

[DeepState]

Was it due to the start of the Shale boom. US stock piles were the indicator for world stock piles but as the shale production increased the US stockpile it didn't increase to the same degree the worlds stock piles thus the disconnect between the historical link.

Good one. Thanks very much. Lemme check out a few things. I'll report back.

 

[qldfrog]

USD oil price fell again in the US now below $84.5.Is there any asx listed ETF/proxy for oil;
With this price, I would be keen to get some investment parked there, and the AUD/USD trend might also give me a bit of a buffer if the oil trend carries a bit longuer.
any thought?
I doubt there is much cheap oil available to be extracted in that price range anymore..but i am maybe wrong.

 

[DeepState]

USD oil price fell again in the US now below $84.5.Is there any asx listed ETF/proxy for oil;
With this price, I would be keen to get some investment parked there, and the AUD/USD trend might also give me a bit of a buffer if the oil trend carries a bit longuer.
any thought?
I doubt there is much cheap oil available to be extracted in that price range anymore..but i am maybe wrong.

Buy WTI futures vs USD
Buy AUD/USD for same notional

 

[DeepState]

USD oil price fell again in the US now below $84.5.Is there any asx listed ETF/proxy for oil;
With this price, I would be keen to get some investment parked there, and the AUD/USD trend might also give me a bit of a buffer if the oil trend carries a bit longuer.
any thought?
I doubt there is much cheap oil available to be extracted in that price range anymore..but i am maybe wrong.

Also:

http://cms.betashares.com.au/cms-admin/_images/776299834ec5f13f5473e.pdf

Please note that the underlying is hedged and that you have mentioned currency movement as a benefit, implying the desire for an unhedged position. This is essentially a WTI futures contract.

 

[Smurf1976]

To me, the lower oil price at the moment says more about the economy and demand than it does about production.

The figures vary a bit, but if you look at worldwide oil production then it's only up slightly. We're talking 1%, 2% or something like that, the exact figure depending on which dates you use and whose data. But nobody is saying that it's up even 5%, we're talking much smaller numbers than that. There's a boom in the USA yes, but then there are other countries where production has gone down - globally it's very limited growth.

So if the price is dropping then that points to demand or speculation rather than an actual boom in supply.

And so far as demand is concerned, well there's basically nowhere left that uses oil as a major component of its' electricity supply. You'd have to look at an awful lot of countries before you found one where it's even 10% of the total, in most places these days it's way down the list behind coal, gas, hydro and nuclear (which combined account for most power generation in just about all countries). For that matter, even wind outranks oil as a source of electricity in many places these days.

So it's not a case of switching away from oil in power stations to something else. That has already been done just about everywhere (and the few places where it hasn't, don't use that much power to start with). And to the extent that someone has scrapped an oil-fired boiler or two recently, well you've got post-nuclear Japan to offset that (though even in Japan, most of the non-nuclear power is coming from coal and gas, not oil, though there's some oil being used).

Much the same could be said for running factory boilers, cement kilns and heating buildings. There's still some use for that, but just about everyone who has the physical option of switching to something else did it years ago. All that's left are a few late adopters - places that had no gas infrastructure but are now building it. There's the odd one here and there, but not a lot.

So it points more toward underlying non-substitutable demand in the real economy. Production is going up a little bit but the price is going down. Either it's the actions of the markets per se (ie not based on anything of a fundamental nature), or the economy just isn't doing that well. I suspect it's the latter.

 

[qldfrog]

. Either it's the actions of the markets per se (ie not based on anything of a fundamental nature), or the economy just isn't doing that well. I suspect it's the latter.

Agree with you but still 84 USD (aka a worthless digital currency being diluted by a couple of dozen of billions a month) for a gallon of relatively rare , finite resource..I am a taker.....

 

[qldfrog]

Also:

http://cms.betashares.com.au/cms-admin/_images/776299834ec5f13f5473e.pdf

Please note that the underlying is hedged and that you have mentioned currency movement as a benefit, implying the desire for an unhedged position. This is essentially a WTI futures contract.

Thanks a lot
yes would be better unhedged but OOO will be fine
being synthetic may see bigger variations than the real WTI as I understand it but it will do.

 

[Trembling Hand]

http://www.ft.com/fastft/221302

"A riveting side story to the slump in oil prices this year is that Brent is down 50 per cent more than WTI," Stuart Kirk, managing director at Deutsche Bank, said.

Maybe somewhat related to what RY has posted above.

 

[McLovin]

I doubt there is much cheap oil available to be extracted in that price range anymore..but i am maybe wrong.

Only about 4 percent of U.S. shale oil production needs prices above $80 for drillers to break even, the International Energy Agency said today in its monthly oil market report. Producers are getting more oil per dollar spent drilling, driving costs down as much as $30 a barrel since 2012, Morgan Stanley (MS) analyst Adam Longson said in a report yesterday.

http://www.bloomberg.com/news/2014-10-14/u-s-shale-oil-output-growing-even-as-prices-drop-eia.html

 

[Smurf1976]

Economics 101 tells me that however much oil production was profitable at $100 per barrel, there will be a smaller amount that's profitable at $50 per barrel. I won't claim to know how much at what price, but as a general principle that should be true.

Continued low prices would thus seem dependent on there not being any real growth in consumption. In other words, the economy remains weak.

 

[qldfrog]

being an engineer, I tend to trust more facts than Morgan stanley;
fracking wells production is boom and crash aka after an initial huge production flow, it crashes within 3 years or so
so you drill another well
which costs a lot;
a few reports were hinting that the oil surge in the us is in fact a capex surge;
I would take a step back and says:
if it is still so profitable, aka even at 30$ , where are the billions? Where are the companies with the marvelous dividends??
"reinvested in new fields are they?that must be surely a great sign....
In my opinion, the QE has produced a flow of cheap USD that were transformed via capex intensive fracking into a flow of oil (and a destroyed earth)
the oil is out, the debt remains and the whole bandwagon will have to stop.

 

[Echidna50]

Interesting bullish article on oil prices from U.S. Seeking Alpha:

http://seekingalpha.com/article/2581505-8-major-reasons-why-the-current-low-oil-price-is-not-here-to-stay