Oil price discussion and analysis

[$20shoes]

Is that referring to Brent or WTI?

From a fundamental perspective, one issue is that much of the recent supply growth has taken place in the US and that is reaching the limits of infrastructure. In simple terms, there's a lack of pipeline capacity to move the oil from where it comes out of the ground to anywhere that can refine, export or otherwise use it and alternative means of transport, eg road tankers, are expensive and of limited scale.

So it's not just oil per se but where it is located is becoming a definite issue at the moment which is affecting prices.

I was looking at WTI smurf.

 

[Ann]

Is that referring to Brent or WTI?

From a fundamental perspective, one issue is that much of the recent supply growth has taken place in the US and that is reaching the limits of infrastructure. In simple terms, there's a lack of pipeline capacity to move the oil from where it comes out of the ground to anywhere that can refine, export or otherwise use it and alternative means of transport, eg road tankers, are expensive and of limited scale.

So it's not just oil per se but where it is located is becoming a definite issue at the moment which is affecting prices.

G'day Smurf, I would have thought, taken in Global isolation, that difficulty of supply in the states would see a price rise for oil if you look at it in simple terms of supply and demand. Currently this is not happening over the last couple of weeks. I think the larger picture of a threat of a slow down from China in response to the increase in tarrifs from the USA and potential reduced demand for oil by China, added to the upcomming increase in output from the Saudies would more than compensate for supply chain difficulties in the US. Just the thoughts of a chartist though.

 

[Ann]

The POO has taken a bit of a wack since I posted my last chart on the 17th of October. The price then was 71.91, now it is down to 63.14 on the last close of 2nd of November. I would have expected a bounce up by now or very soon, but let's see.

 

[luutzu]

The POO has taken a bit of a wack since I posted my last chart on the 17th of October. The price then was 71.91, now it is down to 63.14 on the last close of 2nd of November. I would have expected a bounce up by now or very soon, but let's see.

View attachment 90143

Maybe politics is at work here. 4th of November the sanctions came back. 6th November is the mid-term... need oil prices to stay low; the other Axis of Evil to remain evil again. Then... opps... it's oil, there ain't much of it left so what can ya do.

The US currently permit some 8 state to still import Iranian oil. That's quite interesting.

I mean, Uncle Sam is planning regime change in Tehran, so why are they allowing some friends to still buy Iranian oil and thereby contribute to not totally starve the Iranians.

Maybe 'cause Saudi Arabia and other alliances can't pump that much given the years of under-investment and oil fields having a certain finite amount to them.

 

[Ann]

I think the POO is likely to bounce up sooner rather than later. WTI is around its support/resistance of 60 and Brent Oil is sitting on its support/resistance level of 70. Let's see how it trades tonight.

This is a daily chart of the WTI POO coming from December 2014.

 

[Ann]

Okey dokey, the POO held at the 60 level. It had a low on the day of 59.26 and closed at 60.19. The around 60 held as the support/resistance line as I felt it might. Now I am going to be very interested to hear what kind of "fundamental info" will come out to force the price upward. (Nothing to do with the support/resistance line of course. Note sarcasm). However I may be wrong.

 

[luutzu]

Okey dokey, the POO held at the 60 level. It had a low on the day of 59.26 and closed at 60.19. The around 60 held as the support/resistance line as I felt it might. Now I am going to be very interested to hear what kind of "fundamental info" will come out to force the price upward. (Nothing to do with the support/resistance line of course. Note sarcasm). However I may be wrong.

A judge in the US just blocked the construction of Keystone XL pipeline. Demanding the Trump admin doing (any) environmental studies on leakage etc.

THe KXL is to link those dirty oil sands from Canada down to Houston [?]. So might affect oil supplies in some distant future?

Repeating stuff said before, but I don't think there's any serious over supply of oil. Unfortunately the world's big wigs aren't going to allow the switch to any clean energy anytime soon.

You can kind of see that in Trump's policies and rhetoric. In their interests in countries like Venezuela and Iran - two of the world's largely untapped oil giants who aren't taking orders from the US.

In the shorter/immediate term, the price might be pushed low due to politics and brinkmanship. Next year or two, it's going to have to be at a level where offshore extraction plus years of starvation needs to be recovered, then some.

 

[ducati916]

Okey dokey, the POO held at the 60 level. It had a low on the day of 59.26 and closed at 60.19. The around 60 held as the support/resistance line as I felt it might. Now I am going to be very interested to hear what kind of "fundamental info" will come out to force the price upward. (Nothing to do with the support/resistance line of course. Note sarcasm). However I may be wrong.

An excellent [technical] call earlier, from which after reversing my position, I took a nice profit. Based on your earlier call I took profits on Friday, so now long.

Fundamentals that could create upward pressure:

U.S. oil production surges. The EIA reported that U.S. oil production skyrocketed to 11.6 million barrels per day (mb/d) for the week ending on November 2. Despite fears that shale output would plateau because of pipeline constraints, the shale industry is firing on all cylinders. The figures also help explain the recent downturn in prices.

Russia could benefit from OPEC+ cut. Russia’s oil production is at a post-Soviet record high, but a cut in output may actually work to the benefit of Russian producers. “Producing less at $80 per barrel is better than producing at current levels and at $70 per barrel,” Alexander Losev, chief executive officer of Sputnik Asset Management, told Bloomberg. “A certain output decline will also help the companies to reduce operating costs and further improve their financials, including free cash flow.”

OPEC+ cut would be third reversal. Saudi Arabia increased production in 2015, 2016 and again this year. The first two times, the kingdom backtracked as oil prices sank amid swelling inventories. The potential third production cut in four years suggests Saudi Arabia once again ramped up too quickly, Bloomberg argues. A technical committee for OPEC+ is set to meet this weekend to consider options for 2019, including a possible production cut.

Chevron considers Venezuela exit. Chevron (NYSE: CVX) is one of a handful of oil majors that have stuck it out in Venezuela even as the country continues to fall apart. The oil major’s assets are no longer profitable, and the Wall Street Journal reports that the company is growing weary of the problems. In response to the article, Chevron denied the potential exit. “We’re committed to Venezuela and we plan to be there for many years to come,” Clay Neff, Chevron’s president for Africa and Latin America, said in an interview late Thursday with Bloomberg. The reporting that Chevron might pack up and leave “is not accurate.”

So my data suggests [in agreement with your technicals] as of 6 Nov, that selling pressure is still high but slowing after very heavy selling pressure in the 23 Oct and 30 Oct reports. I am waiting for the next report which should be due early next week to confirm whether the selling pressure on the 13 Nov has changed significantly.

jog on
duc

 

[Ann]

An excellent [technical] call earlier, from which after reversing my position, I took a nice profit. Based on your earlier call I took profits on Friday, so now long.

Fundamentals that could create upward pressure:

U.S. oil production surges. The EIA reported that U.S. oil production skyrocketed to 11.6 million barrels per day (mb/d) for the week ending on November 2. Despite fears that shale output would plateau because of pipeline constraints, the shale industry is firing on all cylinders. The figures also help explain the recent downturn in prices.

Russia could benefit from OPEC+ cut. Russia’s oil production is at a post-Soviet record high, but a cut in output may actually work to the benefit of Russian producers. “Producing less at $80 per barrel is better than producing at current levels and at $70 per barrel,” Alexander Losev, chief executive officer of Sputnik Asset Management, told Bloomberg. “A certain output decline will also help the companies to reduce operating costs and further improve their financials, including free cash flow.”

OPEC+ cut would be third reversal. Saudi Arabia increased production in 2015, 2016 and again this year. The first two times, the kingdom backtracked as oil prices sank amid swelling inventories. The potential third production cut in four years suggests Saudi Arabia once again ramped up too quickly, Bloomberg argues. A technical committee for OPEC+ is set to meet this weekend to consider options for 2019, including a possible production cut.

Chevron considers Venezuela exit. Chevron (NYSE: CVX) is one of a handful of oil majors that have stuck it out in Venezuela even as the country continues to fall apart. The oil major’s assets are no longer profitable, and the Wall Street Journal reports that the company is growing weary of the problems. In response to the article, Chevron denied the potential exit. “We’re committed to Venezuela and we plan to be there for many years to come,” Clay Neff, Chevron’s president for Africa and Latin America, said in an interview late Thursday with Bloomberg. The reporting that Chevron might pack up and leave “is not accurate.”

So my data suggests [in agreement with your technicals] as of 6 Nov, that selling pressure is still high but slowing after very heavy selling pressure in the 23 Oct and 30 Oct reports. I am waiting for the next report which should be due early next week to confirm whether the selling pressure on the 13 Nov has changed significantly.

jog on
duc

Thanks duc, be careful. I have been reviewing both the FAR chart and the BPT chart today and both of those look a bit nasty to me, it has made me a bit more bearish since looking at them. It wouldn't surprise me if that 60 line failed in the next few sessions. I can't find the figures for the COT's OI for November 9 which would have been a help. I had an excellent site for the figures but my computer died a while back with all those links and no backup, sadly.

 

[ducati916]

Thanks duc, be careful. I have been reviewing both the FAR chart and the BPT chart today and both of those look a bit nasty to me, it has made me a bit more bearish since looking at them. It wouldn't surprise me if that 60 line failed in the next few sessions. I can't find the figures for the COT's OI for November 9 which would have been a help. I had an excellent site for the figures but my computer died a while back with all those links and no backup, sadly.

Well here is the data: https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

The next COT report is due 13 Nov. Certainly the 6 Nov report showed [still heavy] but slightly reduced selling. I'm [guessing, educated] that the commercials, the chaps that matter, are counter-trend traders and that prices are now where they would start to reverse.

We'll see.

jog on
duc

 

[Sdajii]

I expect WTI to drop to the low $50s (won't be too much longer) before it bounces, and then I'm tipping it will hit $100 within about 6 months of hitting low $50s.

 

[Ann]

Well here is the data: https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm

The next COT report is due 13 Nov. Certainly the 6 Nov report showed [still heavy] but slightly reduced selling. I'm [guessing, educated] that the commercials, the chaps that matter, are counter-trend traders and that prices are now where they would start to reverse.

We'll see.

jog on
duc

Thanks duc, yes, I know that site. I used to follow the COTs for gold and they published the report quickly. I have found the site again but sadly they don't have the new COT for WTI. http://news.goldseek.com/COT/1541795365.php It is much easier to read.

I expect WTI to drop to the low $50s (won't be too much longer) before it bounces, and then I'm tipping it will hit $100 within about 6 months of hitting low $50s.

That's a brave call Sdajii.

 

[Smurf1976]

I expect WTI to drop to the low $50s (won't be too much longer) before it bounces, and then I'm tipping it will hit $100 within about 6 months of hitting low $50s.

Fundamentals of supply and demand tells me that the $100 is at least plausible but wondering where the $50 comes from?

Why not $60 or $40?

The $50 is based on technical analysis?

 

[Sdajii]

That's a brave call Sdajii.

I'm a brave guy.

 

[Sdajii]

Fundamentals of supply and demand tells me that the $100 is at least plausible but wondering where the $50 comes from?

Why not $60 or $40?

The $50 is based on technical analysis?

Not sure it will quite hit $50, and if so only briefly, but I reckon it will get into the low 50s, at least briefly, before the end of February, maybe sooner.

Not $60 because I think it will get lower. Not $40 because I have very high confidence it won't get that low.

I didn't say $50, but no, not based on technicals. Based on fundamentals. Long story, too long to type.

Call me crazy if you like, but wait until August to say it, and if you still want to, by all means do, but if not, say wow or something appropriate.

 

[ducati916]

I expect WTI to drop to the low $50s (won't be too much longer) before it bounces, and then I'm tipping it will hit $100 within about 6 months of hitting low $50s.

Well it has now 'bounced', before hitting $50s. I can see $100 [again] but I doubt it will be straight up, there will be the usual wiggles or random walk to get there, if it gets there. That $75 level will probably be [technically] a test area.

jog on
duc

 

[ducati916]

Thanks duc, yes, I know that site. I used to follow the COTs for gold and they published the report quickly. I have found the site again but sadly they don't have the new COT for WTI. http://news.goldseek.com/COT/1541795365.php It is much easier to read.

The new WTI is due out 13 Nov. Does your site carry it?

Anyway, I am 'expecting' [guessing] that the reduction in the volume of commercial selling from last week will be continued this week, which will result in a [strong] bounce.

We have the [weak] bounce today, which was suggested from last week's reduction in selling pressure and when combined with your technical call, was sufficient for me to rebalance the short position. It remains to be seen, based on the numbers, just how strong that bounce might be. My guess, strong enough to head back towards $65 if the numbers confirm a [significant] easing in the previous very heavy selling.

I'll post the numbers when they come through.

jog on
duc

 

[ducati916]

Well it has now 'bounced', before hitting $50s. I can see $100 [again] but I doubt it will be straight up, there will be the usual wiggles or random walk to get there, if it gets there. That $75 level will probably be [technically] a test area.

jog on
duc

Spoke too soon, the bounce is gone!

jog on
duc

 

[Smurf1976]

The oil price isn't wasting any time in going down. $57.25 at the moment.

Considering the speed of it and that the price is pretty much just going straight through anywhere that it could be expected to pause or reverse, I'm starting to think this is going to end up as a pretty major fall.

 

[PZ99]

So it's back to Feb 2015 levels and for much the same reason - gotta be good for airline stocks.

It's tempting to reinvest in the ETF (ASX:OOO) which is even less than it was in 2015.