Oil price discussion and analysis

ducati: Indeed, if it goes to the low 40s you can indeed tell me I am wrong. I am confident it will not.

Yes, if you bet 8 on roulette and win, it may be luck. If you confidently say 8 then 17 then 0, and get it right, I'd believe you knew what you were doing, though I wouldn't know how. I wouldn't take you seriously or expect anyone to take you seriously until after it happened. If you knew it but stayed silent then said you knew it was going to happen after it did, everyone would call you a liar. I'm saying what will happen before it happens. I am unaware of anyone publicly stating the same predictions I am making. If you know of anyone, please show me.

As I said, I don't expect anyone to take me seriously until it has played out. I'm surprised at anyone commenting on it at this stage, but you're choosing to.

Perhaps in your roulette analogy, 8 was the low, 17 is the high, and 0 is the timeframe.

As I said, feel free to ignore me until we're around $100. I welcome that. Or you are welcome to tell me I am wrong if events turn out differently from my predictions before August. I don't expect that to happen, but it gives you an alternative reason to talk to me, which perhaps gives you a reason not to talk to me about this before then.

If no one talks about it I won't make much noise, I'll just quietly post something short and sweet, probably less than once per month on average. If people do complain about it, then it gets blown up a little and I'll make posts like this one. I'd prefer not to have to bother

Sdajii said:

I am unaware of anyone publicly stating the same predictions I am making. If you know of anyone, please show me.

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So here are two that I found in less than 5mins using Google.

jog on
duc

Sdajii said:

Yes, if you bet 8 on roulette and win, it may be luck. If you confidently say 8 then 17 then 0, and get it right, I'd believe you knew what you were doing, though I wouldn't know how.

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Assuming a fair table [wheel] it is all luck. No skill at all. Which is rather my point. However low the probability, it is still possible.

You have taken two numbers for oil, $50 and $100. That markets fluctuate, the probabilities of hitting those two numbers could be calculated. They will be significantly higher than 8, 17 and 0.

So whether they hit or not, is fairly irrelevant.

Of far more relevance, which potentially demonstrates something more than luck, is if you said: if 'X' then 'Y'. If this causal relationship was repeatable, viz a methodology, well, that is something else again.

jog on
duc

Okay, so you've found two separate articles by two separate people saying two separate things, and those two articles contradict each other. One is saying the low price will last for years, the other gives a high price with far less chronological specificity than I am giving, violating the conditions of your own first example. One of them disagrees with me, the other partially agrees with a part of what I am saying.

Please, if you're going to do stuff, keep it sensible and relevant. I said I would be interested if you found anyone who when I was first saying it said the same thing. You haven't done that at all. Cherry picking 'sort of almost' matches of some of the parts of what I'm saying and stitching them together ignoring them contradicting each other is just plain silly.

It is with great irony that you repeatedly encourage me to continue conversing with you, yet end these invitations with the ironic and condescending message of 'jog on'. By all means, take your own ironic advice and act on it.

Sdajii said:

Okay, so you've found two separate articles by two separate people saying two separate things, and those two articles contradict each other. One is saying the low price will last for years, the other gives a high price with far less chronological specificity than I am giving, violating the conditions of your own first example. One of them disagrees with me, the other partially agrees with a part of what I am saying.

Please, if you're going to do stuff, keep it sensible and relevant. I said I would be interested if you found anyone who when I was first saying it said the same thing. You haven't done that at all. Cherry picking 'sort of almost' matches of some of the parts of what I'm saying and stitching them together ignoring them contradicting each other is just plain silly.

It is with great irony that you repeatedly encourage me to continue conversing with you, yet end these invitations with the ironic and condescending message of 'jog on'. By all means, take your own ironic advice and act on it.

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My point, is that predictions are dime-a-dozen. They may pan out, they may not. Unimportant. Very often they do not, or take unexpected twists, which although they do eventually pan out, make the journey far too difficult. The articles simply illustrate that those two numbers are out there and have been for some time.

That is not however your position. Your position is, stated with great conviction, that price will hit $50 and no lower, then $100 by August, no later. Could do. In the absence of any analysis, simply random luck, of pretty fair probability.

On the other hand you may have a methodology. You don't want to discuss it. Fine. All that needs to be said is: 'I have a methodology, but I'm not prepared to discuss it.' Case closed.

You seek credit for your call and any claims to the opposite are simply disingeneous. To receive credit it has to be more than random luck, which has no skill attached.

jog on
duc

OK let's do a sensible analysis of WTI with proper reasons to substantiate what I say instead of argie bargie bullsh!t. I won't bother with a chart you can scroll back to my last if you really want to. The oil price has fallen below the support line of $55 I drew on my chart. As I said on my previous chart the next major support line that I can see is $42. There is a Fibonacci Retracement line of 61.8% sitting on $45, the 50% Fibonacci line was $51, so at $50.79 the price of oil is just a little bit below F50% . (Ignore this folks unless you are into Fibonacci stuff. It really only means potential support or resistance lines before it goes up or down again).

However the very important indicator I look at if I really want a proper price forcast are the COTS (Commitments of Traders). This is a report issued by Commodity Futures Trading Co in New York once a week for all futures (contracts) in the market. Such as cocoa, wheat, gold, oil, anything which is bought and sold. On one side is the supplier as in farmer or oil producer, so on and so forth. The other side is the buyer like a bakery or a customer who needs oil to refine or whatever. You have sellers and buyers. Then there is a little category of speculators and they tend to be disregarded as having no idea aka prats. The most important figure to look at is the total Open Interest. That means how many contracts have been written between the buyers and the sellers for that week. When the price of oil, is going up then the producers will be selling more as the buyers can see the price is going up, so they want to buy more at the lower price. This is when you will see a lot of OI (contracts). However when the price is falling the buyers buy less because they are waiting for a better price, therefore as the OI falls, it tells you fewer contracts will be opened.
So the important thing to look out for are Open Interest Orders falling or rising. Where you see short sellers they tend to be the suppliers who are selling their wares to those who are going long, the buyers. You must have a buyer to equal a seller. It is a two sided contract.

What causes a price hike or drop? Well the last hike for WTI was a report saying it was going to be an extra cold winter in the Northern Hemisphere. Up went oil for a bit with extra demand and then it settled back down again. However natural gas didn't drop back as that is great for heating. That keeps rising so far.

OK, let's recap briefly, when the price of any commodity goes up = more OI (contracts)when the price of a commodity drops = less OI (contracts).

Now back to the POO (Price of Oil) in the last COT report, the quantity of OI is really falling, now what does that mean again? The POO is going to fall. It really isn't hard. I know not to buy a big jar of coffee until next week when it is on special. It's a woman thing!

If you want to confirm what I say you will need to Google the site Commodity Futures Trading site (it won't let me link for some reason). Make sure you scroll down to "Crude Oil-light sweet WTI. Be prepared for a dreary read!

Right, with all my substantiation I am now going to make a call that the Price of Oil is going to drop. How far down depends on any shock to the market.

Next question, if the POO is falling how come the petrol is going up at the petrol station? Because our dollar is falling so it will cost us more because our dollar is worth less. Why is our dollar falling? Because the price of gold is falling and our dollar is arm and arm with the POG (Price of Gold). Hope that clarifies it a little bit for you?

ducati916 said:

So here are two that I found in less than 5mins using Google. View attachment 90584 View attachment 90585

jog on
duc

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It was only few years back Caltech CEO predicted to go $200 barrel and oil dipped down significantly . Unless OPEC manipulates oil price probably not go nearer to what bank of America predicted. I think.

ducati916 said:

My point, is that predictions are dime-a-dozen. They may pan out, they may not. Unimportant. Very often they do not, or take unexpected twists, which although they do eventually pan out, make the journey far too difficult. The articles simply illustrate that those two numbers are out there and have been for some time.

That is not however your position. Your position is, stated with great conviction, that price will hit $50 and no lower, then $100 by August, no later. Could do. In the absence of any analysis, simply random luck, of pretty fair probability.

On the other hand you may have a methodology. You don't want to discuss it. Fine. All that needs to be said is: 'I have a methodology, but I'm not prepared to discuss it.' Case closed.

You seek credit for your call and any claims to the opposite are simply disingeneous. To receive credit it has to be more than random luck, which has no skill attached.

jog on
duc

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You're really quite a comical character, aren't you?

You may be able to do it, but find me a prediction as specific as a low lower than the current price followed by a high within a specified timeframe, even if it isn't the same one as mine. Sure, predictions are everywhere, and if I simply said "Oil will say in the $xx-xx range for the next 1-6 months" it would be possible due to random chance, but mine is far more specific. I'm not simply stating a one direction target with one time limit. Even in retrospect, find me a prediction this specific any time in the last 10 years which has turned out to be correct. Go on, show us one single example!

Again, the irony of encouraging me to post when it's obvious to anyone smarter than a third wave feminist that I am not going to do so if you stop effectively begging me to is most amusing. I really don't care if you want to behave that way, and I'll probably stop responding if you keep it up long enough, but for now it's still fun to laugh at your posts.

I'd say 'on ya bike' but honestly, I don't care whether or not you stop being silly.

Sdajii said:

You're really quite a comical character, aren't you?

You may be able to do it, but find me a prediction as specific as a low lower than the current price followed by a high within a specified timeframe, even if it isn't the same one as mine. Sure, predictions are everywhere, and if I simply said "Oil will say in the $xx-xx range for the next 1-6 months" it would be possible due to random chance, but mine is far more specific. I'm not simply stating a one direction target with one time limit. Even in retrospect, find me a prediction this specific any time in the last 10 years which has turned out to be correct. Go on, show us one single example!

Again, the irony of encouraging me to post when it's obvious to anyone smarter than a third wave feminist that I am not going to do so if you stop effectively begging me to is most amusing. I really don't care if you want to behave that way, and I'll probably stop responding if you keep it up long enough, but for now it's still fun to laugh at your posts.

I'd say 'on ya bike' but honestly, I don't care whether or not you stop being silly.

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It is clear that you are taking my criticisms to heart and becoming somewhat emotional. That was not my intention, so my apologies.

I look forward to chatting again when oil hits $100 in July.

jog on
duc

Miner said:

It was only few years back Caltech CEO predicted to go $200 barrel and oil dipped down significantly . Unless OPEC manipulates oil price probably not go nearer to what bank of America predicted. I think.

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As Mr Graham said: 'In the short term the market is a voting machine, in the long term a weighing machine."

Even then, in hindsight, with attribution to causation being applied, how accurate is that? Prices are not cardinal, they are ordinal, reflecting momentary values attached.

My attitude is that prices are essentially random. I trade accordingly. I will change my mind very quickly nowadays. In my early days as a trader I thought I could be 'right'. There is no right/wrong, only making money/losing money.

If prices are random, then any number postulated could be correct. Some numbers have a higher 'probability' attached. Once I would have argued that 'negative' numbers were not possible, then the GFC and quantitative easing turned interest rates negative.

Try to catch [a chunk] of the trend, avoid the chop and all will be well.

jog on
duc

Ann said:

However when the price is falling the buyers buy less because they are waiting for a better price, therefore as the OI falls, it tells you fewer contracts will be opened.

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Referring to the entire post not just that bit but that's among the more useful insights I've gained in my entire time on ASF. Accurate information explained in layman's terms. Like it.

As someone who tends to focus on the fundamentals, particularly with oil, you've prompted me to give this whole "technical" caper another look.

On the fundamental side, one issue of relevance is that there are really two "break even" prices for US shale and they are drastically different.

1. Total cost of the whole operation.

2. Cost of continuing to operate a well that has already been drilled.

The latter is a lot lower than the former so we won't likely see existing wells shut in unless the US goes back to production quotas which still "officially" exist but haven't in practice been applied since 1970.

Where it gets complex is that much of the inputs to the total cost are themselves subject to variable market prices. Drilling costs vary with demand and that of course is influenced by the oil price. Lower oil price = less demand to drill wells = cost of drilling comes down since that's also a market with supply and demand at work, it's not a fixed price service.

So something that is borderline at $40 per barrel could well be rather profitable if prices actually drop to $40 since those things that were borderline at $50 will already have failed to proceed, thus lowering the demand for drilling and the cost of doing so.

There are other cost inputs which also have the same underlying dynamic at work in that they are themselves subject to market forces.

This works in both directions of course and tends to add to wild price swings as a result. A well that would be viable at $80 per barrel using present costs won't actually be viable at that point in reality the costs will have increased. It'll be well over $100 before that gets drilled, and then only if the same company doesn't have better prospects for the use of limited finances and drilling rigs.

Then there are things like pipeline capacity. Exceed the limits and you're up for huge costs either to add another pipeline or for road / rail transport instead. That said, if the price drops and other new wells don't get drilled such that production drops then you may find that all of a sudden there is indeed sufficient pipeline capacity now available.

So overall, the costs of bringing a new well into production are highly variable and tend to move in the same direction as the oil price itself. Oil price goes up = cost of adding supply goes up and vice versa. Hence the "momentum" or "herd" aspect applies not only to speculators but to fundamental production costs as well.

Sdajii said:

Well, we've hit the low I was predicting, so I'm right so far. I'll restate my prediction and say it won't drop further (at least not significantly). I'm fairly sure it won't go below $50 again and if so it won't be by much.

It may linger around here around $50/low 50s for a while, or it may not waste too much time, but again I restate my prediction, it will be $100 or close to it before the end of August. Could be earlier, but won't be later.

Not expecting to be taken seriously until it happens, but I'm posting it all so in hindsight you'll be able to go back and read the posts.

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Never say I don't give credit where credit is due Sdaji!

Ann said:

Never say I don't give credit where credit is due Sdaji!

View attachment 90615

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Hahaha! That's pretty funny

Actually, if I gave my reasons you'd call me a conspiracy theorist and call me insane, but the proof is in the pudding, unless you want to believe an unusually specific prediction was a lucky guess.

Sdajii said:

Hahaha! That's pretty funny

Actually, if I gave my reasons you'd call me a conspiracy theorist and call me insane, but the proof is in the pudding, unless you want to believe an unusually specific prediction was a lucky guess.

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I'm surprised to see you back so soon. Obviously you returned to bask in your accolades having become less emotional. Welcome back.

I'm still in the 'lucky guess' camp. However if you can prove otherwise, I'll recant.

jog on
duc

Ann said:

I know not to buy a big jar of coffee until next week when it is on special. It's a woman thing!

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I'm sorry but this in no way resembles reality.

ducati916 said:

I'm surprised to see you back so soon. Obviously you returned to bask in your accolades having become less emotional. Welcome back.

I'm still in the 'lucky guess' camp. However if you can prove otherwise, I'll recant.

jog on
duc

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Your vivid imagination about me being emotional doesn't mean I was. Your posts are consistently most peculiar. Among other things it's bizarre that you feel the desperate need to repeat again and again and again that I'm merely taking a random guess. Thou doth protest too much. Perhaps it's a veiled attempt to extract more information? Who knows?

I genuinely don't care what you think. You are the one continually posting to me, and I guess I respond, but I've never once decided to address you, and I doubt I ever would. Your interest in me is remarkable, whatever the reason.

Sdajii said:

Hahaha! That's pretty funny

Actually, if I gave my reasons you'd call me a conspiracy theorist and call me insane, but the proof is in the pudding, unless you want to believe an unusually specific prediction was a lucky guess.

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No actually I wouldn't Sdajii, I am open to this sort of thing. Sometimes we see or hear things that make one go...hmmm. You just need to be careful not to fall into the rabbit hole. Many years ago when I was in my regular Chinese restaurant full of suits, one I used to go to after going to the stock exchange talks, I overheard a conservative, non piss-in-your-pocket type guy saying matter-of-factly that the gold price would rise after the Swiss had completed the Jewish reparation of gold. I found that fascinating. Sure enough a while later, up went the price of gold. I guess that was inside information but it sort of came out in a conversational manner. Just for the record, I did not act on that information even though I was 100% confident it was fact. An integrity thing for me.

notting said:

I'm sorry but this in no way resembles reality.

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Does at my place notting. I designed my kitchen with a tiny space for dry food storage as I work by a just-in-time stock replacement. I live in the city close to heaps of food markets, so I have the luxury to be able to do this.

The oil price shot up a bit overnight before settling back again, I am wondering if it had anything to do with this piece of news and maybe this was something that caused rumours in the first place, who would know?...


Veteran Energy Analyst Retires, Saddened by Canadian Oil Policy
By
Michael Bellusci
December 8, 2018, 3:36 AM GMT+11

Martin King is spending his final day at GMP FirstEnergy after nearly twenty-two years with the firm, frustrated at the direction Canadian energy policy is going.

Known simply as “Marty” throughout Canada’s oil patch in Alberta, King currently serves as director of institutional research, focusing on oil and gas, where he’s watched Alberta recently mandate an OPEC-style production cut to boost weak domestic commodity prices.

https://www.bloomberg.com/news/arti...alyst-retires-saddened-by-canadian-oil-policy

Perhaps overlooked is that OPEC isn't the only organisation which aims to regulate the price of oil.

The Texas Railroad Commission did that officially from 1891 to 1970 indeed "on paper" they still do it's just that they keep setting production limits above actual production anyway, but they still exist as such.

OPEC of course. They've been around for longer but in became effective in 1973. In more recent times they've gained some non-OPEC allies, most notably Russia.

Alberta (Canada) now seems to have what amounts to its own version of the TRC.

Various others regulate the industry not so much with a price objective in mind but still with the effect of reducing production so as to benefit their own national interests. Norway is an example of that.