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More Thoughts on the Current Oil Market
By EconMatters
WTI surged to close at $56.01 a barrel on Wednesday, while Brent closed at $62.86 after the US crude oil inventories showed a 'less-than-expected increase'. The latest weekly inventory (week ending April 10) from EIA showed an increase of 1.3 million barrels, much less than the 10.9 million barrels of build from the previous week. The report also showed that total motor gasoline inventories decreased by 2.1 million barrels, while distillate stockpiles rose by 2.0 million barrels.
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Chart Source: Nasdaq.com Apr. 15, 2015 |
Inventory Build Is A Buy Signal?
I'm not sure exactly when and how market players started equating a 'less-than-expected oil inventory build' with a buy signal. This to me merely suggests a slowdown of crude oil production increase, hardly a reason to buy up the market.
Furthermore, the inventory build in distillate, which is used primarily in industrial activities, seems like a sign of weaker broader U.S. economy, which could mean the gasoline inventory would start to build again.
Shale Output To See Its First Decline in 4 Years
Indeed, the U.S. shale oil industry is starting to feel the pinch from lower oil price, down ~60% since 2H14. Another EIA report already predicted U.S. shale will see its first monthly production drop in 4 years this May.
Read More >> Thoughts on the Current Oil Market
Among the five major U.S. shale oil regions, the Niobrara formation, northeast of Denver CO, will lead the month-over-month decline, followed by the Eagle Ford shale in Texas and the Bakken formation in North Dakota, while output from the Permian in Texas and the Utica in Ohio is expected to rise in May.
Oil rig count has been dropping like a rock since 2H14 when oil market turned bearish , and it looks like well inventory has been sufficiently depleted to finally make a dent on production.
% Change Since January 3, 2014
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Chart Source: BofA via Business Insider, April 14, 2015 |
Shale Drillers Are More Resilient Than Expected
However, the advance in oilfield and oil and gas upstream technology has brought tremendous increase in productivity and efficiency in the U.S. shale industry, which means shale drillers, now in survival mode, are more resilient than most people (including Saudi) originally thought. If oil prices stabilize at or above current levels, expect drillers to move in again, rig count and production would quickly recover.
Read More >> Cushing and Gulf Coast Storage Filling Up Fast
OPEC Still Flooding The Market
So overall, the signs are mixed in the U.S. oil market. Outside of U.S., geopolitical tension is still high in the Middle East -- escalating fighting in Yemen, and Iran nuclear deal is still pending. Meanwhile, almost like repenting the oil geopolitical premium put on by a Saudi-led campaign of air strikes against Iran-allied Houthi rebels at Yemen, OPEC pumped 31.02 million barrels per day in March, near a two-year high, pressuring any positive sign from demand or anywhere, for that matter. In a way, Saudi is trying to delay or put a stop to the ongoing energy switch and substitute due to decades of high oil prices.
Iran Could Replace U.S. Shale Cutback
The production cutback by U.S. shale could be interpreted as a positive sign for oil prices in the short term, but the loss from U.S. shale could easily be offset by the increase in Iranian oil export since Iran nuclear deal is expected to have a formalized plan by mid-year.
China Sputters
For the longest time, China has been one popular excuse cited by Oil Bulls. Yes, China was on its way to replace the U.S. as the world's largest oil consuming nation, but the growth engine is now sputtering. This was confirmed when China saw its economic growth slow to 1.3% in 1Q15, compared with growth of 1.5% in the previous three quarters.
$900Bn Wealth Transfer by Cheap Oil
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Graphic Source: Bloomberg.com |
Lower energy prices means lower energy costs for the net oil importing countries while many oil exporting countries inside and outside OPEC are hurting. The IMF estimated in December that the oil price crash could bring in 0.7% GDP growth worldwide. Bloomberg crunched the numbers and came up with a map (above) so we know who gets what and how much. According to Bloomberg,
Net oil importers like the U.S., Europe, and Asia are getting a nearly $900 billion economic stimulus from cheaper oil prices. The Middle East and Russia are the ones getting stuck with the bill.
In other words, cheaper oil has initiated a wealth transfer effect of about $900 billion a year between net oil importers and oil exporters reversing decades of historical trend. The U.S. alone gets $180 billion, and Europe and Asia (i.e. China) are even bigger beneficiaries of this wealth transfer by cheap oil.
Lower for Longer?
So in the grand scheme of things, I agree that oil prices, just like rig count, should become 'lower for longer" until a supply or demand shock triggered by, for example, another financial crisis, or shale oil becomes depleted / dried-up (shale typically has accelerated declining production curve, so this scenario is quite plausible). Nevertheless, the wild card would be the OPEC meeting this June amid mounting pressures from some OPEC members for some kind of coordinated production cut.
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Lots of stuffed channels
And u know the gov promised when they built the strategic oil reserves that they wouldn't use it for fascist gov market manipulation of the markets but shit like a promise could stop them.....
But the they've stuffing channels in all kinds of industry trying to make this economy look better than it is on all bad news good.....
But my rattlesnake portfolio paying today....
It's the regional instability that is keeping the price from dropping to where it belongs - in the $20s. That only delays the inevitable. Iranian oil will soon hit the market, the US will begin drilling off the continental shelf, and Mexico's PEMEX will be jumping back in too.
The OPEC meeting in June? Bawahahaha. Bullshitters Bullshitting Each Other.
The price has nowhere to go but DOWN.
It's the regional instability that is keeping the price from dropping to where it belongs - in the $20s. That only delays the inevitable. Iranian oil will soon hit the market, the US will begin drilling off the continental shelf, and Mexico's PEMEX will be jumping back in too.
The OPEC meeting in June? Bawahahaha. Bullshitters Bullshitting Each Other.
The price has nowhere to go but DOWN.
It's the regional instability that's keeping the price where it is. Still, you'll soon have Iranian oil on the market, the USA will begin drilling off the continental shelf, and Mexico's PEMEX will be jumping back in too. Go on, keep deluding yourselves that the price will hold.
The OPEC meeting in June? Bawahahahaa. A Conference of Bullshitters Bullshitting Each Other.
The price has nowhere to go but DOWN.
Lol here we go again exposing these baffoons is quite entertaining as i said they would attempt the spinning to flatten the price curve cause everyother lie from rig count to well prod has failed to fill cushing....so now its the future beyond mkt gettjng balanced....this was predicted 2 weeks ago by me. Hey did u see that the Bakken has concentrated rigs and drilled more wells only to see prod fall? Here is another prediction as this foreshadows as operators concentrate all resources in most productive low cost regions they will get depleted in next 18 months further pressuring prices higher if price curve remains around 60...
So...we have seen two enormous movements of wealth transfer since the Lehman moment occurred :
1° 20 trillion $ transferred (albeit in paper denominated wealth for the greater part (70%)) from the 99% to the 1%; all due to FED and Banksta collusion and subsequent Casino "carry trades" and currency wars. The rich have gotten much richer piggy backing on the banksta scams. With 6 T $ worth of additional cash wealth sloshing around in corporate and pension fund cum shadow banking accounts-- parked for the majority in tax havens. This has been the greatest rip off of the century and probably of all time.
2° Now that the Oligarchy cabal that runs this show have a problem loading the ever increasing debt on the first world government ledger and on the hyper-consumer, the Oligarchs have started to pull the rug from under each others' feet. Its tuff to keep the real economic curve from hitting the asymptote even if you throw all the paper money at it that the CBs can fabricate.
No kidding Ben and Alan G, you made this global scam now into a perpetual John Galtian fake machine with all the bankstas deep upto their dirty necks, wallowing like whales on the beach when the market belches its pain of unsustainability and throws a victim in the twilight of the ebbing tide to lie there in the morning glow of new dawn's reality.
This has now resulted in the systemic and suicidal currency and financial wars spilling over into the QUEEN BEE energy sector of Pax Americana made world nexus : The ME golden oil patch and its rivals in Russia, shale America and Canada. Dear Henry's game is now being shown up warts n all.
What you sow you now reap Oligarchy and the intricacy of this petrodollar construct, its inherent simplicity for 40 years of US hegemony around the DC/Riyadh axis based on "your wealth denominated in our petrodollar denominated money and placed in our WS assets" is coming apart.
900 billion wealth transferred (since what, 6-9 months?) from the resource rich to the first world consumer market kings. The Oligarchs are now robbing each other!
All the while the global casino is now like the Titanic, cracking at the seams as the rip tide of financial tsunamis loom on the invisible horizon of the HFT pumped electronic money IOU mountain of structured CDO and CDS steroid pumped derivative Godzilla market.
RuitenVrouw: "De internationale gemeenschap moet dringend tussenkomen om een einde te maken aan het systeem 'Liegen om te Leven'".
http://www.nrc.nl/nieuws/2015/04/16/opmars-al-qaeda-in-zuid-jemen-vice-p...
Kinderombudsman Marc Dullaert is niet op de hoogte dat na het officieel uitrollen van de 'Logica van de 1' kinderen en ouders gewoon hun vraag kwijt kunnen op de site van Stichting Met Elkaar.
http://www.waarheiddelen.nl/wereldformule.html
Veel gemeenten hebben al wijkteams opgetuigd, maar die hulpverleners zijn nog niet thuis in het MensBeeld "Bewustzijn = geweten * Intuïtie * (E/mc^2(t) - geweten)". Doordat het systeem 'Leven en Laten Leven' nog steeds niet operationeel is moest Dullaert wel schrijven dat "de teams de noodzakelijke deskundigheid” ontberen.
http://www.volkskrant.nl/binnenland/justitie-start-onderzoek-naar-uber~a...
Natuurlijk wil het ministerie van 'waarheidsvinding en verzoening' ook erachter komen hoe het algoritme van Über werkt en dus wordt deze 'vijandige organisatie' gecriminaliseerd. De manier van het KAPITAAL om de psychosegelovige contracten met netwerk WitteGejT te verdedigen.
tulip juice?
too right
nice summary of too many wolves and not enough deer and moose. may darwin have a say in the matter?
Darwin is popular, eh? I think he would point out that predators are more dependent from their prey then prey from predators
further, I think he would disown "Social Darwinists". just saying
Lol, next you'll be telling them that Adam Smith would disown the "free hand of the market" if it were DEVOID of ethics or morality...Oh, the wealth of nations!
Crudo pronosticos matematicos sin comentarios de texto http://www.aseperfi.com/net/aatricnl/inftricmlcl.htm
so many market commentators and so much ignorance... the gasoline drops at this time of year because the blend is different for summer and winter.... thus the winter stock is run down before the summer stock is built up......
Look at this oil price hiccup (correction) as a small reversal which wipes out some speculators who were banking on the continuing uptrend in world prices. [under the NWO, if you are not part of the cabal, you cannot participate in excessive profits made possible by our market manipulation]. Concurrently it removes the incentive for switching to more sustainable energy sources, which keeps the oil exporting countries in charge for a few more years. Lowering the US trade deficit is a side benefit. This is a large example of the power of the cabal to control all 'markets' for their financial benefit. (there is more, but dinner calls)
Fishhawk
Shale industry sold out by your own goverment!
Everybody better go on vacation this year, otherwise traders bonuses might be hurt and we can't have that....
Yeah, the price could indeed continue it's current trend, unless the trend levels off or changes direction. Then again, the trend could auto-perpetuate unless interrupted by an unexpected event. Even also possible, the trend could morph into random noise.
A shooting war in Saudi will solve all the oil price problems. The market may simply have priced that in.
I promise you the oil market has not priced in a war in Saudi Arabia, not that I'm expecting one.
Better thoughts on the oil market:
http://www.debtcrash.report/entry/oil-price-drop-root-cause-analysis