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Key Signals That Oil Prices Are On The Up
Submitted by Nick Cunningham via OilPrice.com,
Oil prices are showing some signs of life as key indicators start pointing in a bullish direction.
One of the big indicators to watch that will determine which way oil prices are heading is the rate at which oil producers are storing oil. As U.S. shale production surged in recent years, and demand began to slow, oil was increasingly diverted into storage. The U.S. saw oil stockpiles explode to their highest level since at least World War II over the last six months.
The big question is when demand will sufficiently pick up and/or supply will sufficiently decrease so that those inventories stop rising. The speed with which inventories are increasing has indeed slowed a bit. Two weeks ago, there was a rise of just 1.3 million barrels, one of the lowest levels in months.
PIRA Energy Group, an energy research firm, is convinced that the oil markets have turned a corner. “PIRA believes that vast majority of the bearish news is already out and that the price lows for global crude oil markers are in,” the company wrote in its weekly energy recap. PIRA predicts that the oil stock build will peak in May and then start to decline somewhere between June and August. U.S. oil production is already showing signs of decline, demand is picking up, and even a flood of Saudi oil has been swallowed by markets. Oil prices have risen by nearly 30 percent since March, and have appeared to stabilize for the time being (WTI in the mid-$50s and Brent in the mid-$60s). “The magic of price is working to tighten oil markets and higher oil prices are in the offing,” PIRA concluded.
Another indicator to watch is the price of refined products versus the price of crude oil. If the spread between the two widens, as it has in recent weeks, that suggests that consumers are using more gasoline and crude oil prices have not caught up. Driving season in the U.S. is drawing near, so demand for more refined products will continue to rise. That should put some upward pressure on crude oil.
Of course, there are countervailing data that push back the idea that oil prices will continue to rebound. There is a backlog of wells waiting to be completed – a “fracklog” – that will bring a rush of new production online when completed. WTI rising to $65 per barrel could result in an additional 500,000 barrels per day in production. Bloomberg Intelligence says that there are more than 4,700 wells awaiting completion. If and when they are brought online, WTI could drop once again.
Then again, supply and demand fundamentals are obviously not the only determinants. Geopolitics has a way of upending any carefully crafted projection. Iran reportedly fired shots across the bow of a cargo ship near the Straits of Hormuz. One of the most critical waterways for oil trade in the world, the Straits of Hormuz is a mere 21 miles wide at its narrowest point. An estimated 17 million barrels flow through the narrow passage out of the Persian Gulf, or 30 percent of the global maritime oil trade. Iran seized a cargo ship that hailed from the Marshall Islands, and although fears subsided after it became apparent that it was not targeting a U.S. ship, the U.S. Navy did send a Destroyer to patrol the waters.
The incident did not have a major effect on oil prices, but is illustrative of what a major market mover could look like. Geopolitical events can act with utter surprise that could take oil markets by hold at a moment’s notice.
We had another “above ground” example in the past week. Striking workers at a key oil field in Libya shut down production. Although some Libyan fields have been hit by violence, the latest dispute was one over wages. The El Feel field, with a capacity of 140,000 barrels per day in production, was briefly shut down due to the strike, but has since restarted. Libya, though, is still only producing about 250,000 barrels per day, sharply lower than its 1.6 million-barrel-per-day potential.
Oil prices have sort of plateaued after rising from their March lows. The path forward from here, though, is unclear, but the latest data points to a higher prices in the weeks and months ahead.
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Bullshit...but than what isn't ...HFt's pumping up price...
Auto sales drop.. oil prices up.. what part of the narrative am I not getting?
Now that ZH wrote the article, oil price is going down again.
No, Zero Hedge published an article written by a contributor. They didn't make a call either way.
they did before, what happened to $20 oil from Cushing storage lol
What few people that still have jobs are probably going to re-evaluate the cost effectiveness of transportation.
"Free Shit for everyone!"
(Hitlerys new campaign slogan)
Hahahaha, going long on oil was the easiest trade in the last 5 years.
And all the typical momo’s who miss out on every profitable trade got it wrong yet again.
and oil will be at 70 this year, 100 next year.
all commodities will get shit on this summer, they will not shut in fast enough to maintain pricing.
So, as the real economy implodes, we should see oil prices rise right?
when you lose 50%, you need to gain 100% to break even... not even close...
http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=2y
lol, suck it mr. down vote man... hahahahahaaa...
http://www.nasdaq.com/markets/crude-oil-brent.aspx?timeframe=2y
Instead of doing all that research you could have simply looked around at gas prices over the last month, which have ticked up about 10%.
There isn't as much correlation with oil to gas. In the weeks ahead, you will see stories that gas prices are up because of the switch to the summer blend, despite the high volumes of oil stored and still being pumped.
Then you have the summer vacation driving season as another excuse. Then gas crashes.
Talked to an oil guy.
Summer Blend means they dump a little extra Benzene in it.
After that, they will be down for 'refinery maintenance'.
SSDD.
Unconventional is still going to peak in the near term.
Just in time for serfs that can actually afford to get away, higher prices! Yeah!
Just smile and wave boys, just smile and wave.
Central banks bidding oil contracts to create inflation - nice loss for the SNB last quarter - to the tune of $30B - too much intc, googl or lnkd inventory to keep the NDX propped up - fucking gubbamint banksters!!!
Precicely. Someone is loading up on the glut while it's cheap, only to sell when the price goes up. Follow the money bitches!
Can we just ban all articles from Oilprice.com. Mr. Oilprice went long WTI at some price higher than now and got his ass handed to him and wants to try everything he can to get the price per barrel back up.
Tell me again what has actually got better regarding oil fundamentals since the price collapse that started last June? I see more oil in storage than ever, a weakening global economy, a collapse in everything production related, and in general nothing that supports higher oil prices.
Bringing up the summer driving season myth is the first thing that leads me to believe everything coming out of that site is pure bullshit. Oilprice.com is nothing but a peak oil propaganda blog. They won't be happy until WTI trades at $2000 a barrel.
Yes. When was Oilprice ever right about anything?
These are the peak oil Greenies, who still have not admitted that fiasco.
Enough knee jerk stupid already.
Isn't that like Zero pooing on the S&P since under 900? How's that worked out so far? Wouldn't want to have a balanced exposure to opinion... you might actually make some money for once.
It is the strong economy stupid.
Whocouldaknowed? :)
How else will they be able to boost GDP higher this quarter?
What are these supply/ demand fundamentals words this guy is talking about.? In a centrally planned world prices become distorted fundamentals as well as true price discovery goes out the window Paul Krugman style.
the obession with the $47 handle was my favourite
Hunter Biden says he wants prices up so he can frack the fuck out of Ukraine.
Not that putz, it's the new China-Pacific 'risk premium'
"US to move advanced weapons systems into the Far East"
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150501000135&c...
Well that's just great. Guess I'll go joggin and study my Moby Dick this weekend.
I just flew in and out of the shithole otherwise known as the Bakken, after discussions, reading the local rags etc I found out the following for what it's worth.
1) There is not a single rig within 50 miles of Dickinson (makes sense they were on the periphery, center of proven stores was near Watford City) Minot seems to be following suit.
2) Although the bloodbath ensues, small companies that are servicing workover rigs are the least affected and by numerous accounts actually busy.
3) They are shutting in wells "to save on maintenence"
4) The Bakken is still a shithole.
Nuverra/ Power Fuels is a company to watch in my opinion. The company was started by a local who partially sold out to some NeoCon (I can't remember if it was Cheney, Dole or who, maybe someone here knows). They are connected and well located. They have been shuffling people from the periphery but are not laying off.
Bakken is going to be a hole just for the location, the extra transport costs to ship the oil elsewhere means they are never going be economical compared to Permian Basin or Eagle Ford
True, although they have spent a fortune pipelining the hell out of the area. I'm trying to find out how much capacity the new pipelines as well as the ones that are still under construction will have. I think this whole boom was sold to congress as a necessity based on national emergency. Watching the whole thing go down.. everything was just wrong and the motivations behind it all are still not clear.
Pronosticos sobre el futuro del crudo CL
http://www.aseperfi.com/net/aatricnl/inftricmlcl.htm
Saludos
Juan Gajete
My latest data points to lower prices in the weeks and months ahead.
Oil-fund outflows bode ill for prices
27 April 2015, by Nicole Friedman (MarketWatch)
http://www.marketwatch.com/story/oil-fund-outflows-bode-ill-for-prices-2015-04-27
Oil at $65 Could Free 500,000 Barrels From Shale ’Fracklog’
24 April 2015, by Lynn Doan and Dan Murtaugh (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-24/oil-at-65-seen-freeing-half-million-barrels-from-shale-fracklog
Oil Prices Won't Recover Anytime Soon Says Exxon CEO
23 April 2015, by Nick Cunningham (Zero Hedge)
http://www.zerohedge.com/news/2015-04-23/oil-prices-wont-recover-anytime-soon-says-exxon-ceo
U.S. Shale Fracklog Triples as Drillers Keep Oil From Market
23 April 2015, by Lynn Doan and Dan Murtaugh (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-23/u-s-shale-fracklog-triples-as-drillers-keep-oil-out-of-market-i8u004xl
Oil Companies Are Getting a Second Chance in the Bond Market
22 April 2015, by Sridhar Natarajan, Cordell Eddings and Asjylyn Loder (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-21/oil-firms-find-debt-reprieve-in-u-s-as-buyers-binge-on-bargains
Saudi Arabia Adds Half a Bakken to Oil Market in a Month
16 April 2015, by Grant Smith (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-16/saudi-arabia-adds-half-a-bakken-to-global-oil-market-in-a-month
BP CEO warns oil could stay low for few years
16 April 2015, by Sarah Kent - London (MarketWatch)
http://www.marketwatch.com/story/bp-ceo-warns-oil-could-stay-low-for-few-years-2015-04-16
Oil Production Jumps in March Even as U.S. Drilling Collapses
15 April 2015, by Rich Miller (Bloomberg)
http://www.bloomberg.com/news/articles/2015-04-15/oil-production-jumps-in-march-even-as-u-s-drilling-collapses
U.S. crude oil output to soar till 2020 despite price rout: EIA
14 April 2015, New York (Reuters)
http://www.reuters.com/article/2015/04/15/us-usa-oil-outlook-idUSKBN0N51YD20150415
IEA sees sharp rise in Iran oil output in 3-5 years post nuclear deal
12 April 2015, by Nidhi Verma - New Delhi (Reuters)
http://www.reuters.com/article/2015/04/12/us-iran-oil-iea-idUSKBN0N30RD20150412
Here’s how Iran could prevent a rebound in oil prices
9 April 2015, by William Watts - New York (MarketWatch)
http://www.marketwatch.com/story/heres-how-iran-could-prevent-a-rebound-in-oil-prices-2015-04-09
Saudi pumps up oil production to record high 10.3 million bpd
8 April 2015, Riyad (Reuters)
http://uk.reuters.com/article/2015/04/07/saudi-oil-record-idUKL2N0X426Q20150407
Oil prices to stay lower for longer, says Goldman Sachs
7 April 2015, by Sara Sjolin - London (MarketWatch)
http://www.marketwatch.com/story/oil-prices-to-stay-lower-for-longer-says-goldman-sachs-2015-04-07
Bulls focusing on oil, meanwhile the economy is going 1929....