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7 Reasons Why Oil Could Fall Even Lower Before Christmas

Tyler Durden's picture




 

Submitted by Matt Smith via OilPrice.com,

Seventy-eight years after Walt Disney released the first full-length animated feature, and seven factors in today’s crude complex are dwarfing crude prices.

Happy – Let’s start off with the good news: retail gasoline prices have dropped below $2/gallon on the national average. Prices have broken below the lows seen earlier in the year, and are now at their lowest levels since early 2009.

While unplanned maintenance in California is causing prices to see a little bit of a bump higher, Texas – the second largest consumer behind California – is seeing prices below $1.80/gallon:

(Click to enlarge) 

Dopey – News flow on the economic data front is particularly sedate today, with German producer prices the main release out of Europe. (They were down -2.5 percent YoY for November, in line with expectations). Tomorrow sees a return to form in the U.S., with a variety of releases, from a GDP revision to housing data, but for now…all is in slumber.

Bashful – While OPEC has been reticent and reluctant to defend its production levels this year, Russia has been unabashedly boosting exports after six years of declines. As refinery improvements have caused less domestic crude demand, this has opened up a window of opportunity for the country to export more.

Crude production has seen a similar trend: Russia has spent much of the year pumping at near-record levels, in an effort to keep its revenues elevated amid an oil price collapse. Azerbaijan has just announced it is abandoning its currency peg, after burning through half of its foreign exchange reserves this year defending its currency, the manat. (Azerbaijan relies on oil for 90 percent of its export revenues). Russia, however, has been able to mitigate some of the pain of falling crude prices by having the ruble weakening at a similar pace:

Grumpy A WSJ article today highlights how the S&P500 Energy index has lost $408 billion from its market capitalization this year – approximately one-quarter of its total value. This miserable move has only accelerated in the last week or so: the index has fallen more than $48 billion since December 16.

Doc – In a show of solidarity, much of commodityland™ this year has sold off with the crude complex. Of these commodity cohorts, Dr. Copper has perhaps been the most faithful. Similar to crude, copper prices are kicking around six-and-a-half year lows, as supply continues to overwhelm demand.

Nine leading copper smelters in China are weighing up deeper production cuts in an effort to bring some balance to the market. Nonetheless, some Chinese importers have already reduced bookings of term shipments on the expectation of lackluster demand next year.

Sneezy – The old adage that ‘when the U.S. sneezes the world catches a cold‘ seems these days to be just as applicable to the world’s second largest economy, China. Chinese leaders have just approved an economic blueprint for next year which places emphasis on fixing industrial overcapacity and the current property glut, amid their acknowledgement that China is heading for a potentially prolonged slowdown.

Sleepy – As we approach the lifting of Iranian sanctions in the coming months, its oil industry is set to awaken once again from its recent slumber. This is typified by an apparent deal just made between Iran and India, in which Iran will supply oil to India at a steep discount, as well as offering other buying incentives, as it looks to rebuild its market share from its recent stymied levels.

 

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Mon, 12/21/2015 - 15:17 | 6949958 Looney
Looney's picture

Dopey… Isn’t he one of them Saudi Royal assholes?  ;-)

Looney

Mon, 12/21/2015 - 15:37 | 6950028 froze25
froze25's picture

I thought all of the Saudi "Royals" were assholes? Well there is like a thousand of them so one must be an alright guy.

Mon, 12/21/2015 - 15:41 | 6950043 Son of Loki
Son of Loki's picture

"Dear Valued Infidels, Looney and froze,

 

We have scheduled both of your beheadings for Tuesday Morning 8 am, sharp!

 

Please be on time since the beheaders have a long day tomorrow and the Beheaders Union of Saudi Arabia forbids they work beheading after 5pm.

 

Thank you for your cooperation.

 

Sincerely,

Abdulla B. Header"

Mon, 12/21/2015 - 15:17 | 6949959 KnuckleDragger-X
KnuckleDragger-X's picture

Well, according to Saint Krugman, with all this massive supply sitting around, demand should show up any time now...I can hardly wait.......

Mon, 12/21/2015 - 15:27 | 6949970 alexcojones
alexcojones's picture

Back in the late 1950s gas stations gave green stamps with each purchase.  And free road maps. Of course gas was 29 cents for a long time.

BTW, Phoenix will be having a "Single shooter" drill tomorrow, December 22. Just in case it goes "live" somehow.

Mon, 12/21/2015 - 15:27 | 6949996 One of We
One of We's picture

Gramps told me about paying $0.10/gal and the station threw in a burger and a coke if he filled up....

Mon, 12/21/2015 - 15:52 | 6950079 Jayda1850
Jayda1850's picture

A dime was made of 90% silver back then. True value has  not really changed that much, but we gave up the idea of true value to embark on the proven to fail system of fiat.

Mon, 12/21/2015 - 15:59 | 6950116 Joe Sixpack
Mon, 12/21/2015 - 15:32 | 6950011 Joe Sixpack
Joe Sixpack's picture

Santa- Santa is nice and brings gifts to all. 

Mon, 12/21/2015 - 15:36 | 6950025 silverer
silverer's picture

Ho, ho, low!  Merry Christmas!

Mon, 12/21/2015 - 15:40 | 6950038 Falling Down
Falling Down's picture

We all know what that means.

Moar war!

Mon, 12/21/2015 - 15:45 | 6950052 Son of Loki
Son of Loki's picture

Jobs drying up in Texas oil industry as gas prices drop

 

 

HOUSTON --With the price of gas dropping below two dollars a gallon in Houston, Peyton Gregory is saving money at the pump -- but low oil prices also cost her her job.

 

She was laid off from the hiring department of an oil services firm ten months ago.

"It takes two months of part-time work to equal two weeks of pay for what I was receiving at my full-time job."

http://www.cbsnews.com/news/jobs-drying-up-in-texas-oil-industry-as-gas-prices-drop/?ftag=YHF4eb9d17&ref=yfp

Mon, 12/21/2015 - 16:02 | 6950128 FreeShitter
FreeShitter's picture

Wait till Iranian oil comes online.....

Mon, 12/21/2015 - 16:18 | 6950207 db51
db51's picture

With all this gloom and fucking doom...all I really care about is whether people are going to quit eating as much which would negatively effect the 150K buishels of corn, soybeans and wheat I have in storage on farm that is below COP already.   Is it time to go short Walmart Scooters?

Mon, 12/21/2015 - 16:22 | 6950234 Who was that ma...
Who was that masked man's picture

Number 8)    Trump quits using Vaseline as a hair-styling gel.

Mon, 12/21/2015 - 16:23 | 6950236 Davilis
Davilis's picture

Long USO at 10.61. Eat me.

Mon, 12/21/2015 - 16:37 | 6950315 kaboomnomic
kaboomnomic's picture

Oh, oil WILL BE lower alright. But not this year. Next year.

Mon, 12/21/2015 - 17:59 | 6950616 EINSILVERGUY
EINSILVERGUY's picture

$1.58 here in Houston for regular $2.05 for premium

Mon, 12/21/2015 - 18:37 | 6950696 The Spanish Amb...
The Spanish Ambassador's picture

Its .20 cents a gallon here in Salisbury MD. The other $2 a gallon are for taxes.

Mon, 12/21/2015 - 21:20 | 6951181 are we there yet
are we there yet's picture

Peak oil has lost any crediblity. Also, anything that world leaders say that is broad, sweeping, and simplistic like global warming is overstated. Politicians, lawyers, central bankers, and lobbyists are of greater threat.

Tue, 12/22/2015 - 02:52 | 6951984 shining one
shining one's picture

Because it's being deliberately pushed down ?

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