Is $40 WTI Now More Realistic Than $60?

Tyler Durden's picture

Authored by Tsvetana Paraskova via OilPrice.com,

The current rise in oil prices is more of a fear trade right now, driven by fear of what is going on in the Middle East, rather than a result of growing OPEC chatter or inventory reports, Todd Horwitz, chief strategist at Bubbatrading.com, told Bloomberg on Wednesday.

“The oil premiums are very narrow going out to the future, which means that this is more of a fear trade in the front month,” Horwitz said on ‘Bloomberg Markets’.

 

“To me, this is more of just another farce of what OPEC is trying to do, and trying to push these prices higher,” the strategist noted.

OPEC and its non-OPEC partners in the production cut deal are scheduled to meet in Vienna on November 30 to discuss the extension of their pact.

While just a month ago a nine-month extension to the end of 2018 was the base case of all analysts, now there are growing voices that OPEC may delay the decision to early next year. The constant OPEC chatter and the return of some geopolitical risk premium in oil prices - with Saudi Arabia’s purge, heightened Saudi-Iran tensions, and the Iraq-Kurdistan standoff - have pushed oil prices to their highest in two years over the past few weeks.

According to Horwitz, however, the WTI price has little room to rise from its current price of around $58 per barrel, because U.S. shale will return stronger.

There’s a better chance that WTI prices will drop to the low $40s than they rise to the low $60s, Horwitz said.

“I would think that the rigs will be back in the fields and the shale producers will be pumping it out like crazy at these levels,” Horwitz said.

On Wednesday, Baker Hughes said that the number of oil and gas rigs in the United States rose again this week.

The boost in the number of active oil rigs this week brings the total gained in November to 10—the first monthly gain since July. Oil and gas rigs combined were up by 14 in November—also the biggest increase seen since July, in a sign that drillers are once again eager to add rigs after scaling back in August.

Additionally, from a technical perspective, Bloomberg notes that the rally in U.S. West Texas Intermediate crude may be losing steam.

Front-month futures are nearing the upper limit of the Bollinger Band, a sign that they are approaching overbought territory. Stochastics, an indicator of momentum, and the relative strength index also show the advance has probably gone too far. WTI’s gain is being driven by concern that an outage in the Keystone pipeline will disrupt flows from Canada and tighten supplies at the storage hub in Cushing, Oklahoma.

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The Greek horse's picture

I don't think so i see it going to 65$ then coming down to 50$. but lets wait and see what GARTMAN has to say about it?!?!

FreeShitter's picture

It will prob hit 80 next year.

skbull44's picture

Total US energy independence...any...minute...now...

https://olduvai.ca

MonetaryApostate's picture

You guys can speculate price discovery all you want, I'll be sitting here looking at my fake money wondering, what difference does it make?

https://plus.google.com/+GaleInnes/posts/CdLuBK4GcMy

Nobodys Home's picture

We have come to the conclusion that our position is once again basically wrong so we have re-adjusted our portfolio to be wrong again thus continuing our long term strategy.

The Greek horse's picture

68 dollars is a good supply level and retrace back to 52 dollar range and then up to 75$ another supply level from a technical point of view.. Shit I don't think fundamentals matter anymore at least for me.. Excluding a major WAR in which case back to 100s of oil a barrel.   

SwapThis's picture

One well placed rocket attack in KSA oil fields or several other spots in ME could get us to $100 very quickly.  That pot is on the boil and still a lot of things that can go bad quickly no?

MGTOW_MONERO_XMR's picture

Who cares, as long as they keep this ship sailing I'm happy in the short term

Yen Cross's picture

  I almost shorted CL yuuuge earlier today. Thankfully, I don't "window shop" anymoar.

  CL and Brent are both due for some attitude adjustment, and I think the $usd is going to strengthen into December.

Ms No's picture

All that depends on whether SA and Iran start blowing the shit out of each other. 

 

EBT excepted's picture

y’alls ca start wid dat raghead ovah dey...

debtor of last resort's picture

Range bound bitchez. Forget about it.

NDXTrader's picture

60 to 55 to 70 by year end

Indelible Scars's picture

That is roughly 37 days. Don't bet too much on it. Or, do. DILLIGAF?

roadhazard's picture

Shale and fracking are the GREAT oil price moderators.

 

I keep that on speed dial.

Dreedle's picture

Yes but it goes deeper than that.

Davidduke2000's picture

squeezing rocks to oil few drops of oil is not only destroying the water tables, it is endangering the crust and will cause huge earthquakes, but all that does not matter, live day by day. 

Catahoula's picture

Getting bullish oil for first time in a long time

Indelible Scars's picture

This Earth is floating on oil. It will never go away until the Earth itself implodes. Of course, nothing is out of the realm of possibility but the universe is so perpetual, don't count on it happening any time soon.

A1 T's picture

By now any oul traders on hedge know who the analysts are who have correctly predicting oul. Shitwave has been on dead. Shepwave shitwave. Same thing.

Nobodys Home's picture

Oh. You mean Shempwave! Eeep pee pee peep. The niece is nice!

Dreedle's picture

So far Schlepwave and the man of  mystery  oil insider are the only ones calling crude oil.  Did you see their reports for Monday yet?

AlphaSeraph's picture

WTI is now 58.97USD. If the likelyhood that it goes to 40 is higher than 60, this analyst is effectively calling for an economic/market collapse that starts on Monday.

That's one hell of a ballsy call.

Tugg McFancy's picture

Why do you keep publishing this shit? Oil price are fucking idiots.

It's damn obvious there's no record production given the difference between the weekly and monthly numbers and the EIA will be forced to revise their 2017 exit rate, guess what happens then. The shale recovery has been a bust.

US production has been near flat since April.

pitz's picture

Shale isn't profitable at even these levels, so I don't see how it would fall that much more.  Yes, a producers, desperate for cashflow, are going back and completing wells previously drilled before the bust, but even $59 is hardly sustainable.  

truthalwayswinsout's picture

Fracking is becoming cheaper and more productive all the time.

It is more probable that prices will hit $10. Power is transferring from the Middle East to US-Canada as they are the most reliable suppliers and produce the most oil between them.

pitz's picture

Its only getting cheaper because little of it is being done, and the service providers are depleting their capital to keep themselves alive.

 

 

Harry Lightning's picture

Oil and all other commodities are very close to beginning a major downtrend that will characterize the first half of 2018, and perhaps the entire year. I don't know about $40 a barrel, but I think its a good bet that oil will hit $50 before $70, and that the next really big move in oill prices will be down rather than up. Economies are pushing the upper end of their limits and already three major Central Banks are well into tightening cycles. Chna is in a debt trap which is causing its interest rates to rise as its economy slows. A reflection of the underlying problems that are starting to reveal themselves across the rst of the global economic tapestry.

This combination of events never ends well. What is feared most always comes to pass, and what is most feared now is how will Central Banks respond to a 20% drop in global asset prices without adding more fuel to the fire that burns whatever credibility they may have left. Markets exist to test, both prices and policies. The global financial and commodity arena now will proceed to test the resolve of Central Banks to slowly lt air out of the balloon they have inflated, to see if the slow approach becomes a rout. 

Whether they succeed with the slow approach or succumb to circumstances beyond their control, asset prices will be coming down during the next six to eight onths and maybe longer. As such, oil prices will fall along with grains and energy. Initially bond prices may increase, but the resultant liquidity crunch as Central Banks refse to give in to the deflating balloon will cause investors to liquidate bond holdings to pay for leveraged losses in other instruments. 

So criticize this author if you must but remember what he is predicting, because he's probably going ot be proven correct.

king leon's picture

China and Russia have the rest of the other oil producing countries by the bollocks. In 2018 russian oil/gas pipeline comes on stream. China will become an exporter of Russian Oil to the rest of the Far East all the way down to Australia, trade free from the Petrodollar.  

dunce's picture

40 dollar oil has them at each others throats instead of ours. 60 dollar oil gives them more monery for mischief.

Davidduke2000's picture

it hit $60 yesterday during the day to settle at $59. this article is moot already.

DaiRR's picture

Oil will squiggle higher until solid state electrical storage is perfected.  Then "watch out below."