Oil Price - Jan 11

Oil Price - Jan 11

Postby dan_s » Fri Jan 11, 2019 2:20 pm

Investing.com - Saudi Arabia's vow to "rebalance" the oil market -- meaning to bring prices up again from last year's lows by slashing production -- appears to be working with crude futures headed for their biggest weekly gain in at least six months. But Friday's trading itself was down as investors took profit on a near uninterrupted rally since the start of 2019. Some of the selling also came on concerns that the Chinese economy could see one of its slowest growth years in nearly three decades, partly marring the bullish narrative.

Oil is by far the most actively traded commodity. Did you know that there are many more oil futures contracts trading hands each day than all of the metals combined, including gold and silver?

Most of the oil futures are traded by computers. There is normally profit taking on Friday after a big run up.

Oil never goes up or down in a straight line.

Brent crude rose 6.4% on the week, its largest weekly advance since April.

Just three weeks back, oil was in a bear market, with WTI down 40% on Christmas Eve from four-year highs hit in early October. U.S. crude futures have since gained more than 20%, re-establishing a bull market, in a remarkable turnaround spurred by Saudi production cuts and initial optimism over trade talks this week in Beijing between U.S. and Chinese delegations.

Saudi Energy Minister Khalid al-Falih said on Wednesday the kingdom was pumping approximately 800,000 barrels less a day from a record high of 10.2 million barrels per day in November. The amount Riyadh would ship overseas in February would be another 100,000 bpd less than January's 7.2 million bpd, he added.

While that may be the case, analysts are also fearful that current WTI prices above $50 per barrel could incentivize U.S. shale oil drillers to ramp up production, blunting some of the impact from the Saudi cuts. < I always find comments like this funny. Does the Wall Street Gang think that CEOs of upstream companies sit looking at the screen and when oil goes above a certain amount they pick up the phone and order another rig to go to work?

U.S. crude production surged by than 2 million barrels per day in 2018 to a record 11.7 million bpd. Reuters cited consultancy JBC Energy as saying earlier this week that it was possible that U.S. output was “significantly above 12 million bpd” this month. < Per EIA ( https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W ) U.S. oil production has been flat (11.6 to 11.7 million bbls per day since October.

The other concern is China. Three days of U.S.-Sino talks concluded this week with no concrete announcements, sapping the market of the initial euphoria that a trade deal might have been announced.

Another meeting between U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He is expected later this month, as the two countries strive to hash out a deal before the March 1 deadline, which will hypothetically bring additional tariffs on $200 billion worth of Chinese goods.

Analysts have said there are mounting signs that China’s growth in 2018 and 2019 will be the lowest since 1990. Being the world's biggest oil consumer, any untoward happening in China's economy will have major ramifications for oil demand.
Dan Steffens
Energy Prospectus Group
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Posts: 20207
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - Jan 11

Postby dan_s » Fri Jan 11, 2019 2:27 pm

Bullish comments from the Money Show.

Crude Reversal- You Ain't seen Nothing Yet

OPEC production cuts will soon start to bite and make us forget about a so called over supplied product market, notes Phil Flynn, Senior Energy Analyst, The PRICE Futures Group.

Remember that talk of an oversupply in oil? Well that was so last year— or maybe December. The recovery in oil is now at the longest winning streak since 2010 — at least in terms of consecutive up days, not by overall price move. The shift in mood is based on the fact that the end of the year swoon in oil was due to a lot of false prices and irrational pessimism.

That pessimism put into motion the underpinning for this consequential comeback and signals much higher prices later this year. While we are coming into significant resistance at $53.50 and again at $54.17, based on February WTI, the reality of OPEC production cuts will start to set in. In the short term a battered shale sector will be hard pressed to match the cuts until later in the year when new pipelines start to open to remove oil bottlenecks. Yet in the short term, we expect U.S. rig counts will continue to decline and U.S. production will stagnate.

OPEC production cuts will soon start to bite and make us forget about a so called over supplied product market. While we seem to have a lot of gasoline, we still must have the right type of gasoline. We will still have to go into summer blends and drawdown supply.

While more shale oil may be good for gasoline diesel, it is still a challenge. Nick Cunningham at Oil Price writes: “One consequence of U.S. shale continuing to grow while OPEC+ countries keep barrels off of the market, is the increasing shift towards lighter oils in the global crude slate. Oil from West Texas tends to be light, while barrels from Saudi Arabia are more of the medium variety. Prices for gasoline and naphtha have grown increasingly weak – a result of the surging supply of light oil. Meanwhile, medium and heavy supplies are less abundant, and diesel prices reflect that.

Nick says that the “light/heavy disparity could grow as the year wears on, with the impending regulations on marine fuels from the International Maritime Organization (IMO) set to take effect at the start of 2020. The IMO rules will force dirty fuel oil out of the mix for ship-owners, and diesel and other distillates will be called upon to fill the void. Analysts have long predicted that the IMO rules could drive up global crude oil prices. < If you are not aware of the importance of the IMO 2020 regulations then you need to do some reading. It will become "the rage" in 2H 2019. Send me an email and I will send you an update on the status of IMO 2020.

Norway oil output is also falling. Reuters reported that Norway’s oil regulator reduced its forecast for production this year, predicting crude output could drop to the lowest in three decades before recovering in 2020. Oil output of 82.2 million cubic meters, or 1.42 million barrels a day, would be the lowest since 1988. The forecast compares to actual production of 86.2 million last year and is down from an earlier estimate of 87.2 million.

Canada has also cut oil production.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 20207
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - Jan 11

Postby dan_s » Fri Jan 11, 2019 2:36 pm

If you believe that WTI will move over $60/bbl this year, then CLR is a "Screaming Buy" up while it is still trading under $50/share. None of their oil is hedged and they are going to report STRONG Q4 results.

LONE is my Top Pick among our Small-Caps. They are going to report a big increase in production from Q3 to Q4 and with most of their oil production was hedged in Q4. The oil price pullback had almost no impact on their cash flow from operations. LONE is going to report a big increase in the value of the hedges, causing a spike in Reported Earnings. LONE sells 100% if their oil into the LLS market at about a $5/bbl premium to WTI.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 20207
Joined: Fri Apr 23, 2010 8:22 am


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