Oil Prices - Feb 17

[dan_s]

Iran could support any effort to stabilize oil prices, including cooperation between OPEC and non-OPEC oil producers, the nation's oil minister said after a meeting Wednesday, according to Reuters. Oil Minister Bijan Zanganeh said while he supports a production "ceiling" to stabilize oil prices, it's the first of several steps that should be taken, according to Reuters reports quoting the ministry's official Shana news agency.

Any rumors like this cause the speculators that have shorted oil to cover. The hedge fund managers have tight stop loss orders on their shorts, so any move up triggers short covering.

Committed buyers will return only when they see confirmation of declining production from the U.S. and Russia. Both should happen in Q2.

[setliff]

there has been a rash of 13G/A's this past week. these have to be committed buyers but mkt hasn't moved that well.

[dan_s]

They're probably waiting for Goldman Sachs to tell them it is time to go long.

[setliff]

today was very bullish---

from IV board----------

crude down 3.3mb

gasoline up 0.75mb

dist down 2mb

cushing down 0.176mb

crude jumped almost a buck on the news. now we need confirmation from the EIA tomorrow to watch shorts run for the hills.

[dan_s]

FEAR and GREED drive the markets and you can multiply that by 10X when you talk about traders of NYMEX futures. Most of the speculators that trade oil futures do it on margin and they make big bets.

I believe that IEA has once again underestimated (just like they did in 2008-2010) the impact that low fuel prices have on the demand for oil. IEA is forecasting a demand spike of close to 2.0 million barrels per day from Q1 to Q3. I believe it could be double that amount. At the beginning of 2010, IEA forecast that demand for hydrocarbon based liquid fuels would increase YOY by 1.0 million barrels. The actual demand increase for 2010 was 3.3 million barrels per day.

One reason that demand for crude oil goes up each summer is because refiners cannot blend in cheaper NGLs for "Summer Blend" gasoline. During the winter a lot butane goes into gasoline.

I also believe non-OPEC production will decline much more than the 700,000 BOPD IEA is now forecasting. The active rig count is dropping like a rock. 78 U.S. rigs have been stacked in the last two weeks. CXO, DVN and XEC alone announced they are dropping 30 rigs by Q2.

$30 oil is UNSUSTAINABLE and anyone with a brain knows it. The longer oil stays below $40/bbl the bigger the next "Oil Crisis" will be. If WTI spiked to $100/bbl tomorrow, U.S. oil production would continue falling for at least six months. This is a HUGE industry that does not change directions quickly.
This is going to be a very interesting year.

[dan_s]

Credit Suisse energy sector analyst: "Tuesday morning's meeting between the oil ministers of Saudi Arabia, Russia, Qatar, Nigeria and Venezuela was, in our view, significant in a number of ways," the team, led by Jan Stuart said. "While an agreement to freeze supply at January levels for the balance of this year does not sound like much and has only been subscribed to by three Opec members and Russia; the simple fact is that the words Saudi Arabia + Russia + Oil + Agreement have not been printed in one sentence since oil prices began to collapse in the summer of 2014."