Crude Oil Prices - October 1

[dan_s]

Here is what our friends over at Raymond James had to say about WTI price movement this morning.

"There is still quite a bit of fear surrounding practically
anything tied to oil at the moment and yesterday’s trading did little to
alleviate those concerns. Anyone banking on a crude oil bottom was
sorely disappointed after it fell more than 3% and continued to dutifully
play the role of a falling knife. From a technical perspective, long-term
support won’t really come into play until the $85-86 range if the early
September lows are violated, so those still hoping for a rebound will be
watching the area around $89 very closely. And of course, while oil
tanks, the U.S. dollar seemingly has its sights set on the moon. Weak
eurozone inflation data for September elevated the expectancy for
some sort of new stimulus measures in Europe, which would
theoretically drive down its rates while making the U.S.’s look relatively
more attractive. This news contributed to a spike in the already hot
Dollar Index, which is now at its highest point in four years and just
finished with its largest quarterly gain in six years. Fundamentally, this
does seem to make sense; while currency rates are complicated and
much goes into their movements, for the most part they are tied to the
outlook of a country’s economy and the U.S. does still appear to be
moving in the right direction, especially vis-à-vis Europe. Looking at the
charts, the dollar has now risen for eleven straight weeks and should be
due for a pullback. It is now at resistance, but if it breaks through, the
next likely resistance spot does not come into play until around $89."

My take is that since mid-August WTI has been flopping around $93 (see http://www.cmegroup.com/trading/energy/ ... crude.html). Dips during that time have been tied to the rising U.S. dollar index. If WTI crawls back to $93 by the end of this week, we should be OK. Winter is on the way and so is a lot of demand for heating oil. - Dan

[setliff]

RJ hasn't been right re cl for a long long time----------

[par_putt]

http://www.bloomberg.com/news/2014-10-0 ... ction.html

Worst Seen Over for Crude Prices as Saudis Cut Production
By Grant Smith Oct 1, 2014 9:53 AM CT 28 Comments Email Print

The worst is over for global oil prices, according to UBS AG and Barclays Plc. After the biggest quarterly drop in more than two years, Brent is set to recover as Saudi Arabia cuts output and demand climbs, they said.

[dan_s]

As I have posted here MANY TIMES: Saudi Arabia is still in control of global crude oil prices AND they need lots of money to fund their social program.

IMHO there is absolutely no way Saudi Arabia will stand by and let crude oil prices fall. Not with ISIS moving toward them. Their biggest fear is a Sunni uprising and the best way for them to avoid it is to keep throwing money at their citizens.

[Lemonhawk]

Price cut rather than production cut? What are the implications overall?
[/i]
Saudi cuts official crude prices in battle for market share

DUBAI/KHOBAR (Reuters) - Saudi Aramco has sharply cut its November prices for Asian oil customers in the clearest sign yet the world's largest exporter is competing for market share.

The oil giant slashed its flagship Arab Light selling price by $1 a barrel versus October to a discount of $1.05 a barrel to the Oman/Dubai average, it said on Wednesday, the fourth monthly price cut in a row.

The cut was bigger than anticipated by traders who expected the official selling price (OSP) differential for Arab Light crude to Asia to fall by around 70 cents a barrel in November. It underscored the ample supplies in global oil markets that have already pushed international benchmark Brent crude oil to a two-year low below $95 a barrel this week.

The state-owned oil company dropped its Arab Light OSP to Northwest Europe by 40 cents for November versus October at a discount of $3.95 a barrel to the Brent Weighted Average (BWAVE).

The Arab Light OSP to the United States was set at plus $2.05 a barrel to the Argus Sour Crude Index (ASCI) for November, down 40 cents a barrel from October.

http://finance.yahoo.com/news/saudi-cut ... 56485.html

[jsb1949]

What is the purpose of both lowering production and prices? That's counterproductive, is it not?

[dan_s]

The market sets the price. SA had to cut the price because of the big jump in U.S. Dollar Index.

Their move to cut production is being done to tighten supply/demand and stabilize the price. Let's hope it works.

[dan_s]

I just looked at the Interday Chart for WTI. There was a big drop in from $90.70 to $88.20 from 3:00AM to 5:30AM. Since then the price has climbed back to over $90.
At that early hour it only takes a few trades to cause the big dip and set off a lot of automated trades.

[setliff]

very good point, dan. i started watching about 640a and it was going up with each tick.
we're on the road and it is painful to be in suspense all day. appreciate your post mortums.

jim