As I said at Tuesday's luncheon, I believe almost all of the recent dip in oil prices is the result of the rising U.S. dollar. There has not been a run up in the value of the dollar like this in decades, if ever. I don't see how that can continue.
Plus, September was a rather soft month for oil demand. Demand will pick up as we move closer to winter. I also see a lot of risk to global oil supply (Iraq, Libya, Russia, Nigeria .....).
The WTI front month contract on NYMEX dipped to $88 in premarket (3:00 to 5:30 AM ET) on very light volume. The big dip was caused by automated selling when it went below $90. Since 5:30 AM the front month (November) contract has been on the rise and is now approaching $91.
WTI has been flopping around in the $90-$95 range for over six weeks. I think it will move higher as we move deeper into Q4. Again, the big rise in the U.S. dollar has just pushed the well defined trading channel down about $7/bbl. At least that is what appears to me as the most reasonable explanation for the recent dip in oil prices. Unless there is a major global recession, there has not been a significant change in the supply/demand fundamentals.
Watch this video: http://www.cnbc.com/id/102050386
Crude Oil Prices - October 2
Crude Oil Prices - October 2
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Crude Oil Prices - October 2
Warren Buffet says when you have a 100 year time horizon, just buy good companies with sound fundamentals run by good managers and don't worry about the market swings. I wish I could always think like that. But I never really liked roller coasters either.
Re: Crude Oil Prices - October 2
I think we will all be in a much better mood in less than six months.
1. It will help firm up oil prices if the dollar stops going up: http://www.marketwatch.com/investing/index/dxy/charts
2. Oil Demand will pick up in Q4 as winter approaches - Wednesday's EIA storage report shows it is already starting.
3. Saudi Arabia will take steps to raise Brent. They really do need the money.
4. My bet is that Iraq will go from bad to worse. There are going to be over 100,000 Christians killed if we don't move soon to get them out. I think we will see a major assault by ISIS on the Green Zone within weeks. If ISIS starts killing a lot of Shiite in Bagdad, Iran will send in troops (probably already there). I really feel sorry for the Average Joe in Iraq; they are screwed.
5. Nigeria has big exposure to Ebola, which could cause supply problems (i.e. - major companies pulling people out of the country)
6. I also think we could see a spike in natural gas and propane prices this quarter.
1. It will help firm up oil prices if the dollar stops going up: http://www.marketwatch.com/investing/index/dxy/charts
2. Oil Demand will pick up in Q4 as winter approaches - Wednesday's EIA storage report shows it is already starting.
3. Saudi Arabia will take steps to raise Brent. They really do need the money.
4. My bet is that Iraq will go from bad to worse. There are going to be over 100,000 Christians killed if we don't move soon to get them out. I think we will see a major assault by ISIS on the Green Zone within weeks. If ISIS starts killing a lot of Shiite in Bagdad, Iran will send in troops (probably already there). I really feel sorry for the Average Joe in Iraq; they are screwed.
5. Nigeria has big exposure to Ebola, which could cause supply problems (i.e. - major companies pulling people out of the country)
6. I also think we could see a spike in natural gas and propane prices this quarter.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Crude Oil Prices - October 2
re: six months, I would be in a better mood when it just puts in a solid base!
How Low Can Oil Go?
Dan Dicker, The Street.com senior contributor, explains why oil prices are likely to keep falling as the U.S. dollar remains strong.
Video
http://video.cnbc.com/gallery/?video=3000316884
How Low Can Oil Go?
Dan Dicker, The Street.com senior contributor, explains why oil prices are likely to keep falling as the U.S. dollar remains strong.
Video
http://video.cnbc.com/gallery/?video=3000316884
Re: Crude Oil Prices - October 2
U.S. Dollar higher again this morning: http://www.marketwatch.com/investing/index/dxy/charts
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Crude Oil Prices - October 2
One risk is that OPEC will not cut production if they think they can handle the price slump and the competing American
producers can't. This hypothesis would square with the Saudis cutting crude prices bbl, tacitly undercutting US numbers
and putting pressure on US shale producers.
Cf this, from Bloomberg, from the IV BRY board:
<<WTI Oil Seen Falling by Most Accurate Forecaster
Published: Oct 02, 2014
By Lananh Nguyen Oct 2, 2014
West Texas Intermediate crude is poised to extend its slump below $90 as consumption slows and supplies climb from the U.S. and Libya, according to the most accurate forecaster of prices of the grade in the second quarter.
Crude is under pressure because of signs of easing demand in emerging markets, said Jason Kenney, an equity analyst at Banco Santander SA. Prices are also falling because of “comfortable supply” as U.S. shale oil production booms and Libyan crude output rebounds, he said. WTI fell below $90 a barrel today for the first time in 17 months, extending this year’s decline to 9.9 percent.
Surging output from shale deposits has turned the U.S. into the world’s largest producer of liquid petroleum, cutting its need for imports just as the pace of global demand is slowing. U.S. crude output rose to the most since 1986 last month, while OPEC pumped at the highest level in a year.
“I think it’s reasonable to stay cautious rather than bullish on oil prices,” Kenney said in a phone interview from Edinburgh. “The challenge in oil pricing globally at the minute is weak consumption trends across northeast Asia and also in the Middle East and Latin America.”
WTI will average $97.50 a barrel this year, dropping to $86 in 2015, according to Santander. The U.S. benchmark traded $2.06 lower at $88.67 a barrel on the New York Mercantile Exchange at 11:47 a.m. London time. Brent crude, the European benchmark, fell 20 percent from its June peak to trade at $92.24 a barrel today on London’s ICE Futures Europe exchange.
Demand Trend
“The global oil demand trend showed clear signs of weakening” last quarter, as demand growth from the same period a year earlier fell to 480,000 barrels a day, the lowest in two and a half years, according to a Sept. 11 report from the International Energy Agency in Paris. The adviser to 29 industrialized nations also trimmed its demand forecast for next year to 93.8 million barrels a day because of a “weaker outlook for Europe and China.”
The Organization of Petroleum Exporting Countries probably won’t react immediately to the oil price slump by reducing production because “they can probably withstand Brent prices between $80 to $85,” Kenney said.
OPEC output increased by 413,000 barrels a day to 30.935 million in September as Libyan production rebounded to the highest level in more than a year, according to a Bloomberg survey. Saudi Arabia yesterday dropped its official selling price for crude oil to Asia to the lowest level since 2008 amid speculation it was seeking to gain market share in the fastest-growing region for petroleum demand.
Bloomberg ranked energy forecasters based on the accuracy of their predictions for the most recent eight quarters ending on June 30, 2014. Kenney’s average margin of error of 4.11 percent was the lowest.
To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net>>
producers can't. This hypothesis would square with the Saudis cutting crude prices bbl, tacitly undercutting US numbers
and putting pressure on US shale producers.
Cf this, from Bloomberg, from the IV BRY board:
<<WTI Oil Seen Falling by Most Accurate Forecaster
Published: Oct 02, 2014
By Lananh Nguyen Oct 2, 2014
West Texas Intermediate crude is poised to extend its slump below $90 as consumption slows and supplies climb from the U.S. and Libya, according to the most accurate forecaster of prices of the grade in the second quarter.
Crude is under pressure because of signs of easing demand in emerging markets, said Jason Kenney, an equity analyst at Banco Santander SA. Prices are also falling because of “comfortable supply” as U.S. shale oil production booms and Libyan crude output rebounds, he said. WTI fell below $90 a barrel today for the first time in 17 months, extending this year’s decline to 9.9 percent.
Surging output from shale deposits has turned the U.S. into the world’s largest producer of liquid petroleum, cutting its need for imports just as the pace of global demand is slowing. U.S. crude output rose to the most since 1986 last month, while OPEC pumped at the highest level in a year.
“I think it’s reasonable to stay cautious rather than bullish on oil prices,” Kenney said in a phone interview from Edinburgh. “The challenge in oil pricing globally at the minute is weak consumption trends across northeast Asia and also in the Middle East and Latin America.”
WTI will average $97.50 a barrel this year, dropping to $86 in 2015, according to Santander. The U.S. benchmark traded $2.06 lower at $88.67 a barrel on the New York Mercantile Exchange at 11:47 a.m. London time. Brent crude, the European benchmark, fell 20 percent from its June peak to trade at $92.24 a barrel today on London’s ICE Futures Europe exchange.
Demand Trend
“The global oil demand trend showed clear signs of weakening” last quarter, as demand growth from the same period a year earlier fell to 480,000 barrels a day, the lowest in two and a half years, according to a Sept. 11 report from the International Energy Agency in Paris. The adviser to 29 industrialized nations also trimmed its demand forecast for next year to 93.8 million barrels a day because of a “weaker outlook for Europe and China.”
The Organization of Petroleum Exporting Countries probably won’t react immediately to the oil price slump by reducing production because “they can probably withstand Brent prices between $80 to $85,” Kenney said.
OPEC output increased by 413,000 barrels a day to 30.935 million in September as Libyan production rebounded to the highest level in more than a year, according to a Bloomberg survey. Saudi Arabia yesterday dropped its official selling price for crude oil to Asia to the lowest level since 2008 amid speculation it was seeking to gain market share in the fastest-growing region for petroleum demand.
Bloomberg ranked energy forecasters based on the accuracy of their predictions for the most recent eight quarters ending on June 30, 2014. Kenney’s average margin of error of 4.11 percent was the lowest.
To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net>>
Re: Crude Oil Prices - October 2
ok, the dollar is down and whatdoya know, so is Cl.