Oil Price - Sept 4

[dan_s]

If you are a Day Trader in oil futures or you just like the roller coaster, you should love the oil futures market. Each headline or rumor pushes oil up or down by several dollars. Today the move is UP.

Bloomberg: Oil rose after the U.S. announced plans to intensify sanctions on Iran and Russia said it would trim production in September.

Futures in New York advanced more 4% after Brian Hook, Washington’s special representative to Iran, said the U.S. will add “maximum pressure” to its Iran campaign. Russia’s energy minister Alexander Novak said his country’s monthly oil output would fall in September, according to Interfax.

Read More: https://www.bloomberg.com/news/articles ... e-tensions

MY TAKE:
> FEAR that the U.S. vs China trade war will lower demand for oil is WAY OVERBLOWN. In the Great Recession of 2008-2009 demand for oil went down only 1% and spiked by 3% in 2010, right back to the LT trend line. NO ONE is predicting another Great Recession. Even IEA thinks oil demand will go up over a million barrels PER DAY in 2019 and another 1.4 MMBOPD in 2020.
> FACT: Without the U.S. sanctions being lifted against Iran and Venezuela (less than 1% chance of happening) there is NO WAY that OPEC production can return to the level the cartel produced in December, 2018.
> There are now CLEAR SIGNS that U.S. oil production growth has stopped and will probably decline in 2H 2019. WHY??? Read the previous post about Raymond James' new report on U.S. declining well productivity.
> FACT: North American oil production CANNOT GROW at today's active rig count. WHY?? The production from horizontal shale oil wells completed in 2018 will decline AT LEAST 60% within twelve months. So, at the current active rig count the horizontal shale wells completed during the first nine months of 2019 will at best will just replace the production from the shale oil wells completed last year. Let that sink in. Then remember that the other million oil wells completed prior to 2018 are also on decline.

$55/bbl oil is not a sustainable price for the world's most important commodity. Even if WTI spikes to $75/bbl by year-end (Raymond James forecast), I don't think the upstream companies will increase drilling activity enough to restart U.S. oil production growth. Once production in an oilfield rolls over it is extremely hard to reverse the decline.

[dan_s]

WTI prompt month (OCT 19) was up $2.32 on the day, to settle at $56.26/Bbl and up another 12 cents in after-hours trading at 4:12PM ET.

Also, NG prompt month (OCT 19) was up $0.087 on the day, to settle at $2.445/MMBtu. NYMEX Strip for December to February are all over $2.60. Gassers getting a bit of relief.