Oil Price - May 30
Posted: Wed May 30, 2018 1:23 pm
The price of oil is up today because "reality" is sinking back in that:
1. Demand for oil exceeds supply by over a million barrels per day in May and the gap between demand and supply will widen in June, July and August (peak annual demand for transportation fuels) by at least another million barrels per day.
2. Saudi Arabia + Russia might be able to bring a million barrels per day more oil to market by the end of the year, but very little new supply is even possible over the next three months.
3. All of the other OPEC cartel members MIGHT have another 200,000 barrels that they could bring to market this summer and none of them have any interest in lowering oil prices.
4. Venezuela's oil production will decline another 200,000 barrels per day this summer.
5. Trump is unlikely to back down from his threat of more and more sanctions against Iran.
My SWAG is that OPEC announces a 300,000 to 500,000 BOPD increase in quota levels at their June 22 meeting. Their justification will be to make up for the big drop in Venezuela's production, which is a valid reason. My take is that they have not done it already is because none of the cartel members except for Saudi Arabia has any excess production capacity anyway.
Oil traders were looking for a reason to take profits last week, so they did. Now reality is creeping back in and so are the traders taking long positions on oil. A close today above $68/bbl sets the stage for a move back over $70/bbl if the EIA reports a draw from storage tomorrow and an increase in the refinery utilization rate.
As I have been telling you for months in my podcasts, there is STRONG SUPPORT for WTI at $67/bbl. As long as that support level holds, all of my stock valuations in the newsletter are valid.
1. Demand for oil exceeds supply by over a million barrels per day in May and the gap between demand and supply will widen in June, July and August (peak annual demand for transportation fuels) by at least another million barrels per day.
2. Saudi Arabia + Russia might be able to bring a million barrels per day more oil to market by the end of the year, but very little new supply is even possible over the next three months.
3. All of the other OPEC cartel members MIGHT have another 200,000 barrels that they could bring to market this summer and none of them have any interest in lowering oil prices.
4. Venezuela's oil production will decline another 200,000 barrels per day this summer.
5. Trump is unlikely to back down from his threat of more and more sanctions against Iran.
My SWAG is that OPEC announces a 300,000 to 500,000 BOPD increase in quota levels at their June 22 meeting. Their justification will be to make up for the big drop in Venezuela's production, which is a valid reason. My take is that they have not done it already is because none of the cartel members except for Saudi Arabia has any excess production capacity anyway.
Oil traders were looking for a reason to take profits last week, so they did. Now reality is creeping back in and so are the traders taking long positions on oil. A close today above $68/bbl sets the stage for a move back over $70/bbl if the EIA reports a draw from storage tomorrow and an increase in the refinery utilization rate.
As I have been telling you for months in my podcasts, there is STRONG SUPPORT for WTI at $67/bbl. As long as that support level holds, all of my stock valuations in the newsletter are valid.