Big picture deflationary slowing views are dominating the crude oil market and most of the energy complex. The trade appears to be so concerned about slackening demand and burdensome supply that minor supply side glitches like refinery issues, extreme hot weather and increased tropical storm activity isn't being given that much consideration. As in other markets traders are concerned that the world will see even more evidence of slowing and slackening demand before decisive central bank action is seen. Extreme temperatures in the US and increased tropical storm activity in the Gulf and Atlantic probably helped natural gas buck the down trend pattern in the petroleum complex today. The weekly natural gas storage report showed an injection of 62 bcf. Total storage stands at 3006 bcf or 27.1% above the 5 year average.
Over the last four weeks natural gas storage has increased 262 bcf.
Last summer when oil dipped under $80 it only stated there for a few days. $80/bbl for WTI is a key support level.
Oil dips under $80/bbl
Oil dips under $80/bbl
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil dips under $80/bbl
One person who just got a significant interview on Bloomberg is John Manley who is the deep-thinker behind Wells Fargo and what he calls, “the Big Energy Bet”. His belief is quite stolid that he doesn’t see oil prices going a lot lower and he points out that there are two things affecting the price of oil. One is the economic perception
(which is decidedly not good at the current time) and the second point is supply and demand.
He just believes OPEC and the Saudis which has been trying to support world economies up until lately, won’t want oil at these prices for that much longer. Manley also point out that oil is expensive to find and expensive stuff to lift.
Nat Gas
He is not so constructive on natural gas though as he suggests that gas will stay cheaper, longer than most people expect.
As far as the big difference between oil and gas he points out that oil is easy to burn and easy to ship while natural gas is easy to burn, but difficult to ship.
Manley tends to go with the big, dividend-paying integrated, but his point is he believes $80-ish is the bottom.
Tech Talk On Oil
If you are looking for people with a technical perspective, well Bob Hoye and his sidekick Ross Clark and they are expecting a
rebound in crude oil. They write rather bluntly, “The weekly chart is oversold to a degree only seen eighteen times since
1983. Most instances saw the price recover 45% to 55% of the preceding decline. With the exception of 2008, 35% was the minimum retracement. If prices can close above $84 we should look for an initial target of $91 with a likely target of $94 to $97.”
Josef Schachter
But onto Josef Schachter, who is the one guy who has been predicting a bear market in oil since late last year. His target has
been $75 and for the first few months of this year when oil was at such a lofty level, I suspect his name evoked a few snickers.
Not any more.
While some of his favorite stocks have been hurt like everybody else, he has a very interesting projection, expecting that
the North American markets haven’t finished suffering their traditional summer ugliness and he thinks it’s going to get worse.
If you are looking for the good news in the ugliness, he suggests that with the resource sector already having been trashed,
it’s probably going to be other sectors that take the worst of the bruising for the rest of the summer. He expects a bottoming in oil that could be as close to $75 and possible on spikes, even lower. But then he says, you get the traditional winter demand for oil kicking in as well as his expectation that the Saudi’s and other OPEC people won’t want oil at these prices for much longer.
Schachter points to some of the recent moves with the price of oil according to seasonal patterns and it is truly uncanny particularly look at the last two years when oil has bottomed two years in a row at close to $80 in October and both years ran to $105 or $110 by spring. That has elicited huge responses in some of the junior stocks that today are yours for two-for-one or three-for-one prices. Schachter also points out that $75 is not that far away.
Needless to say, we can only hopethat he’s right and that we have a few months left of shopping at wholesale prices in the
market, to make up for the past few months.
(which is decidedly not good at the current time) and the second point is supply and demand.
He just believes OPEC and the Saudis which has been trying to support world economies up until lately, won’t want oil at these prices for that much longer. Manley also point out that oil is expensive to find and expensive stuff to lift.
Nat Gas
He is not so constructive on natural gas though as he suggests that gas will stay cheaper, longer than most people expect.
As far as the big difference between oil and gas he points out that oil is easy to burn and easy to ship while natural gas is easy to burn, but difficult to ship.
Manley tends to go with the big, dividend-paying integrated, but his point is he believes $80-ish is the bottom.
Tech Talk On Oil
If you are looking for people with a technical perspective, well Bob Hoye and his sidekick Ross Clark and they are expecting a
rebound in crude oil. They write rather bluntly, “The weekly chart is oversold to a degree only seen eighteen times since
1983. Most instances saw the price recover 45% to 55% of the preceding decline. With the exception of 2008, 35% was the minimum retracement. If prices can close above $84 we should look for an initial target of $91 with a likely target of $94 to $97.”
Josef Schachter
But onto Josef Schachter, who is the one guy who has been predicting a bear market in oil since late last year. His target has
been $75 and for the first few months of this year when oil was at such a lofty level, I suspect his name evoked a few snickers.
Not any more.
While some of his favorite stocks have been hurt like everybody else, he has a very interesting projection, expecting that
the North American markets haven’t finished suffering their traditional summer ugliness and he thinks it’s going to get worse.
If you are looking for the good news in the ugliness, he suggests that with the resource sector already having been trashed,
it’s probably going to be other sectors that take the worst of the bruising for the rest of the summer. He expects a bottoming in oil that could be as close to $75 and possible on spikes, even lower. But then he says, you get the traditional winter demand for oil kicking in as well as his expectation that the Saudi’s and other OPEC people won’t want oil at these prices for much longer.
Schachter points to some of the recent moves with the price of oil according to seasonal patterns and it is truly uncanny particularly look at the last two years when oil has bottomed two years in a row at close to $80 in October and both years ran to $105 or $110 by spring. That has elicited huge responses in some of the junior stocks that today are yours for two-for-one or three-for-one prices. Schachter also points out that $75 is not that far away.
Needless to say, we can only hopethat he’s right and that we have a few months left of shopping at wholesale prices in the
market, to make up for the past few months.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil dips under $80/bbl
From Elliot Gue:
Our outlook remains the same. As US economic data continues to weaken, expect the Fed to keep rates at ultra-low levels through 2014. The central bank also is likely to announce a third round of quantitative easing (QE3) later this year, perhaps totaling more than half a trillion dollars in additional bond purchases. We suspect Federal Reserve Chairman Ben Bernanke will choose the annual late-August conference in Jackson Hole, Wyoming to unveil QE3, just as he did when unveiling QE2 back in 2010.
We continue to look for more downside in stocks and other risk assets this summer. The June stock market rally in the S&P 500 was simply an oversold bounce in the context of a broader market correction that began in early April. At a minimum, we expect the S&P 500 to re-test its early June lows of around 1,266. We also expect the index to undercut those levels and retest technical support in the 1,200 to 1,225 area.
Crude oil prices have also been hit hard over the past few weeks for the same reasons stocks have corrected, namely concerns about global economic growth. However, crude is more oversold than the broader market and fundamental supply/demand balances remain tight outside of the US.
We're looking for West Texas Intermediate crude oil to find support near last year's lows of around $75 to $76/bbl and Brent crude oil should bottom out in the $85 to $90/bbl region. Ironically, falling oil prices this summer will stoke demand during summer driving season and boost consumers.
Our outlook remains the same. As US economic data continues to weaken, expect the Fed to keep rates at ultra-low levels through 2014. The central bank also is likely to announce a third round of quantitative easing (QE3) later this year, perhaps totaling more than half a trillion dollars in additional bond purchases. We suspect Federal Reserve Chairman Ben Bernanke will choose the annual late-August conference in Jackson Hole, Wyoming to unveil QE3, just as he did when unveiling QE2 back in 2010.
We continue to look for more downside in stocks and other risk assets this summer. The June stock market rally in the S&P 500 was simply an oversold bounce in the context of a broader market correction that began in early April. At a minimum, we expect the S&P 500 to re-test its early June lows of around 1,266. We also expect the index to undercut those levels and retest technical support in the 1,200 to 1,225 area.
Crude oil prices have also been hit hard over the past few weeks for the same reasons stocks have corrected, namely concerns about global economic growth. However, crude is more oversold than the broader market and fundamental supply/demand balances remain tight outside of the US.
We're looking for West Texas Intermediate crude oil to find support near last year's lows of around $75 to $76/bbl and Brent crude oil should bottom out in the $85 to $90/bbl region. Ironically, falling oil prices this summer will stoke demand during summer driving season and boost consumers.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group