Oil Prices

[dan_s]

The front month NYMEX contract for WTI crude oil closed at over $100/bbl today, but most of our stocks were down. The market seems to be worried over the Russian expansion plans (or at least that is today's excuse).

After the markets closed: SAN FRANCISCO (MarketWatch) -- S&P Capital IQ chief equity analyst Sam Stoval raised his end-of-the-year S&P 500 Index SPX -0.70% target to 1,985 late Wednesday as stock prices keep pace with earnings growth. "In the coming year, we believe the S&P 500 will rise in price by an amount similar to the consensus increase in operating EPS through Q1 2015, but trimmed slightly by the projected rise in inflation, reflecting the approximately 3% growth in real GDP through early 2015," Stovall said in a note. His previous target had been 1,940."

If global GDP growth comes in above 3% then EIA's current estimate of 1.4 million bbls per day of increased oil demand is probably too low. The geopolitical risk premium has also increased. Putin is testing Obama and so far Obama is not looking real tough.

Giving support to WTI: Crude oil inventories at Cushing, Oklahoma have declined by 12 million bbls over the last seven weeks. See: http://www.eia.gov/petroleum/

U.S. liquids production continues to increase. In fact, the U.S. is leading the world (followed by Canada) in production growth. However, it is VERY IMPORTANT to remember that a lot of the shale production is NGLs, note crude oil.

[par_putt]

http://www.hardassetsinvestor.com/weekl ... draws.html


Bottom Line: Oil prices may continue to decline, led by Brent, which is headed to $100 after breaking below the key $105 support level. The U.S. benchmark WTI should outperform.

[dan_s]

I discussed this at the last luncheon in Houston and I will again in Dallas on April 16. Q2 is ALWAYS the low point of the year for crude oil demand because 90% of humans live in the northern hemisphere. We should see the low for oil prices in the next two months. Then demand and prices should rise into year-end.

As long as U.S. + China + India economies are growing (even if slowly) the demand for crude oil is going up.

Upward channel for WTI is very strong. Bottom of channel is $94, so unless it closes below $94 the upward channel remains the major technical support for oil prices.