Energy Prospectus

A lot of the decline in crude oil prices is directly related to the rise in the U.S. dollar. See chart below.

http://www.marketwatch.com/investing/index/dxy/charts

and today CNBC had a guest saying the US dollar breakout is just beginning, with more room to run, and oil prices are headed down to $30/bbl. Every market needs a carnival barker to entertain the crowd.

http://www.cnbc.com/id/102175351

Even when we had a total global economic meltdown in 2008, the price of oil dip to $37 and bounced back to the $60s within a week.

All of the talk that OPEC is going to flood the market to gain market share is total BS because they can't. Can we at least wait until after the OPEC meeting on November 27 to over-react.

Read this: http://www.ogj.com/articles/2014/11/eia ... mber122014

“Saudi Arabia will continue to play some role as a swing producer, but perhaps to a lesser extent, as the country is sensitive to significant losses in market share,” EIA said. The agency still projects Saudi Arabia’s production to decline in 2015 compared with this year, but by a smaller amount than previously expected.

Libya’s crude oil production, meanwhile, reached 1 million b/d in October, its highest level since early July 2013. However, Libya’s output has since fallen due to new production outages.

In this month’s STEO, EIA expects global consumption to rise 900,000 b/d in 2014 and 1.1 million b/d in 2015, compared with 1.3 million b/d in 2013. Consumption by member countries of the Organization for Economic Cooperation and Development is expected to decline 300,000 b/d in 2014, led by Japan and Europe. The global demand forecast was revised downward by 200,000 b/d to average 92.5 million b/d in 2015, based on weaker global economic growth prospects for next year. [Lower fuel prices are an economic stimulus in the developed economies, so IMHO OECD consumption may go up next year. - Dan]

Non-OPEC production is expected to increase 1.9 million b/d in 2014 and 900,000 b/d in 2015. The US will account for most of the projected non-OPEC supply growth, increasing 1.5 million b/d in 2014 and 1.1 million b/d in 2015.

However, EIA’s US total supply growth forecast in 2015 has been revised downward from last month by 100,000 b/d, reflecting the recent decline in oil prices and the expectations that West Texas Intermediate crude spot prices will remain near $80/bbl through 2015.
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My take is that there will be a lot of screaming at the next OPEC meeting by nations that NEED higher oil prices. All Saudi Arabia has to do is announce a 500,000 bbl per day cut and the price of Brent jumps back over $90 and their revenues go up. I think Saudi Arabia is playing a game to get other OPEC members to agree to some minor production cuts.

They may believe their projections, but this sounds like an understandable effort to stimulate the
economy, and AP is picking up on the theme. Govt forecasts 2015 crude to be averaging $83. (k1f)

<<Gov't Tells U.S. Drivers To Get Used To Cheap Gas
Associated Press
By JONATHAN FAHEY, AP Energy Writer
Thursday November 13, 2014 12:02 AM
NEW YORK (AP) — Those low gas prices on station signs aren't going away soon, the government says.

In a dramatic shift from previous forecasts, the Energy Department predicted Wednesday that the average price of gasoline in the U.S. will be below $2.94 a gallon in 2015. That a 44-cent drop from an outlook issued just a month ago.

If the sharply lower estimate holds true, U.S. consumers will save $61 billion on gas compared with this year.

Rising oil production, particularly in the U.S., and weak spots in the global economy have led to a sharp reduction in oil prices over the past four months. Not seeing much of a change ahead, the government cut its forecast for global oil prices next year by $18 a barrel to $83.>>

(More) <<http://www.kitco.com/news/2014-11-13/Go ... p-Gas.html

The drop in gasoline prices has served as a gigantic tax cut for consumers in the U.S. Retailers like Walmart and Target will benefit hugely from the drop in gasoline prices, especially with the coming holiday shopping season. Look at the breakout on TGT and WMT since early November on their charts.

Oil Wavers on OPEC Speculation -- Barron's Blog

Oil prices slumped back near four-year lows as hopes fade that OPEC, the crude producers' cartel, will agree to reduce output.

Oil prices have plunged by about 30% since the middle of June in a world awash with overproduction and sinking industrial demand.

The Organization of the Petroleum Exporting Countries is slated to meet on Thanksgiving, but already skepticism for a production cut is hitting the market.

Oil prices embarked on a sharp drop mid-morning, with The Wall Street Journal'sNicole Friedman and Christian Berthelsen reporting that a meeting between Venezuela, Mexico, Saudi Arabia and Russia's OAO Rosneft yielded no agreement for an oil-production reduction. Russia and Mexico aren't OPEC members but are key players in the debate surrounding oil output. West Texas Intermediate crude futures dropped 1.2% to $74.88 a barrel in recent trading.

Prices perked up shortly before 1:00 p.m., however, following a conflicting story from the WSJ's Benoît Faucon, in Vienna:

OPEC members are inching toward a compromise that could lead them to cut oil supply, as the producer group prepares for one of its most closely watched meetings in years this week.

Tuesday's slide bled into oil-tracking ETFs including the United States Oil Fund ( USO) and the iPath S&P GSCI Crude Oil Total Return Index ETN ( OIL), which each slumped more than 1%. Barron'sBen Levisohn flagged the hit to producers including Anadarko Petroleum(APC) and Apache ( APA).

Energy stocks on the S&P 500 fell most, while ETFs U.S. oilfield-service companies slipped in turn. The

Market Vectors Oil Services ETF (OIH) dropped 1.5%, while the Energy Select Sector SPDR Fund ( XLE) slipped 0.9%

Electronic trading in crude will run through 1 p.m. Eastern time on Thursday, cutting 4 1/4 hours from a full-day's session.

More at Barron's Focus on Funds blog, http://blogs.barrons.com/focusonfunds/