Big dip in the U.S. dollar today is why oil prices are up.
See: http://www.marketwatch.com/investing/index/dxy/charts
Reading between the lines, I think the Fed knows it has to do something about the big spike in the dollar which is killing U.S. manufacturers that are trying to compete overseas.
Oil Price
Re: Oil Price
liberally, this could be seen as a double bottom for CL with a target in the mid sixties.
Re: Oil Price
I will be happy with a move back to $50/bbl. As I say in the newsletter, I think we flop around in this range for a couple more months, then drift higher. EIA's report yesterday that production is already falling in the Eagle Ford, Bakken and Niobrara is just the beginning.
EIA and IEA reports are conservative, based more on historical data. For the most part, they take historical trends and just extend them. They are a afraid to forecast falling production until they actually see the evidence of it. As the active rig count continues to fall like a rock, eventually the oil production will fall. IEA noted in their report (which you should all read carefully), that once U.S. shale production rolls over the decline could be "abrupt".
IEA quote: "While the US supply response to lower prices might take longer to kick in than expected, it might also prove more abrupt."
Keep in mind that we are in "unchartered territory". In over 35 years I have NEVER seen the active rig count drop this far this fast. Over 100 rigs moving back the yard week after week is stunning to me.
The oil price quoted in the news each day is the front month NYMEX contract. 95% of those contracts are being traded by "speculators" who are drive more by emotions than facts. There are a lot of very nervous speculators holding short positions. Even the hint of a falling dollar will cause a big short covering rally.
EIA and IEA reports are conservative, based more on historical data. For the most part, they take historical trends and just extend them. They are a afraid to forecast falling production until they actually see the evidence of it. As the active rig count continues to fall like a rock, eventually the oil production will fall. IEA noted in their report (which you should all read carefully), that once U.S. shale production rolls over the decline could be "abrupt".
IEA quote: "While the US supply response to lower prices might take longer to kick in than expected, it might also prove more abrupt."
Keep in mind that we are in "unchartered territory". In over 35 years I have NEVER seen the active rig count drop this far this fast. Over 100 rigs moving back the yard week after week is stunning to me.
The oil price quoted in the news each day is the front month NYMEX contract. 95% of those contracts are being traded by "speculators" who are drive more by emotions than facts. There are a lot of very nervous speculators holding short positions. Even the hint of a falling dollar will cause a big short covering rally.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group