Energy Prospectus

Ed Morse, head of global commodity research at Citigroup, says oil is likely to go back to $30 as today's spike was simply short covering rather than a real turnaround in oil sentiment. However, after it goes down to $30, it will start going up again. This, I think, is contrary to your belief Dan. Makes me wonder if I should be adding or not? Thoughts please?

No one knows were oil is heading in the short-term. Hitting the bottom on the nose is pure luck.

I firmly believe the global oil market is much tighter than many on Wall Street think it is. All this talk of 1.5 to 2.0 million "excess supply" is BS. If so, there is over 500 million barrels of "Missing Oil". The U.S. has almost half of the world's oil storage capacity (640 million bbls). How can U.S. oil in storage be on decline if the world is producing that much more than we need.

BTW per the EIA (which I believe is over-estimating production), in the last six weeks, U.S. crude oil production has declined by 221,000 barrels per day. You can check the math for yourself here: http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm

After what I heard at EnerCom, I now believe U.S. oil production will decline by AT LEAST another 500,000 barrels per day by year-end.

Core Labs (a super company with offices all over the world) said non-OPEC oil production outside of the U.S. is also on decline and will be AT LEAST 1,000,000 barrels per day less in 2016. They said Russian production may drop by 900,000 BOPD.

IMO concern over China's oil demand is over-blown. China's economy may slow from 8% annual GDP growth to 3% or 4%, but it is still growing. Primarily because of the stimulus created by low fuel prices, the U.S. and European economies now look much better. I think U.S. oil demand will increase over the 2nd half of this year.

I believe we are completing the 3rd and final test of the bottom for prices during this cycle. Several closes above $40/bbl will set the base for a march back to the long-term trend line.

BELIEVE ME, THE BIG DROP IN U.S. PRODUCTION THAT IS JUST AHEAD WILL DRAW A LOT OF ATTENTION.