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Page added on January 29, 2016
Don’t believe oil bump, $18 still coming
With depressed oil prices poised for a second-straight weekly advance, closely followed analyst John Kilduff said Friday the bounce from 12-year lows won’t last.
West Texas Intermediate crude was steady early Friday, after gaining nearly 3 percent Thursday on hopes of a deal among OPEC countries and Russia to cut production to tackle the growing supply glut.
“This whole story line about there being a coordinated production cut plan is just rubbish,” said Kildfuff, the founding partner of Again Capital, an alternative investment manager specializing in energy and metals.
Russian Deputy Prime Minister Arkady Dvorkovich on Friday played down expectations for an output cut agreement, saying Moscow would not intervene to balance the market.
“We take the position that our oil sector is, to a significant extent, private, and is commercially minded. It is not under the direct control of the state. Our market is governed by the decisions of individual companies, and that is how it will continue,” Dvorkovich said.
Against this backdrop, Kilduff told CNBC’s “Squawk Box” that he still thinks oil goes lower from here, sticking with his recent call for $18 per barrel as the bottom. “We’re going to get that low.”
“I don’t know why there’s such negativity in the stock market around this low oil price because it’s so great,” he said. “I filled up my tank for $25 yesterday.”
Kilduff said the consumer benefits from cheap oil and cheap gasoline outweigh the negative affects among oil producing companies and oil-dependent states and localities.
“This is nothing but stimulative and positive for the economy,” he said.
21 Comments on "Don’t believe oil bump, $18 still coming"
Davy on Fri, 29th Jan 2016 8:25 am
“Kilduff said the consumer benefits from cheap oil and cheap gasoline outweigh the negative affects among oil producing companies and oil-dependent states and localities.” Said Nero of his music as Rome burned.
I am of the opinion oil is now trapped within its own dynamics and the dynamics of the currency markets and the knock-on effect to the equity and debt markets. In other words this is an interconnected process of deflationary forces at multiple levels. There is no recovery to sustained healthy prices for consumers and producers in the oil sector. What we have now is a dangerous cocktail of volatility where different economic sectors adversely affect other sectors as they move within volatility.
If oil prices spike that drives economic volatility. If markets drop that hurts oil. If currencies become destabilized, as we see now with devaluations, we see further economic disruptions in the markets and oil. This is a catch 22 of deflation. More debt means less liquidity. Currency devaluations drive other currencies into dangerous territory. Oil prices rise and we will see economic reactions in demand.
Business cycles cannot be fixed. They can be resisted and delayed but not stopped. The Ponzi global bubbles are deflating without anything to stop this. We have discussed this trap over several years that central banks have gotten the world into. There are consequences for easing and rate repression. There are consequences for mal-investment and overcapacity and the moral hazards of extending and pretending bad debt away. It is now time to pay up.
goat2055 on Fri, 29th Jan 2016 8:31 am
I think the reason for the broader markets following oil down is due to a bigger systemic issue – this most recent growth bubble, starting around the end of WWII, is nearing its fundamental peak and is leveling off.
Normally, low oil prices means cheaper gas and an immediate boost to the economy as people have more money to spend and invest. Of course, the obvious exception are the oil companies and anyone associated with oil. Still, even though that sector may suffer to a degree the rest of the economy usually soars upward. On the other hand when oil prices go up then that usually puts the brakes on the economy.
This time is different. The demand for oil and every other commodity in the world is way off. Ditto for consumer goods such as washing machines and TV’s and industrial machinery and medical equipment. Airline profits are up due to cheap jet fuel but we don’t know how long that will last.
Probably this short (70-year) growth spurt is beginning to deflate – like so many before it. Most of the potential new customers such as in China and India have been tapped out. No new customers on this planet to expand goods and services to – or at least not that many more. Little room left for population growth or “subdivisions” to be built (need room for growing food!). That seems to be the problem now – with climate change thrown in to the mix. Stay tuned – we’ll see what happens after the elections!!!
makati1 on Fri, 29th Jan 2016 9:17 am
Most people seem to be using their gas “savings” to pay off their debt or just put food on the table. The consumer society is morphing into the survival society, all over the world. By the end of this year, we will live in a new world of less is more.
tahoe1780 on Fri, 29th Jan 2016 10:50 am
“Survival Society” indeed. Healthcare spending – http://www.zerohedge.com/news/2016-01-29/and-biggest-contributor-us-spending-growth-2015-was
penury on Fri, 29th Jan 2016 11:05 am
Why do people continue to deny that the greatest consumer of energy is the manufacture and construction of things. it took more energy to build the car you drive than the gas you burn going to Walmart, when manufacturing dies, your economy dies along with it.
Plantagenet on Fri, 29th Jan 2016 11:06 am
The oil glut continues.
As long as supply exceeds demand, there will be downward pressure on oil prices.
Cheers!
aspera on Fri, 29th Jan 2016 11:15 am
penury: I’ve wondered if it’s like the old sensible/insensible heat notion. The energy we put into the vehicle is tangible, palpable, vivid, here-and-now, etc. The embedded energy is more conceptual, harder to “see” in the here-and-now.
If you’re trained as an engineer or scientist it is easy to “see” that which is embedded; it has a reality. Not so much for others. I’m not saying they are dumb. This is just a different ways of knowing (a concept that, ironically, engineers and scientists seem to have more difficulty with that the “non-…”)
goat2055 on Fri, 29th Jan 2016 12:08 pm
An even bigger embedded energy is in the roads vehicles are driven on. There is a heavy dependency on the fossil fuels used to make asphalt, concrete, steel and other road construction materials.
It makes one wonder, when the oil and gas are “gone” how will roads and bridges be built and maintained. Sure, you can have fleets of electric cars (if you can figure out how to get the energy to smelt the iron and manufacture them) but on what will you drive them?
GregT on Fri, 29th Jan 2016 3:49 pm
At the foundation of any society is it’s ability to produce food. Modern agricultural practices are completely reliant on fossil fuels, and there is no substitute available that will allow us to continue to produce food on the scale needed to maintain our population numbers. Societal complexity, security, and specialization are the direct results of the amount of food available, and the amount of time available per capita to do other things besides ‘gathering’ food.
The usual focus is on technology, and more specifically on transportation technologies. Without the availability of food, societies will rapidly devolve into chaos. All of the electric vehicles, roads, bridges, and infrastructure that we now take for granted, won’t matter in the slightest, when people become hungry enough.
twocats on Fri, 29th Jan 2016 4:06 pm
By the end of this year, we will live in a new world of less is more. [mak] some like you mak are already there, for the vast majority of developed world its going to be a new world of less is even more depressing than more. that’s what happens when you’ve stripped away human connections for too long and too deep, they can become stunted and don’t always grow back when given the opportunity.
twocats on Fri, 29th Jan 2016 4:08 pm
At the foundation of any society is it’s ability to produce food. [GregT]
Yeah, the Nate Hagens talk that Apman posted the other day goes into this energy slave vis-a-vis food concept in good detail. Nate has been refining that talk for at least 3 years now and its definitely one of the best overviews, including this energy/food vector.
ennui2 on Fri, 29th Jan 2016 4:16 pm
Folks, as much as it pains me to admit, Planty is the voice of common sense. Doomers should capitulate to it.
Boat on Fri, 29th Jan 2016 4:32 pm
ennui2,
Why would the truth about there is a glut bother you or pain you. I have been pointing out disinformation by doomers for over 2 years. Unpopular opinions as well. lol
ghung on Fri, 29th Jan 2016 4:40 pm
ennui said “Planty is the voice of common sense. Doomers should capitulate to it.”
Riiight…. Capitulate to a broken fuckin’ record. Someday maybe our resident glut-slut will have an original thought. Meanwhile, it’s Friiiiday! Cheers.
GregT on Fri, 29th Jan 2016 5:46 pm
“Folks, as much as it pains me to admit,”
Stock on on plenty of pain-killers then. While you are suffering from the pain induced by planter’s ‘common sense’, most of the rest of us will continue to assess the situation rationally.
onlooker on Fri, 29th Jan 2016 5:57 pm
Maybe it pains you so much because you have to do a whole lot of mental and physical contortions to believe this “common sense”
Apneaman on Fri, 29th Jan 2016 6:17 pm
It’s painful alright. Cognitive dissonance causes a great deal of mental pain. Hence the never ending soothing stories.
“In psychology, cognitive dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time, performs an action that is contradictory to one or more beliefs, ideas or values, or is confronted by new information that conflicts with existing beliefs, ideas, or values”
https://en.wikipedia.org/wiki/Cognitive_dissonance
GregT on Fri, 29th Jan 2016 6:34 pm
“Yeah, the Nate Hagens talk that Apman posted the other day….”
Thanks twocats,
I’ll see if I can find it. Far too much time is being spent on how to keep the same systems alive that have caused all of our biggest problems to begin with, and almost zero time being spent on the things that should be of the greatest concern, IMO. We’re going to be in for an entire world of hurt at some point in the future, and that future is not that far away.
onlooker on Fri, 29th Jan 2016 6:45 pm
“In psychology, cognitive dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time, performs an action that is contradictory to one or more beliefs, ideas or values, or is confronted by new information that conflicts with existing beliefs, ideas, or values” Reminds me of an episode of the original Star trek whereby Captain Kirk finally realized that the way to neutralize an advanced deadly robot was to make it doubt its purpose or principal commands. The robot literally was deactivated via cognitive dissonance as it could not reconcile two principal commands of its programming.
Davy on Sat, 30th Jan 2016 8:15 am
“What’s Not to Like About Cheap Oil? Well …”
http://www.bloomberg.com/news/articles/2016-01-28/what-s-not-to-like-about-cheap-oil-well-
Krnz300 on Sat, 30th Jan 2016 10:28 am
Boom……Bust……..
Half of U.S. Fracking Industry Could Go Bankrupt as Oil Prices Continue to Fall
http://ecowatch.com/2016/01/18/fracking-industry-bankrupt/?utm_source=EcoWatch+List&utm_campaign=bddf330f10-Top_News_1_18_2016&utm_medium=email&utm_term=0_49c7d43dc9-bddf330f10-86023917