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Oil just dropped to a 5-month low below $46

Oil just dropped to a 5-month low below $46 thumbnail

Oil prices struck a new 2017 low on Thursday as mixed U.S. stockpile data compounded bearishness that has permeated the energy complex in recent weeks.

U.S. West Texas Intermediate crude fell below $46 and international benchmark Brent breached $49, both sinking to the lowest level since Nov. 30, the day the Organization of the Petroleum Exporting Countries agreed to cut output.

Analysts said WTI could eventually decline to $42 now that it broke this key level.

U.S. West Texas Intermediate 2-day performance

The move lower came after the U.S. Energy Information Administration reported a much smaller-than-expected drop in crude oil inventories and another week of soft gasoline demand.

John Kilduff, founding partner at energy hedge fund Again Capital, said there was no one headline moving oil on Thursday. Instead, he chalked it up to more technical trading.

“That $47 level … is huge,” he said.

On Tuesday, oil breached the previous week’s low of $48.20, sparking a round of high-volume, late-afternoon selling.

There is some support around the $45 level, Kilduff said. But if U.S. crude settles below $47 a barrel on Thursday, he believes the contract could plunge to the November lows of $42 a barrel.

Seaport Global Securities also put the next major support zone at $45.90, with another critical level at $42.70.

Roberto Friedlander, head of energy trading at Seaport Global Securities, pointed to “terrible” demand for refined products, uncertainty around future oil consumption and “what seems like an endless supply of oil.”

An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Futures Now: Oil falls on supply data  

Both Kilduff and Friedlander said oil futures appeared to be getting caught up in a broader sell-off in commodities on concerns about Chinese demand.

Investors are looking forward to OPEC’s May 25 meeting, where the exporter group will decide whether to extend its six-month production cut through the second half of 2017. OPEC and other exporters agreed to reduce output by 1.8 million barrels a day late last year.

While OPEC compliance has been good and many expect the group to extend its share of the cuts, global inventories have so far remained stubbornly high, including in the United States.

A Reuters survey indicating that compliance with the output cut deal fell among some OPEC members in April has weighed on oil prices. News of growing output from OPEC member Libya, which is exempt from the deal, also hurt sentiment.


12 Comments on "Oil just dropped to a 5-month low below $46"

  1. rockman on Thu, 4th May 2017 11:08 am 

    And just the standard reminder: this is not the price of oil being sold today under long term contracts where the vast majority of oil is sold. It’s the futures price some are betting futures contracts will be bid above this price in 30. The price contracted oil sells for in May will be calculated partially by the closing price of oil futures between 1 to 3 months ago depending on the details of the sales contracts.

  2. bobinget on Thu, 4th May 2017 12:17 pm 

    Thanks for that reminder, rockman.

    Now, we should look at why. IMO low prices are destabilizing exporters like Nigeria and Venezuela.
    Who gains?

    Usual suspects; USA, China. Coincidently, the world’s
    biggest importers.

    IMO the US, one of the world’s biggest producers as well as consumers, has more to lose than gain.

    China OTOH has EVERYTHING to gain.
    China is fixin to foreclose on Venezuela’s heavy oil.
    Price manipulation works BOTH ways.
    With so many traders on margin, $45… should be no surprise.

    All eyes should be on unstable Venezuela, Nigeria even, perhaps, targeted Saudi Arabian choke points.
    Desperate measures may come into play. China wins either way.

    Not satisfied with $45, shorts are taking oil lower.

    It’s one o’clock in the East. Time for bargain hunters.

  3. twocats on Thu, 4th May 2017 12:39 pm 

    good points bob. people on these blogs are usually pretty quick to say “supply and demand” or some variant of that as if that is a sage-soaked comment worthy of long white beard stroking. economics is just as often a political or military tool as it is some natural system with its own universal unchanging rules.

  4. Jerome Purtzer on Thu, 4th May 2017 6:37 pm 

    Short sighted profit oriented unmitigated destruction of the Earth and all the systems that support us humans. It seems that people only miss the forest once they’ve cut down every last tree. The same applies to oil, everyone is trying to figure out how fast they can get it out of the ground to support their increasingly manic lifestyles. Party on!

  5. Boat on Thu, 4th May 2017 11:28 pm 

    two cats,

    If you actually followed oil you would know Lybia has added about 400,000 bpd and Nigeria 200,000 per day, all in the last week. 600,000 bpd has a definite affect on supply. The world oil storage had been basically treading water but now will start adding to the glut. So yes, supply and demand rule. Nothing has changed.

  6. bobinget on Thu, 4th May 2017 11:39 pm 

    12:30 EASTERN CL now $44. and falling hard.

    Chinese waiting in wings as Nigeria and Venezuela

    At any time some idiot will do what he believes will save the day.

  7. GregT on Thu, 4th May 2017 11:46 pm 

    “If you actually followed oil you would know Lybia has added about 400,000 bpd and Nigeria 200,000 per day, all in the last week. 600,000 bpd has a definite affect on supply.”

    Let’s all hope that the extra 600,000 bpd drives prices back down to the $20/bbl range, like what they have been for the better part of the past 100 years. Fuck the planet and the future of all of the species on it, economic growth is all that really matters. Right Kevin?

  8. Plantagenet on Fri, 5th May 2017 12:54 am 

    Its supply and demand.

    The EIA is estimating US shale production will go up by 800,000 bbl/day in 2017, and oil production is also rising in Libya, Iran and Iraq.

    Add them all together and you’ve got an oil glut.


  9. deadlykillerbeaz on Fri, 5th May 2017 6:09 am 

    When you cut down trees for lumber, you cut what you can, mill the logs into dimension lumber what you can, the milled lumber enters the economy, the market, as an economic supply.

    The total supply of logs and lumber would be all of the trees in the world, dwarfs the economic supply. All of those trees will never be cut into 2×4’s no matter what the wonks tell you.

    The same goes for oil. Even though there is a finite supply, there still will be more than what can be sold each day. Analogous to the lumber industry, somewhat.

    The economic supply of oil, that which is available each day, oil that can be bought or is already sold is 100,000,000 barrels per day, somewhere in that range, is much less than all of the reserves of oil throughout the world. The total supply, all that can be recovered, is not the economic supply.

    If the total amount of economic supply of oil is not equal to the demand, the economic demand, the oil that can be bought, there will be a price increase for that amount of oil that is available for sale at that time.

    The economic supply runs short, less than the economic demand, the price increases. The economic demand translates to buyers bidding for some more oil, it can be a known amount, the money is there. If the oil isn’t there, it will get there. The buyer wants the oil.

    Plenty of trees to cut for lumber out there, they’re not in danger of becoming extinct. A renewable resource that has an inexhaustible supply.

    I suppose if oil were to be forming in the here and now, more oil can be counted in the future, not necessarily adding more, just keeping the supply on an increasing timeline.

    The Seneca Cliff will take a while to get here, the daily supply of oil surely can outlast the ups and downs for the next 50 years or more. It can be irrational too, the market, longer than anyone alive can remain solvent. Time is on its side.

    If there are 5 trillion barrels of oil, the total amount recoverable, and 1.5 trillion are gone, then the remainder is what is left to burn.

    3.5 trillion barrels divided by 100 million barrels consumed each day will equal the number of days of oil supplies to last.

    Not quite like that, but it illustrates the reality.

    3,500,000,000,000/100,000,000=35,000 days to get that oil to market.

    What? About 96 years or so?


    Gonna last for some time into the future, even if it is a finite amount, it will be there to satisfy the need for some more oil.

    The demand won’t die, there will be somebody who wants oil and a little bit more tomorrow.

    Especially with all those millenials riding bikes and their attention turned to a cellphone, a waning demand means a longer time for oil to last.

    Them millenials don’t need no stinking’ cars.

    A Redwood seedling grows a foot per year, in 90 years, it will be 90 foot tall. Exponential function right there.

    Leave the Redwoods where they are, mow down the Amazon, it’ll grow back.

    If it is ok to burn a 100 million barrels of oil each day, then trees can be cut with reckless abandon too.

    The Mississippi River Valley was clearcut years ago. Had to move to California, Oregon and Washington State to keep the mass cutting of trees in full gear.

    It ain’t gonna stop, none of it.

    Happy Day! And pay attention too!


  10. Boat on Fri, 5th May 2017 10:04 pm 


    I burn very little of the world’s gasoline. Are you really that stupid to blame one guy. PS that 600,000 drove down prices to $45. Besides I have not drilled 1 well, refined or sold one drop of gasoline. Try to get your shyt together idiot.

  11. dave thompson on Sat, 6th May 2017 4:23 am 

    Great analysis deadkiller, The only problem I see in the exponential function of extraction, the burning of trees and oil you point out is that of climate change. According to the folks paying attention humans have about ten years left, maybe. The problem being enough habitat to grow food at scale. Keep a watch on the arctic ice and the blue ocean event that is happening this year or next.

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