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Page added on June 6, 2019

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Oil In Bear Market; Is Now The Time To Buy?

Consumption

Reasons For the Oil Sell-Off

The sell-off in the oil prices has been mainly due to two main factors:

  • Oil glut building up
  • Trade war impacting the demand equation

Even though we had many negative headlines on oil prices in the past few days, the gains for the WTI and Brent are standing tall. The year to date gains for WTI is at 9.58% and for Brent, it is 10.88%. Remember during the peak, when the price of WTI touched its $66.44 high and Brent $74.04, these YTD gains were over 30%.

Nonetheless, despite the brutal sell-off yesterday, the WTI oil price is still holding its critical level of $50. For Brent, the critical price point is $60. The supply glut remains the concern here. According to the U.S. petroleum stockpiles data, the supply jumped by 22 million barrels last week touching its highest level since 1990.

Also, the data from nearly half of the global oil consumption countries showed that year-on-year demand growth has halted. Basically, oil glut horrors have started to flash on trader’s dashboards. The below chart shows that U.S. petroleum stockpiles have surged while the WTI crude futures have fallen off the cliff.

WTI price falls off the cliff as the supply glut builds up again.

ThinkMarkets, Bloomberg

Having said this, both Brent and WTI have attracted bargain hunters and both are trading in a positive territory today. WTI is up 0.23 percent and the Brent price is trading higher by 0.21 percent.

The Bigger Question

The bigger question is if this upward move, which is primarily driven by the bargain hunters, can be sustained? Well, the answer to this question isn’t that simple.

More To Come

The fact is that the effects of the trade war between the U.S. and China were never factored in the oil demand equation. It is only now that we have started to see some of these concerns surfacing in the oil market and sadly, it is only going to get worse because I do not see any light at the end of this tunnel due to the prolonged dispute. Trump is in full nuclear trade war mood; he is picking up wars left and right – Mexico is now a great example of this.

To conclude, it is very likely that if the trade war issues are not resolved we can see the oil market giving up its gains. The key support level for Brent sits at $55 and for the WTI it is $45.

Forbes



22 Comments on "Oil In Bear Market; Is Now The Time To Buy?"

  1. Robert Inget on Thu, 6th Jun 2019 9:36 am 

    The operative word, ‘shale’.

    1) The US is overproducing. (shale)
    This causes bloated inventories.

    2) The ‘turn-around’ time for shale, months, instead of YEARS for conventional. $60 oil brings on supply almost at once. $50 kills extra supply.
    So, there we are $50/$60 range.
    Big oil are running TEN K horizontal drill pipe
    with God only know how many fraccs.
    (this limits the number of rigs in service)
    All can be done from a single central ‘pad’.

    3) BIG oil has the advantage.
    (a) plenty of lower cost finance
    (b) Big oil runs all levels. From exploring, leasing,
    finance, drilling, transportation, retail, Pentagon connections etc.

    4) Few know exactly where an additional 500 K p/d is coming from. I suspect, Russia.
    Always tagged are ‘unknown’ millions of barrels per week or heavy oil are being imported.
    W/O Venezuelan Heavy oil imports GOM refineries cannot operate.

    Trump was fuming that gasoline prices were rising. If you recall he threatens military action to regain control of Venezuelan imports.
    ALL that talk went silent after a long phone call from Putin. I’m GUESSING Putin traded oil for
    peace.
    Now how long will Putin keep shipping vital heavy oil to the US always depends on how well Trump
    handles Putin’s demands.

    4) Canada has all the heavy oil we ever need.
    Canada has all the heavy oil China would lobe to have. The question remains, will extra pipeline capacity be built to China, the US or Eastern Canada. (Canada IMPORTS oil in the East)
    (look up “Canada East” pipeline plan if interested)

    5) Small NA oil companies are going bankrupt
    with oil prices below cost of production BECAUSE
    they do not own upper tier infrastructure like
    drilling, marketing, delivery, retail, etc.
    Chevron, Exxon, Shell,BP, can lose money in one sector, like shale and make it up with a single GOM deep water producer.

    6) I own only pipelines at this time. For some reason pipelines track oil and gas prices and Not
    demand. (which remains better than ever)
    Some PL’s pay excellent dividends and have for decades. If you are a passive investor, buying low
    and Not selling is the secret.

    Enviros are doing a great job killing any new pipelines. None are calling for existing lines to be plugged. Hence, great dividends.

    5) The old expression; “cure for low oil prices is low oil prices” actually works for shale.

  2. Sissyfuss on Thu, 6th Jun 2019 9:51 am 

    All the oil majors have their hands full with rearranging the deck chairs while ignoring the fact that there are not enough lifeboats for the shale passengers. All this as an orange colored iceberg comes into view.

  3. Robert Inget on Thu, 6th Jun 2019 10:33 am 

    The FACT that zero Venezuelan heavy oil is being imported here or exported there has been almost universally ignored. In the meantime, China and Russia have solidified control of future exports.

    The FACT that the RATE of increased demand has been lowered doesn’t indicate actual demand hasn’t increased or leveled.

    https://tradingeconomics.com/china/imports
    (imports rise, unexpected?)

    Since 90% of trading is dictated by computers,
    one can’t expect nuance.
    If WTI is brought down than so goes equities.

    Mexico is a NET IMPORTER of Oil.

    Threats of (oil) tariffs are meaningless. IOW’s Mexico contributes zero oil to US mix. We do get hundreds of jobs refining and reexporting finished products.

    If the Trump Administration places tariffs on Mexican goods as it has China and India it’s
    even more inflationary. Mexican food stuffs,
    TV’s, cars, stuff we use daily.

    Iran is selling it’s oil to China.. Big time.
    Russian oil has aligned with India and Japan.

    The clock is ticking on USD as world reserve currency.

    No one knows what plans are in place, if any, when SHALE exhausts. In two, three years max.

  4. Robert Inget on Thu, 6th Jun 2019 10:34 am 

    The FACT that zero Venezuelan heavy oil is being imported here or exported there has been almost universally ignored. In the meantime, China and Russia have solidified control of future exports.

    The FACT that the RATE of increased demand has been lowered doesn’t indicate actual demand hasn’t increased or leveled.

    https://tradingeconomics.com/china/imports
    (imports rise, unexpected?)

    Since 90% of trading is dictated by computers,
    one can’t expect nuance.
    If WTI is brought down then so goes equities.

    Mexico is a NET IMPORTER of Oil.

    Threats of (oil) tariffs are meaningless. IOW’s Mexico contributes zero oil to US mix. We do get hundreds of jobs refining and reexporting finished products.

    If the Trump Administration places tariffs on Mexican goods as it has China and India it’s
    even more inflationary. Mexican food stuffs,
    TV’s, cars, stuff we use daily.

    Iran is selling it’s oil to China.. Big time.
    Russian oil has aligned with India and Japan.

    The clock is ticking on USD as world reserve currency.

    No one knows what plans are in place, if any, when SHALE exhausts. In two, three years max.

  5. Cloggie on Thu, 6th Jun 2019 12:42 pm 

    That was a short “stagnation”!

    Agreement in place in Germany about the construction of new major power grid lines from the North Sea to the southern German states:

    https://deepresource.wordpress.com/2019/06/06/breakthrough-grid-expansion-in-germany/

    The renewable energy transition can continue.

  6. Cloggie on Thu, 6th Jun 2019 12:51 pm 

    The Greens now the largest party in Germany, in the polls:

    https://www.spiegel.de/politik/deutschland/deutschlandtrend-gruene-legen-in-umfragen-weiter-deutlich-zu-a-1271270.html

    – Greens 26%
    – CDU 25% (“Conservatives of the Marxist variety”)
    – AfD 13% (populists)
    – SPD 12% (social-democrats)

    The renewable energy transition is here to stay and so is the pro-EU attitude of German politics and society.

    https://www.spiegel.de/politik/deutschland/cdu-nach-angela-merkel-die-grosse-leere-a-1271049.html

    The great void after Angela Merkel. Nobody is really happy with her designated (female) successor with the charisma of a doorknob.

    And her name “Annegret Kramp-Karrenbauer” is even too German for Germans, hence the abreviation AKK. Her name btw would hint more towards a career at Volkswagen than in politics.

  7. Sissyfuss on Thu, 6th Jun 2019 2:45 pm 

    Greens won’t build a wall, Clogwhopper. Maybe a lovely trellis to support the peonies.

  8. Cloggie on Thu, 6th Jun 2019 3:08 pm 

    “Greens won’t build a wall”

    We don’t need a wall in southern Germany, Great Thinker, we need a determined Italy and Balkans. And guess what, everything is already in place to keep the colonists out, a situation you can only dream about.

  9. Antius on Thu, 6th Jun 2019 3:28 pm 

    “Oil In Bear Market; Is Now The Time To Buy?”

    Nope. Oil prices are dropping due to inventory rises. These are occurring because global trade in real goods is now declining as the Chinese ponzi scheme runs out of steam and growing income inequality in western countries erodes purchasing power. Less demand for real goods, means less transport of real goods; which means collapsing demand for diesel, etc. Get ready for a big recession. And get ready for even more commodity price deflation as people everywhere get poorer.

  10. Antius on Thu, 6th Jun 2019 3:41 pm 

    Has no one seen these yet? Two excellent articles on sustainable small scale wind power.

    https://www.lowtechmagazine.com/2019/06/wooden-wind-turbines.html

    https://www.lowtechmagazine.com/2019/06/small-wooden-wind-turbines.html

    What DeDecker does not really mention is the importance of choosing the right site. With small turbines, getting decent energy returns depends upon siting the turbine in a favourable location – often on the top of a hill.

    However, his point about improving EROI by reducing embodied energy makes a lot of sense. I suspect that a stone or rammed earth tower would be a good way of doing this for a relatively small wind turbine. Especially if the tower can double as a workshop, a store or even as a dwelling.

  11. Antius on Thu, 6th Jun 2019 3:48 pm 

    “The Greens now the largest party in Germany, in the polls”

    Too bad. If those fuckers dominate German politics, they will open the floodgates for the third world. Must be all that Arab semen that keeps getting pumped into German women. It seems to be damaging their brains.

  12. Cloggie on Fri, 7th Jun 2019 1:11 am 

    “Too bad. If those fuckers dominate German politics, they will open the floodgates for the third world. Must be all that Arab semen that keeps getting pumped into German women. It seems to be damaging their brains.”

    Too pessimistic. Arabs are unable to make it to Germany, because the “soft under-belly of Europe” no longer is soft.

  13. makati1 on Fri, 7th Jun 2019 2:41 am 

    “D-Day And The Myth That The U.S. Defeated The Nazis”

    https://www.moonofalabama.org/2019/06/d-day-and-the-myth-of-a-us-victory.html

    “The U.S. lost 411.000 people due to World war II, Great Britain lost 450,000, Germany some 7 million and the Soviet Union more than 20 million…

    Since they were attacked by the Germans in 1941 the Soviets had pressed their allies to open a western front against Germany. In 1943, after the defeat of the Germans in Stalingrad and the failure of their counter attack in the Battle of Kursk, it became obvious that the Soviets would defeat the Nazi forces. At the Tehran conference in November 1943 Stalin pressed Roosevelt and Churchill again to finally open a western front. Knowing that the Soviets would win over Germany they agreed to launch their invasion in May 1944.”

    The “REAL” history of WW2 is not taught in US schools. But then real history does not exist in delusional Amerika.

  14. Antius on Fri, 7th Jun 2019 4:10 am 

    Why oil prices are falling – A 19% reduction in Chinese diesel demand relative to last year. When oil consumption in the world’s largest importer literally tanks, it is bound to have a negative impact on the price of internationally traded oil.

    https://tinyurl.com/y6qystzt

    In fact, Chinese diesel demand appears to have fallen 30% since its peak in 2015. Given that diesel powers goods transport in large and efficient diesel engines; such a decline can only be explained by falling transport of real goods.

    It is tempting to put this down to the trade war, but the decline appears to have been well underway long before the Trump tariffs took effect.

  15. Davy on Fri, 7th Jun 2019 6:05 am 

    “Tempers flare as oil-rich Venezuela starts to ration gas at the pumps”
    https://tinyurl.com/yyf9dujz digital journal

    “Since Monday, drivers in the western state of Lara can buy only 30 liters (eight gallons) of fuel a week, while a rationing system based on vehicles’ license plates has been introduced in Bolivar state in the south and Monagas in the west.”

    “In neighboring Tachira state, residents have started smuggling in fuel across the border from Colombia, despite the crossings being officially closed, triggering long lines at pumps in the Colombian border town of Cucuta. Until recently, the flow of smuggled fuel had gone the other way, from Venezuela into Colombia, because state-subsidized fuel was so cheap that smugglers could earn significant mark-ups in Colombia.”

  16. Dredd on Fri, 7th Jun 2019 7:53 am 

    Bull and Bear it (Square Finger ‘Splainin’).

  17. makati1 on Fri, 7th Jun 2019 9:47 am 

    For MOB: https://www.youtube.com/watch?v=p-L0NpaErkk&list=RDoKL6bmiuLmg&index=22

    “When Chicago Died” From my youth. Enjoy!

  18. The Reel Donald on Fri, 7th Jun 2019 10:58 am 

    WTF happened to this site’s hosting? Now I can hardly bring it up w/o enabling a bazillion scripts. Bring back the old site hosting or I’ll write an executive order!

  19. Davy on Fri, 7th Jun 2019 11:29 am 

    “How The US Regime Uses Sanctions To Soften A Country Up For Invasion”
    https://tinyurl.com/y4b2sogk zero hedge

    “The Trump regime is clearly hoping for an excuse to invade Iran, and if Iran blocks the Strait of Hormuz, then Trump and his friend Netanyahu will have their wish, their excuse to invade that country.”

    “The US regime is also trying this strategy against Venezuela, of economically strangling the country with sanctions as a way to soften it up for an invasion. The excuse for an invasion there will probably be ‘humanitarian’, in order to stop the shortages of food, medicine and other necessities, which shortages are being caused by America’s economic sanctions against Venezuela and against any company that trades with Venezuela.”

    “These examples show how economic sanctions against a country are the first stage of war by the US regime, an unofficial declaration of war against that ‘enemy’ country, and the preparatory stage for a coup, or, if the coup fails to work, then for an invasion.”

  20. JuanP on Fri, 7th Jun 2019 12:32 pm 

    Mueller Caught In Another Deception; Key ‘Russia Link’ Exposed As Informant For US, Ukraine

    Konstantin Kilimnik, who worked for Trump campaign chairman Paul Manafort, was described on page 6 of the Mueller report as having “ties to Russian intelligence” – and was cast in a sinister light as a potential threat to democracy. Mueller completely omitted the fact that Kilimnik was working as an informant and intermediary between America and Ukraine, and subsequently indicted him for obstruction of justice. And Mueller mentioned none of this in his report despite knowing about it since 2018 – more than a year before the final report. However Mueller’s omission of his “extensive, trusted assistance to the State Department seems inexplicable.” We learn this four days after deceptive edits were found in the Mueller report regarding a phone call between attorneys for President Trump and former national security adviser Mike Flynn designed to make it appear as though Trump was attempting to strongarm Flynn and possibly obstruct justice by shaping witness testimony. As Solomon concludes – “A few more such errors and omissions, and Americans may begin to wonder if the Mueller report is worth the paper on which it was printed.

  21. JuanP on Fri, 7th Jun 2019 12:39 pm 

    OOpps my bad I forgot to put my link from Zero Hedge. I love the hedge for the best alternative news

  22. More Davy Identity Theft on Fri, 7th Jun 2019 4:27 pm 

    JuanP on Fri, 7th Jun 2019 12:32 pm

    JuanP on Fri, 7th Jun 2019 12:39 pm

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