THE Price of Crude pt 14

by **ROCKMAN** » Sun 21 Jan 2018, 17:57:30

Goner - So true. But look at the curve of any market index and they have turned near vertical. In 4 decades I've never seen such a plot take a hard correction in the near term for any animal: stock, oil price, rig count, etc. Depending on the scaling of the plot usually easy to see that "Oh shit!" point coming. Not that at was heavy in the market (too f*cking old) but have gone 100% liquid. Don't care at all if I didn't it the peak. Now my focus is one guessing when we hit the next bottom...or close enough to it. Just like I did when folks over compensated on Chevron when oil prices crashed.

Same plan: buy low...sell high. Or at least higher.

by **AdamB** » Tue 23 Jan 2018, 00:39:06

Hail the Return of $100 Crude! Maybe
A slump in new production outside the U.S. shale patch in 2019 could help to send Brent crude briefly back above $100 a barrel next year, according to London-based consultancy Energy Aspects. The International Energy Agency also has a 100 number in its latest outlook, published Friday. While it doesn't forecast prices and doesn't yet look as far ahead as 2019, it sees global demand exceeding 100 million barrels a day for the first time in the fourth quarter of this year. Oil's slump is over -- hail the return of triple-digit crude! Well, maybe, briefly. OPEC ministers and friends meeting in Oman today to assess their output deal would be wise not to get too carried away. The IEA, as I noted last week, is much less bullish about demand growth in the coming months than other pundits. For some, this raises the

Hail the Return of $100 Crude! Maybe

by **asg70** » Tue 23 Jan 2018, 02:03:24

And again, 10 years later, speculation muddies the waters for peakers trying to tease out how much of this is supply and demand vs. profiteering.

https://www.bloomberg.com/gadfly/articl ... omplicated

by **Outcast_Searcher** » Tue 23 Jan 2018, 19:13:58

asg70 wrote:And again, 10 years later, speculation muddies the waters for peakers trying to tease out how much of this is supply and demand vs. profiteering.

https://www.bloomberg.com/gadfly/articl ... omplicated

I still say that marginal speculation may distort things to some extent for awhile. Perhaps several months or even a year or more.

However, long term, the supply/demand relationship is dominated by real consumers of oil and real producers of oil, and a huge proportion of the futures contracts are used to hedge such real world usage and production.

I find it interesting that in virtually every large oil price spike, the liberals are screaming for windfall profits taxes, claiming collusion, blaming speculators, etc.

And yet, when there is a big bust like recently and Americans get the gift of relatively low oil prices, it's CRICKETS when it comes to liberals thanking speculators for driving oil prices down, or thanking oil producers for all their good work in ensuring abundant supply.

....

I'd say it's because crying (or shrieking) to a sympathetic audience of voters is FAR more politically profitable than offering fair and balanced kudos when things go well re the same issue. (And heaven forbid the conservatives take credit at the expense of the liberals when things do go well, re oil prices!)

...

Of course, I'm a "weird" guy who believes in capitalism, and neither wants to bail out the too aggressive in bad times, nor heavily punish the wildly successful in good times, as I believe capitalism needs to have strong incentives to get intelligent risk taking to occur in things like oil markets.

(To defend that position, I'll cite how much more productive big US oil firms are relative to the typical third world state owned oil company, relative to management of resources and unit profit.)

by **GoghGoner** » Wed 24 Jan 2018, 11:43:10

WTI above $65 for the first time since 2014. Slight draw in crude inventories but a large draw at Cushing has traders excited. Also, total products supplied +8% over last year. Demand is still strong in the weekly numbers.

Brent back above $70. The ratio is under $5 right now so WTI is still gaining on Brent as expected. Also, looks like backwardation is increasing. Near term supply crunch.

by **AdamB** » Thu 25 Jan 2018, 13:05:14

PERHAPS the most vexing thing for those watching the oil industry is not the whipsawing price of a barrel. It is the constant updating of theories to explain what lies behind it. In March 2014, when the price of a barrel of Brent crude was in three figures, the then boss of Chevron, an oil giant, observed that the scarcity of cheap oil meant “$100 per barrel is becoming the new $20”. Two years later, when the oil price slumped below $28, the talk was of a global oil glut caused by the furious efforts of the OPEC cartel to regain market share. Now that oil prices have tested $70, analysts are again scratching their heads. In “1984”, George Orwell coined the term “doublethink”, the ability to believe two contradictory things. Oil analysis seems to require similar cognitive gymnastics. Three big

Why the oil price is so high

by **Outcast_Searcher** » Thu 25 Jan 2018, 14:43:51

AdamB wrote:
PERHAPS the most vexing thing for those watching the oil industry is not the whipsawing price of a barrel. It is the constant updating of theories to explain what lies behind it.

...

Oil analysis seems to require similar cognitive gymnastics.

Why the oil price is so high

It's the same thing with economists' predictions vs. what actually happens. Oil is just a volatile subset of the global economy.

The world is complex. Many factors like various (changing) technologies, geopolitcs, etc. interact. Look how hard it is to, for example, predict future interest rates. Or stock markets except as a multi-decade general trend.

My main question on this idea to the author is, "Why are you just noticing this now?"

by **GoghGoner** » Fri 26 Jan 2018, 09:51:42

This graph should dispel anymore glut thoughts around here but there isn't much objectivity in closely held opinions.

by **GoghGoner** » Fri 26 Jan 2018, 09:59:09

Since Pops isn't around to post this... Dollar and oil prices still strongly correlated.

https://pbs.twimg.com/media/DUduXiDX0AE-B9x.jpg

by **Tanada** » Fri 02 Feb 2018, 13:47:56

So looking at the WTI bid price chart on CNBC the price has been;
Above $45/bbl from about July 10, 2017;
Above $50/bbl from about Oct 10, 2017;
Above $55/bbl from about Nov 10, 2017 and;
Above $60/bbl from about Dec 27, 2017.

With the increases in production from American frackers there is some downward pressure but the OPEC+ commitments to maintain cuts in favor of higher prices has prevented a fall off. Furthermore as the storage stockpile at sea in anchored tankers has now been eliminated through sales and the land storage has fallen a good percentage things may be stabilizing at this level for a while, but it is far too soon to tell.

On the other hand the first month of 2018 has had prices comparable to the fourth quarter of 2014 more than the last three years and the price rise to the this level was a more sustained slope than the sharp up and down spikes we have occasionally experienced over the last three years that always petered out instead of becoming a new trading range.

by **GoghGoner** » Sun 04 Feb 2018, 09:26:22

This is from the IEA a couple of weeks ago. Libya's oil production fell by 1.3 mbd to start off 2013 so that triggered the inventory declines that year. Crude price was higher in 2013 than what my model called for -- I would expect oil prices to have declined in 2013 because the commodity cycle turned to bear in 2012. Crude defied gravity until 2014 when Iran sanctions lifting and shale frenzy finally brought enough oil back into the market.

The oil market is clearly tightening; in the three consecutive quarters 2Q17-4Q17 OECD crude stocks fell by an average of 630 kb/d; such a threesome has happened rarely in modern history: examples include 1999 (prices doubled), 2009 (prices increased by nearly $20/bbl), and 2013 (prices increased by $6/bbl). Since the nadir for Brent crude in June when the price was $45/bbl, the 2017 OECD crude draws have coincided with a price increase for Brent of nearly $25/bbl.

by **GoghGoner** » Sun 04 Feb 2018, 09:35:59

Looks like backwardation increased again recently. There will not be any oil stored for short-term profit until the oil price curve goes back to contango. There is a huge glut of storage capacity right now.

by **GoghGoner** » Tue 06 Feb 2018, 18:16:46

I kept hearing how OPEC is propping up prices by curtailing production. The only OPEC country that could even be questioned about not pumping full out is SA. SA may not be full throttle but they are only 1 mdb from it and they don't really like to be full throttle anyway. OPEC is doing nothing to prop up prices.

by **Outcast_Searcher** » Tue 06 Feb 2018, 18:55:43

GoghGoner wrote:I kept hearing how OPEC is propping up prices by curtailing production. The only OPEC country that could even be questioned about not pumping full out is SA. SA may not be full throttle but they are only 1 mdb from it and they don't really like to be full throttle anyway. OPEC is doing nothing to prop up prices.

Agreed. From what I've read, they don't need to as increasing global demand is taking care of the issue for them. They realized it wasn't in their best interest to try to crush prices (and crush themselves economically), since that wasn't going to kill the shale oil producers, or at least not the shale oil resources. So they've let the (more) normal forces of supply and demand reassert themselves.

It's all about global demand, which in the short to intermediate term is all about global economic activity.

by **kublikhan** » Tue 06 Feb 2018, 21:30:55

I disagree. OPEC cuts did indeed raise the price of oil off it's 2016 lows. Far from pumping flat out, OPEC is over complying with the agreed output cuts. The current compliance rate is 138%, an astonishingly high number considering OPEC has a historic compliance rate of around 60%.

March WTI crude oil futures contracts rose 0.11% to $64.80 per barrel at 1:15 AM EST on February 1, 2018. Prices rose due to OPEC’s higher compliance with the production cuts in January 2018. Prices are near a three-year high. OPEC’s compliance with the ongoing production cuts was at 138% in January 2018 and 137% in December 2017, respectively. Higher compliance supports oil prices.

Impact
Oil producers agreed to cut production by 1,800,000 bpd from January 2017 to December 2018. Crude oil prices have risen more than 50% since June 2017, partly due to the production cuts. Higher compliance with pledged cuts would draw down global and US crude oil inventories and support oil prices. Any unplanned supply outage from Libya, Nigeria, Iraq, and Venezuela could also support oil prices.

Impact
Record US oil production could be the biggest bearish driver for oil prices in 2018. Non-OPEC production is expected to rise by 1,150,000 bpd in 2018, which could also weigh on oil prices.

Why OPEC's Crude Oil Production Rose in January

by **GoghGoner** » Wed 07 Feb 2018, 06:30:50

The compliance number was an arbitrary number set by OPEC . It was set after that one month production spike on the graph. That very short term spike on which they are using for a baseline was when they were off loading inventories (this whole spike is bogus in my opinion). I know this because I watched Iranian floating storage numbers during that time.

You can easily see how much they have historically produced and how they are producing today. Looking individually at the OPEC producers, there is nothing in their production graphs that would even lead anybody to guess their was a cut (because there wasn't).

http://peakoilbarrel.com/opec-december-oil-production/#more-18449

by **kublikhan** » Wed 07 Feb 2018, 10:11:46

GoghGoner wrote:The compliance number was an arbitrary number set by OPEC . It was set after that one month production spike on the graph. That very short term spike on which they are using for a baseline was when they were off loading inventories (this whole spike is bogus in my opinion). I know this because I watched Iranian floating storage numbers during that time.

You can easily see how much they have historically produced and how they are producing today. Looking individually at the OPEC producers, there is nothing in their production graphs that would even lead anybody to guess their was a cut (because there wasn't).

http://peakoilbarrel.com/opec-december- ... more-18449

The spike in oil production was not Iran draining it's tankers. Iran's production increased because the sanctions were lifted. And it continued to increase long after Nov 2016. Even now, Iran's oil production is higher than Nov 2016:

Table 5 - 9: OPEC crude oil production based on secondary sources, tb/d
Country Nov 2016 Dec 2017
Algeria 1,089 1,037
Angola 1,688 1,633
Ecuador 547 526
Equatorial Guinea 160 132
Gabon 221 197
Iran, I.R. 3,710 3,829
Iraq 4,590 4,405
Kuwait 2,810 2,700
Libya 577 962
Nigeria 1,656 1,861
Qatar 651 594
Saudi Arabia 10,623 9,918
UAE 3,078 2,878
Venezuela 2,066 1,745
Total OPEC 33,305 32,416

OPEC Monthly Oil Market Report 18 January 2017

OPEC Monthly Oil Market

OPEC's cuts alone took a million barrels of supply out of the market. Over half a million more barrels were taken offline by the non OPEC member countries participating in the cut. And keep in mind those are net cuts. Allowances were made for some member countries to increased production. I already mentioned sanctions being lifted on Iran and their increased production. Nigeria and Libya were also allowed to increase their production. Iraq has added more capacity and is ready to open the taps as soon as the deal ends. Russia too wants to increase production. And that's in addition to SA who cut the most.

by **GoghGoner** » Wed 07 Feb 2018, 11:25:30

I said one month production spike. It is important to notice when analyzing the compliance percentages. It happened right when OPEC announced these fake cuts. If you can't look at the graphs and say I can see where they cut, then they probably didn't cut. You can see the cut clearly in 2009, you can't see it now. You were wrong about the glut and tried to post a bunch of garbage to solidify your point and you are mislead about these fake cuts.

Funny, that post takes the fake one month surge and does the comparison with it (nov 2016). What a scam job to milk the markets and it worked. They unloaded their storage and folks that can't read graphs still believe they have cut.

by **kublikhan** » Wed 07 Feb 2018, 11:55:22

Oh I see. You are one of those. You have your opinion set in stone and are absolutely convinced you are right. Anything that contradicts your point of view is garbage, fake, scam, etc. There is no point debating someone with that kind of attitude.

by **GoghGoner** » Wed 07 Feb 2018, 12:30:18

kublikhan wrote:Oh I see. You are one of those. You have your opinion set in stone and are absolutely convinced you are right. Anything that contradicts your point of view is garbage, fake, scam, etc. There is no point debating someone with that kind of attitude.

It depends on the subject. On this subject I am aware of and I have consumed about every detail. I was invested in oil during the OPEC announcement and I had a very nice vacation last year because of it. I have skin in the commodity cycle now and do a lot of my own analysis. Sorry I got annoyed with you, I have generally agreed with your posts in the past.