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Crude Rally Unwinds Completely – Expect $40 Oil
Oil prices plunged on Wednesday as the EIA shocked traders once again, raising the possibility that the oil markets are not as close to “balance” as once thought. The EIA revealed several worrying signs for the oil markets. First, crude oil inventories actually increased by 1.7 million barrels for the week ending on July 22, the first increase in over two months. Oil stocks rose to 521.1 million barrels. And in another worrying sign for product markets, gasoline inventories also increased for the week, rising by 0.5 million barrels, the fifth increase in the past six weeks. Gasoline inventories are now sitting largely unchanged from March levels, despite hopes and expectations that the summer driving season would cut down on the high levels of supply. Citigroup now estimates that gasoline inventories around the world have topped 500 million barrels. The figures came as a surprise, with analysts’ expecting a […]
Oil nears a fresh bear market: 5 things to watch
Crude oil’s quiet slide from its 2016 high sharpens questions about the outlook for the commodity S ince oil prices hit a year-high above $52 a barrel in June they have slipped almost 20 per cent, leaving them on the cusp of a new bear market and heaping more pressure on oil companies and major producing countries that had hoped the worst of the rout was over. Here are five things traders are tracking to see if the slide continues — or if the sell-off is just a blip in a recovery. Supply and demand Two years since oil began its precipitous decline from above $100 a barrel, troughing below $30 in January, the market appears to be edging closer towards balance. High-cost supplies are declining, demand has been boosted, and concern about the impact of investment cuts on future supplies have all helped the market recover from levels […]
Oil Industry About To Be Burned Again By Fall In Oil Prices
The current oil-price rally is over. U.S. rig counts have surged as oil prices sink. Capital is driving the oil markets and it enables bad behavior
by producers. That is why oil prices will stay low. The oil-price rally that began in February is over. Prices rose from $26 per barrel to $51 by early June and are now below $42 (Figure 1). If they fall through $40, the next likely support level is at $36 per barrel. (Click to enlarge) Figure 1. The current oil-price rally is over. Source: EIA, Wall Street Journal and Labyrinth Consulting Services, Inc. Capital Drives The Oil Market and Prices Most people think that fundamentals–supply and demand–drive the oil market but capital drives the market and oil prices. More than anything, rig count reflects capital flow. Many believe that oil prices drive the rig count but it is really capital flow that drives […]
Why Saudi Arabia Continues To Pump Crude At Record Levels
Hawtah field As the Financial Times reported on 12 July , Saudi Arabia’s oil-output reached record highs in June 2016. Increasing production 280,000 barrels/day to 10.6m b/d, Saudi Arabia has once again waved off OPEC’s request not to glut the market with oil. As it turns out, economic principles explain why the Saudis began, in late 2014, to pump crude as fast as they could – or close to as fast as possible. In fact, there is a good reason why the Saudi princes are panicked and pumping. Let’s take a look at the simple analytics of production. The economic production rate for oil is determined by the following equation: P – V = MC, where P is the current market price of a barrel of oil, V is the present value of a barrel of reserves, and MC is the marginal recovery cost of a barrel of oil. […]
Shell misses expectations with 70 percent earnings plunge
