We’ve long framed collapsing crude prices as a battle between the Saudis and the Fed. When Saudi Arabia killed the petrodollar late last year in a bid to bankrupt the US shale space and secure a bit of leverage over the Russians, the kingdom may or may not have fully understood the power of ZIRP and the implications that power had for struggling US producers. Thanks to the fact that ultra-accommodative Fed policy has left capital markets wide open, the US shale space has managed to stay in business far longer than would otherwise have been possible in the face…
The oil bust has been largely a supply-driven phenomenon. Unlike the last time that oil prices were this low – during the 2008-2009 financial crisis – this past year’s price collapse has not been because of destruction in demand, but due to too much supply. Nevertheless, the way the oil markets get out of the current mess and find equilibrium is from both a supply and demand correction. Supply is indeed falling in the United States. Last week the EIA reported sharply lower production figures for the first half of 2015, revealing that U.S. oil production has been falling quicker…
Big oil is taking no chances with the outcome of Alberta’s royalty review currently underway. In 2007, the industry was surprised when royalties were jacked up despite dozens of corporate presentations to the royalty review panel warning of the fragility of investment economics and the damage increased royalties would cause. Therefore producers and others with significant vested interest have already started the lobbying process.Such is the case with Canadian Natural Resources Limited (CNRL) which made a slide presentation to the new NDP Alberta government on August 20. The industry has obviously learned never to assume politicians actually understand what makes…
As traders, investors and pundits, we all like to think that what we do is akin to a science. We believe that by working harder and being smarter we can give ourselves an edge, that enough research will reveal to us the next move, either a long term trend or an intraday blip on a chart, and that we can profit from that knowledge. Usually, especially over longer time spans, we are correct in that assumption. Sometimes, however, no amount of fundamental or technical analysis will help.Over the last week or so we have seen some violent swings in the…
October Crude OilTechnical Analysis(Click Image To Enlarge) October Crude Oil futures are in a position to finish the week higher after an impressive follow-through rally, following last week’s potentially bullish closing price reversal bottom chart pattern. Although the main trend is still down according to the weekly chart, the chart pattern indicates a shift in momentum to the upside.If the rally continues then look for crude oil to test the first two objectives at $50.20 and $51.25. Since the trend is down, sellers are likely to come in following a test of this zone. If the buying is strong enough…
Oil prices have posted their strongest rally in years, jumping an astounding 27 percent in the last three trading days of August. While much of the recent price movement defies reason and is enormously magnified by speculative movements by traders to take and cover their bets on oil, still, there were a series of rumors, events, and fresh data that helped contribute to the spike. For example, on August 31, the oil markets woke up to the news that Russian President Vladimir Putin will meet his counterpart from Venezuela to discuss “possible mutual steps” to stabilize oil prices. The meeting…
In some ways the numbers don’t look that bad. For a group of 25 diversified, publicly traded Canadian oilfield service (OFS) companies, combined revenue of nearly $9 billion in the first six months of 2015 was only 22.1 percent lower than $11.53 billion for the same period in 2014. With oil prices down 50 percent for the first half of 2015, a revenue decline of 22.1 percent looks misleadingly attractive.The problem is that at the field level, OFS is nowhere near as profitable as producing oil or gas. When producers fetch $100 for a barrel of oil, direct field lifting…
The energy complex was volatile this past week, driven by outside factors and traditional fundamentals. The week began with crude oil under pressure because of a huge sell-off in global equity markets. The catalyst behind the selling pressure was turmoil in the Chinese economy following the previous week’s release of a bearish manufacturing activity report. Investors were looking for action from Chinese officials because the selling pressure and excessive volatility suggested that no one was steering the ship. The People’s Bank of China stabilized the markets on Tuesday when it cut its one-year lending rate and lowered the amount of…
It is clear that it is no longer supply and demand for oil that is dictating the price but is instead the financial markets and more importantly money flows tied to central bank policy. Bearish sentiment in the oil markets is taking over as net short positions near record highs. According to Reuters, 50 to 60 hedge funds have taken short positions that account for around 160 million barrels of oil in near term contracts. In fact, the amount of short positions in oil options and futures now exceeds levels in the great financial meltdown of 2008, believe it or…
With WTI falling below $40 and perhaps heading for $20, one needs to wonder if OPEC’s strategy is working out as planned? Why are they following this course and what are their goals? The face value explanation, accepted by many, is that OPEC is protecting market share especially against rampant supply growth in the OECD, namely in the US LTO (light tight oil) patch. This post examines how OPEC’s market share has evolved with time and with past swings in the oil price.This turned out to be more complex than expected. But scrutiny of the data shows that following each…
