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Over the course of 2014 the prices the world paid for crude oil tumbled from over $125 per barrel to around $45 per barrel now, and could easily drop further before recovering for a time to then begin the cycle of boom and bust all over again . You get the idea. In the end, the wild whipsawing of the oil market, and the even wilder whipsawing of financial markets, currencies, the rolling bankruptcies of energy companies, followed by the entities that financed them, then national defaults of the countries that backed these entities, will in due course cause industrial…
In a documentary that aired recently on the Canadian Broadcasting Corporation’s popular The Fifth Estate program, an allegory of Vladimir Putin was presented. The wily Russian president was described growing up in a shabby St. Petersburg apartment, where he would often corner rats. Now, punished by low oil prices and Western sanctions against Russian incursions in Ukraine/ Crimea, Putin is himself the cornered rat. Many wonder, and fear, what he will do if conditions in Russia become increasingly desperate. In the last six months oil prices have plunged over 50 percent and the Russian economy is hurting. The country now…
In the past few weeks I have received numerous questions about the role of a “drop in demand” in the oil price decline. These questions are driven by many stories in the media that have referenced a drop in demand. There are two primary reasons given for this so-called demand drop. One is that years of high oil prices have resulted in reductions in consumption through conservation and improvements in vehicle fleet efficiency. The second reason is due to the strengthening dollar, oil has become more expensive for many countries since oil is generally traded in dollars. There are elements…
The combination of Western sanctions and the collapse of oil prices is exposing deep structural problems in Russia’s economy, and it is showing the petro-state model of governance developed by Vladimir Putin is unsustainable. Yet just because Putin’s system can’t last doesn’t mean its demise is imminent. Voices of reason in Russia readily acknowledge that the economy is in dire shape. In the past few months, Russia’s Central Bank has burned through roughly $90 billion of its reserves to prop up the ruble, but it hasn’t succeeded in stabilizing the Russian currency. “We have entered a real, full-fledged economic crisis,”…
Thursday’s ECB announcement from Mario Draghi gave everyone in the stock market continued hope – with 60b Euros of bond buying power, the stock markets both across the pond and here reacted positively. We’ll see even lower rates than already exist in Europe (even if German Bonds already have negative yields). For the oil complex, the move had a predictable negative impact – a bigger than expected QE program from Europe sent the dollar again soaring, driving oil prices lower and with them, shares in oil companies. We see another expected reaction to another of the 5 inputs to oil…
Crude Oil Outlook Crude oil futures began the week in a position to rally based on the technical chart pattern formed the weak-ending January 16, however, there was no follow-through move to confirm the potentially bullish pattern. This is a good indication the market is in the hands of strong sellers. When dealing with technical chart patterns and especially those that go against the dominant trend, the follow-through or confirmation move is the key. Without it, the move is just a guess and quite risky since it is usually in the opposite direction of the main trend and against the…
The death of Saudi Arabia’s King Abdullah made international headlines on January 22, raising questions about the future of the Middle East. News of his death briefly rattled the oil markets, but the media attention paid to the event outstrips the significance: it is business as usual in the Arabian Peninsula. The outpouring of praise for King Abduallah was bizarre. The Washington Post labeled him a “reformer,” and The New York Times said he was a “force of moderation.” U.S. Secretary of State John Kerry took to Twitter to pay his respects. “King Abdullah was a man of wisdom &…
Several hours ago Saudi Arabia announced that its 91-year-old King Abdullah had passed away, in the process setting off what may be a fascinating, and problematic, Saudi succession fight which impacts everything from oil, to markets to geopolitics, especially in the aftermath of the dramatic political coup in neighboring Yemen. As a reminder, it is Saudi Arabia whose insistence on not cutting oil production with the intent of hobbling the US shale industry has led to the splinter of OPEC, and to a Brent price south of $50. Which is why today's event and its implications will be analyzed under…
Japanese novelist Haruki Murakami was so consumed by running he combined two of his loves to write a book called ‘What I Talk About When I Talk About Running‘. Although an odd concept, it’s actually quite a compelling read. Not only did I think this title was really great (although paraphrased from Raymond Carver), but it also reminded me of my own rather obsessive compulsions. So here are some of the things that I currently think about when I think about crude oil. –Global economic growth. Crude oil demand growth is highly dependent upon economic growth, and specifically from emerging…
Remember the Sesame Street song? One of these things is not like the others,One of these things just doesn't belong,Can you tell which thing is not like the othersBy the time I finish my song? OK. Which curve on this chart is not like the others?It's the U.S. and Canada's oil production curve over the past several years. That's why oil prices have fallen: too much oil for the demand in the world. The tight oil from North America is the prime suspect in the production surplus that's pushing down oil prices.Related: IMF Says Oil Drop Permanent, OPEC Says Rebound Soon…
