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Bears Are Back In The Oil Market

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Friday August 17, 2018

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Oil prices testing lows

(Click to enlarge)

- WTI fell to $65 per barrel on Wednesday, flirting with the 200-day moving average.
- WTI traded above that threshold for much of the past year.
- The 200-day moving average is a key resistance point. It offers some support when prices are above the line, as is the case here. But the risk to prices is significant, from a technical trading perspective, if prices dip below that line.
- When prices fall below the 200-day average, the resistance gives way, setting off some automatic selling.

2. Permian legacy decline rate swells

(Click to enlarge)

- Shale drilling requires companies to constantly drill new holes to offset the sharp decline in output that comes in the first year of a previously drilled well. The more wells brought online means that this “legacy decline rate” grows over time as the wells age.
- The legacy decline rate in the Permian is enormous because there are so many wells in the region. But that makes the industry’s task daunting – more wells need to be brought online to offset the scores of older wells.
-…

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