• 4 minutes End of Sanction Waivers
  • 8 minutes Balancing Act---Sanctions, Venezuela, Trade War and Demand
  • 11 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 14 minutes What Would Happen If the World Ran Out of Crude Oil?
  • 1 min California is the second biggest consumer of oil in the U.S. after Texas.
  • 4 hours Permafrost Melting Will Cost Us $70 Trillion
  • 11 hours At Kim-Putin Summit: Theater For Two
  • 35 mins Let's just get rid of the Jones Act once and for all
  • 11 hours NAFTA, a view from Mexico: 'Don't Shoot Yourself In The Foot'
  • 18 hours UNCONFIRMED : US airstrikes target 32 oil tankers near Syria’s Deir al-Zor
  • 18 hours How many drilling sites are left in the Permian?
  • 19 hours Nothing Better than Li-Ion on the Horizon
  • 22 hours New German Study Shocks Electric Cars: “Considerably” Worse For Climate Than Diesel Cars, Up To 25% More CO2
  • 8 hours "Undeniable" Shale Slowdown?
  • 3 hours Liberal Heads Explode as U.S. Senate Confirms Oil Lobbyist David Bernhardt as Interior Secretary
  • 19 hours Russia To Start Deliveries Of S-400 To Turkey In July
  • 11 hours Gas Flaring

Oil’s Big Drop: The Contrarian View

Rig

One of the first things I learned as I started my career in a dealing room was that, unlike in a marriage, on a trading desk being a contrarian made sense. You have only to look at the fickle nature of opinion to see why. Just a few days ago it seemed like everybody in the oil market was convinced it was going higher. OPEC’s cuts and the expected boost to U.S. growth from Trump’s administration led to everyone and their mom buying oil futures. I pointed out here and elsewhere that that huge ratio of longs to shorts in the market meant that vulnerability was to the downside, especially as the OPEC cuts could be offset by increased shale production in the U.S. and that the “Trump effect” was a hope rather than a fact at this point.

Sure enough, over the last couple of days we have seen the market turn as that increased U.S. production has become obvious, in turn leading to cracks seeming to appear in OPEC’s much heralded agreement, and with it opinion has shifted and everyone is bearish. Now that we are here, though, it is necessary to once again take a contrarian view. Now that everybody seems convinced that we are dropping back to the low $40s for WTI it is getting close to the time to buy. I can see somewhere around $47 being achievable over the next few days, but around there or at the first sign of a turnaround I would be a buyer.

(Click to enlarge)

The crazy thing about this move is that the conditions that have supposedly…




Oilprice - The No. 1 Source for Oil & Energy News