Been bleeding me for the last 7 months or so (mostly due to oil and gas I reckon). Feels like I should cut losses but have a nagging feeling we've seen the worst of it and bound to rebound come winter. Thoughts?
nah bro. this is way too complicated. i've spent a great deal trying to understand enough to trade oil and up till now the only thing I am certain of is that there is a practical floor around 42 (not that it can't be broken for a day or two) due to oil services companies in the permian bassin.
North America has forever changed the supply side of the hydrocarbon equation. Big time. In fact I would be much more inclined to trade crack spreads and distilled products and storage in lieu of Crude Oil or Natural Gas.
Rig count is 954, up from 454 same time year ago. That's down from a high of 1900 end of 2014, but OPEC production is hitting a year high of nearly 33 mb/d as compliance falls. In a new report, investment bank Morgan Stanley pointed to tightening signs for certain crude oil blends, including the Urals blend and oil from Angola. The market is showing some optimism, and narrowing differentials for other benchmarks against Brent offer some evidence about tightening conditions. At the same time, Morgan Stanley noted that U.S. shale companies tend to hedge their production at $50 per barrel, which could provide resistance for further price gains. Venezuela will likely default in Oct./Nov. which will have some impact on the oil patch. North Korea tensions a growing wildcard. My conclusion is I would not hold an overnight short position at this time. End of year target of 60-65, stop at 47.50
Well, summer driving season of peak demand will be coming to an end soon. I think our inventories are lower than they were a year ago at this same time, but not by a lot. I remember reading that Saudis claimed to be reducing exports to the US, but who knows. Biggest bullish factor for oil is that no one is looking for new oil. Eventually, once known sources are depleted, there will be a supply shock at some point. Oil can break 42 given enough supply or bearish fundamentals. I thought I recall it dropping to a low of below 30 in Feb 2016. There are some interesting articles on crude oil over at seeking alpha.
#1."The question is how fast does Venezuela fail?" Helima Croft of RBC Capital Markets said on CNBC last week. "The thing is Venezuela has no capacity to overproduce at this point. Their oil production is going in one direction and that is down," she said. "The national oil company owes $3.5 billion due in October-November. They are unlikely to make those payments," Croft said. “We really do think a disorderly default is on the cards for Venezuela." A default might then put some of Venezuela’s oil assets in the sights of bondholders, who could try to seize oil cargoes in lieu of repayment. The end result, one way or another, is likely a decline of oil exports from Venezuela, sending a jolt through the oil market. Ultimately, that could push oil prices up to $70 to $80 per barrel later this year, Croft predicts. #2. Oil futures flip into backwardation. The contango in the oil futures market has all but disappeared, with a slight backwardation emerging in the futures structure, which is when near-term contracts trade at a premium to futures further out. The backwardation is an indication that the market is tightening and the extreme bearishness drowning the market earlier this summer has diminished. #3. From a technical perspective the chart shows a tight coiling up between 48.5 and 50. A break from this range, in either direction, will be quite intense in my opinion.