I'm a new trader. Can someone explain to me why nobody on this thread thinks oil can sink into the single digits? Are there technicals you're looking at? Just curious.
40USD is break even price for most countries. The prices are at these levels because the prince wants to get more market share and was willing to sacrifice income for some time. Putin was not too worried because he also could survive this price war for long time. US Shale is the weak link in the picture. BUT... Covid19 messed up their math and demand sharply fell. "Suddenly" the brave prince and Putin are willing to be friends again and agree on production cuts. BUT... no one wants to cut production as deep as the present situation demands. So we will be in the 20USD until the world stocking capacity is full, which will not take many weeks, and price will dive to 15USD or even 10USD, but sooner or later even the giants will need to stop the bleeding of their budgets and assume the biggest production cuts ever to ensure that oil gets to 30USD (minimum), but ideally above 40USD
That's helpful - i really appreciate the explanation. It still seems like the overwhelming supply could completely wipe out the prices, but I'm new to this and don't know enough context.
I like WTI $40 by the end of the year. I too think US shale will be pushed out. But how low can it go? When storage is full and there is not enough demand for it's use, every barrel that comes out of the ground will drive the price down. I have a bear call spread on USO, trying to take advantage of some of that contango.
I believe that it will not go bellow 15USD, but I admit that it can go as low as 10USD. That's why I only have 15% in the leveraged ETF. If it gets to 15USD I convert everything into the leveraged one.
Usually companies track very well when Oil goes down but very badly when goes up. Also a company can go to bankrupt, have bad management, too much debt, etc
Well, somebody thinks it MIGHT get there, namely the CME. They've been working on this for a while, and it is now in testing! https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2020/04/Chadv20-160.pdf @bone