What I keep hearing is a glut of heavy/sour crude and an increasing shortage of light/sweet. Most of the recent Saudi supply increases are HS and they are having a hard time unloading it. They are tapped out on LS and may be on the right side of the Hubbert peak already. How to play that? Sort whoever is levered to HS and long Valero for the crack spread?
LNG is not a cheap substitute. Even optimistic forecasts have the cost of LNG well over $20 per barrel of oil equivalent for the forseeable future. The only substitute cheap and plentiful enough to drive WTI prices to $20 is good old conventional crude oil. The only sensible argument you can make for $20 crude is based on supply and demand of conventional oil. At today's high prices, it makes sense to talk about new technologies, substitution, etc. Those lead naturally to a bear case of $30-$50, which is the range of marginal production cost for unconventional petroleum as well as breakeven costs for substitution. Martin
Hi. I'm from Norway. Stockmarket normally leads crude oil down/up. $Nikkei has been good with turningpoints like jan.1997, feb.1999, oct. 2000, oct.2003 for crude oil. $XOI-index has often been lagging, maybe because it's also some type of utility ?
First the recession, then oil drop. Not forcasting recession due to oil. Hasn't seemed to put much of a dent in growth last few years. Several other factors have me believing this (econ cycle in general, consumers nailed by RE quagmire, etc).
Higher oil price means higher interest rates at end of econ cycle --> it destroyes the breadth($nysi,$nasi) and the homebuilders in the market.
Here we just had the finance minister on TV babbling about how the world will certainly run out of oil, and that the price of oil will only move up in the future. When politicians are bullish, it's time to SELL.
Drillers have rolled over on the weekly charts after 3 years in bull mode. They look terrible (good short). This appears to be a harbinger of lackluster demand for their services in the coming quarters.