(edited)

So, after much ado the oil producers have reached some sort of agreement. The figure was expected to be more than 1mbpd (the production increase) but analysts are assuming it will settle somewhere between 600,000 bpd to 800,000bpd. Hence, the recent price hike. WTI rallied more than 4%!

But we all know that this is irrational exuberance. There is another meeting today (23rd June) and the allocation of the increase in production is yet to be decided. Dust has not settled yet. What might the future hold for oil markets?

Oil rallies in the wake of OPEC deal: https://www.platts.com/latest-news/oil/newyork/brentwti-spread-narrows-sharply-in-wake-of-opec-10461969

 

@William Edwards @Tom Kirkman @Jan van Eck let's start a discussion exploring the possibilities.

Edited by Osama
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Hmmmmmm, would it surprise anyone if I said I was hoping for an average of $65 oil this year?

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So you think it will go down ? Trump did put yet another tweet to say that this level of prices is unacceptable. I hope he'll have a strong reaction if it stays at this level. A NOPEC legislation would probably be a good solution for this cartel, but will he have the guts to do it...

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(edited)

On 6/23/2018 at 6:42 AM, JunoTen said:

So you think it will go down ? Trump did put yet another tweet to say that this level of prices is unacceptable. I hope he'll have a strong reaction if it stays at this level. A NOPEC legislation would probably be a good solution for this cartel, but will he have the guts to do it...

I would be quite surprised if  President Trump  "had the guts" to craft a counter-cartel.  That is not quite how it works in the USA.  First off, all legislation starts in the House  of Representatives, and has then to pass through both the House and the Senate, then sent for approval signature to the President.  He can approve or disapprove ("veto"), but  do it all himself?  Nope. 

Notwithstanding Mr. Trump's personal penchant for the Executive Order, that option cannot be used to go around the Sherman Anti-Trust Act. So, legally speaking, Trump has no ability to do what you propose.  One of the ironies of the USA is that the President's powers are remarkably limited  (although those Presidents do not seem to either believe or understand that!). He can shout and scream and stomp his feet, of course, but he tends to do that anyway. 

Now, where do oil prices go?  I would remind readers of the truths set forth by William Edwards here, and go back and read his careful postings on the realities of oil pricing, and how that flows from oil traders, not market fundamentals.  Oil prices will go where the traders, who are rank speculators, push it, and those guys operate only on two things:  greed, and fear. They neither know nor care about oil "facts."  Truth, to a trader, is what the other fellow believes, and how you can exploit that for your own gain. 

 

Edited by Jan van Eck
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4 minutes ago, Jan van Eck said:

I would be quite surprised if  President Trump  "had the guts" to craft a counter-cartel.  That is not quite how it works in the USA.  First off, all legislation starts in the House  of Representatives, and has then to pass through both the House and the Senate, then sent for approval signature to the President.  He can approve or disapprove ("veto"), but  do it all himself?  Nope. 

Notwithstanding Mr. Trump's personal penchant for the Executive Order, that option cannot be used to go around the Sherman Anti-Trust Act. So, legally speaking, Trump has no ability to do what you propose.  One of the ironies of the USA is that the President's powers are remarkably limited  (although those Presidents do not seem to either believe or understand that!). He can shout and scream and stomp his feet, of course, be he tends to do that anyway. 

Now, where do oil prices go?  I would remind readers of the truths set forth by William Edwards here, and go back and read his careful postings on the realities of oil pricing, and how that flows from oil traders, not market fundamentals.  Oil prices will go where the traders, who are rank speculators, push it, and those guys operate only on two things:  greed, and fear. They neither know nor care about oil "facts."  Truth, to a trader, is what the other fellow believes, and how you can exploit that for your own gain. 

 

 I hope speculators won't push the prices too far though because I believe an oil price crash of a permanent nature is coming soon, and there would be just too much money lost.

Trump seems determined to get the prices lower... I don't know how far he'll go to do that, but he has shown tenacity in the past, maybe he'll surprise us.

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1 minute ago, JunoTen said:

 I hope speculators won't push the prices too far though because I believe an oil price crash of a permanent nature is coming soon, and there would be just too much money lost.

Trump seems determined to get the prices lower... I don't know how far he'll go to do that, but he has shown tenacity in the past, maybe he'll surprise us.

If The Donald wants to collapse the speculators in the trading pits, he would have to invoke fear.  And he can do that very easily.  The one power that the President has is to open the spigots on the "Teapot Dome," the big storages for naval reserves. I have no idea what has accumulated in those reserves, but whatever it is, it is a lot!  So:  making the statement that he will sell (pick a number)  100 million barrels of naval reserve oil into the market, and  the traders all panic, and your spot price drops like a stone. 

How likely is that scenario?  Hey, who knows?  The White House is in chaos on a good day, and the world is a pretty crazy place every day.  Anything is possible, even plausible!

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5 hours ago, Tom Kirkman said:

Hmmmmmm, would it surprise anyone if I said I was hoping for an average of $65 oil this year?

I think that was a very intelligent forecast!

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1 hour ago, JunoTen said:

So you think it will go down ? Trump did put yet another tweet to say that this level of prices is unacceptable. I hope he'll have a strong reaction if it stays at this level. A NOPEC legislation would probably be a good solution for this cartel, but will he have the guts to do it...

Yes. We might have to wait until we see a shift in sentiment(s). Few additional rigs, some inventory build up reports and rising US shale production: You have a good scenario of oil going down.

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1 hour ago, Jan van Eck said:

I would be quite surprised if  President Trump  "had the guts" to craft a counter-cartel.  That is not quite how it works in the USA.  First off, all legislation starts in the House  of Representatives, and has then to pass through both the House and the Senate, then sent for approval signature to the President.  He can approve or disapprove ("veto"), but  do it all himself?  Nope. 

Notwithstanding Mr. Trump's personal penchant for the Executive Order, that option cannot be used to go around the Sherman Anti-Trust Act. So, legally speaking, Trump has no ability to do what you propose.  One of the ironies of the USA is that the President's powers are remarkably limited  (although those Presidents do not seem to either believe or understand that!). He can shout and scream and stomp his feet, of course, be he tends to do that anyway. 

Now, where do oil prices go?  I would remind readers of the truths set forth by William Edwards here, and go back and read his careful postings on the realities of oil pricing, and how that flows from oil traders, not market fundamentals.  Oil prices will go where the traders, who are rank speculators, push it, and those guys operate only on two things:  greed, and fear. They neither know nor care about oil "facts."  Truth, to a trader, is what the other fellow believes, and how you can exploit that for your own gain. 

 

I completely agree with speculators deciding prices...and as the speculators will speculate a certain set of news or events (from the past, happening or anticipated) and I think we might see such a mix of factors that pricss will go down. In any case speculations/sentiments....they are too a fickle thing to predict.

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1 hour ago, Jan van Eck said:

If The Donald wants to collapse the speculators in the trading pits, he would have to invoke fear.  And he can do that very easily.  The one power that the President has is to open the spigots on the "Teapot Dome," the big storages for naval reserves. I have no idea what has accumulated in those reserves, but whatever it is, it is a lot!  So:  making the statement that he will sell (pick a number)  100 million barrels of naval reserve oil into the market, and  the traders all panic, and your spot price drops like a stone. 

How likely is that scenario?  Hey, who knows?  The White House is in chaos on a good day, and the world is a pretty crazy place every day.  Anything is possible, even plausible!

A pretty crazy place ...now crazier with Trump!

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21 minutes ago, Osama said:

A pretty crazy place ...now crazier with Trump!

But you do have to remember that, despite outward appearances, there is no true ideological basis or foundation for anything that President Trump does.  For him, it is all "transactional."  for example, you hear him railing against "immigrants," which in America is code-speak for those who are not totally white  (especially for various "browns," such as Mexicans).  Trump is perfectly happy with totally-white immigrants; all of his wives have been white immigrants!  He even made a remark at one time about how the US needs more immigrants from Norway.  

Ideological Republicans loathe and abhor the North Koreans.  The Donald has no qualms about running off to Singapore and shaking hands with Mr. Kim, who, let us remember, is a murdering cutthroat psychopath. I invite any reader here to name another Republican who would do that.  (For that matter, I invite any reader to name any American who would do that, besides Dennis Rodman.)

Then you have this craziness about The Wall.  Republicans don't even want to do that, it costs too much.  Plus, the effectiveness is dubious.  IN one section, where The Wall was constructed of pounding Steel Sheet into the sand, a Mexican, in classical entrepreneurial spirit, simply cut a door panel out of the wall, welded in a pair of hinges and a clasp, and put a padlock on it.  When some migrants wanted to cross, the Mexican would unlock his private door and charge the migrants fifty cents each to simply walk through.  Nothing like a door to make life easy. 

But do remember this about America: for Americans, Washington is more about Entertainment than Government. Trump, the man from the reality shows, understands this. Americans are a very ingenious people, and they cleverly figure out ways to make money not because of Government (outside of the contractors building 100,000-ton aircraft carriers, of course) but in spite of Washington.  The Government is in effect a giant parasitic drag on the economy and on the society; it no longer really contributes anything, except bombast on TV, which is purely entertainment.  The real work is done by individuals, in spite of the efforts by politicians and bureaucrats to be obstacles. And those individuals, precisely because America has attracted so many clever people to go live there, have managed to do well for themselves and the society in spite of the best efforts of the bureaucracy to wreck things. 

Welcome to America, the land of impossible contradictions.  Expect craziness when you live here!

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3 hours ago, Jan van Eck said:

The Government is in effect a giant parasitic drag on the economy and on the society; it no longer really contributes anything, except bombast on TV, which is purely entertainment.

This has a striking similarity with the situation in my country as well.

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3 hours ago, Jan van Eck said:

But you do have to remember that, despite outward appearances, there is no true ideological basis or foundation for anything that President Trump does.  For him, it is all "transactional."  for example, you hear him railing against "immigrants," which in America is code-speak for those who are not totally white  (especially for various "browns," such as Mexicans).  Trump is perfectly happy with totally-white immigrants; all of his wives have been white immigrants!  He even made a remark at one time about how the US needs more immigrants from Norway.  

Ideological Republicans loathe and abhor the North Koreans.  The Donald has no qualms about running off to Singapore and shaking hands with Mr. Kim, who, let us remember, is a murdering cutthroat psychopath. I invite any reader here to name another Republican who would do that.  (For that matter, I invite any reader to name any American who would do that, besides Dennis Rodman.)

Then you have this craziness about The Wall.  Republicans don't even want to do that, it costs too much.  Plus, the effectiveness is dubious.  IN one section, where The Wall was constructed of pounding Steel Sheet into the sand, a Mexican, in classical entrepreneurial spirit, simply cut a door panel out of the wall, welded in a pair of hinges and a clasp, and put a padlock on it.  When some migrants wanted to cross, the Mexican would unlock his private door and charge the migrants fifty cents each to simply walk through.  Nothing like a door to make life easy. 

But do remember this about America: for Americans, Washington is more about Entertainment than Government. Trump, the man from the reality shows, understands this. Americans are a very ingenious people, and they cleverly figure out ways to make money not because of Government (outside of the contractors building 100,000-ton aircraft carriers, of course) but in spite of Washington.  The Government is in effect a giant parasitic drag on the economy and on the society; it no longer really contributes anything, except bombast on TV, which is purely entertainment.  The real work is done by individuals, in spite of the efforts by politicians and bureaucrats to be obstacles. And those individuals, precisely because America has attracted so many clever people to go live there, have managed to do well for themselves and the society in spite of the best efforts of the bureaucracy to wreck things. 

Welcome to America, the land of impossible contradictions.  Expect craziness when you live here!

Indeed.....Veritably!! There is no "ideological basis" for what Trump does. He sees world in a parochial way...strange and parochial way. His actions are not only detrimental for U.S. but, given that we live in a globalized world, other countries as well.

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UPDATE: https://www.bloomberg.com/news/articles/2018-06-23/saudis-pledge-decisive-oil-supply-increase-to-reassure-consumers

"Saturday’s accord, in which non-OPEC countries ratified the previous day’s deal, dropped the pledge that the 1 million barrel-a-day increase should be shared proportionally among members, opening the way for the full volume to flow, Al-Falih said.

"If we allocated the number pro-rata basis among the 24 countries, given the capacity of those countries that can increase, it had been estimated that about 60 percent will be achieved,” Al-Falih said. “But because we went away from allocation on a pro-rata basis, we will be closer to 1 million than to 600,000 barrels a day."

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5 minutes ago, Osama said:

. “But because we went away from allocation on a pro-rata basis, we will be closer to 1 million than to 600,000 barrels a day."

Well now!  One guess who intends to hog that increase!

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1 hour ago, Jan van Eck said:

Well now!  One guess who intends to hog that increase!

Not that hard to guess (WINK)

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7 hours ago, Osama said:

I think that was a very intelligent forecast!

I think that it was one person's guess.

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As I have previously stated, with explanations, I believe that the basic outlook for the next several years is down. This expected trend is simply applying the thirty-year cycle to a system managed, or mis-managed, by OPEC. There are two significant events that add to my "lower price for longer" expectation. 1) The IMO-dictated elimination of a home for about two million barrels a day of heavy sour crude (price war) and 2) The assured collapse of the world economy due to the over-committed borrowing. Looks pretty straight-forward to me.

Fluctuations will be enhanced by Jan's mindless futures speculators.

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2 hours ago, Jan van Eck said:

Well now!  One guess who intends to hog that increase!

And who wants to bet against the hog with unlimited pricing authority?

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18 minutes ago, William Edwards said:

As I have previously stated, with explanations, I believe that the basic outlook for the next several years is down. This expected trend is simply applying the thirty-year cycle to a system managed, or mis-managed, by OPEC. There are two significant events that add to my "lower price for longer" expectation. 1) The IMO-dictated elimination of a home for about two million barrels a day of heavy sour crude (price war) and 2) The assured collapse of the world economy due to the over-committed borrowing. Looks pretty straight-forward to me.

Fluctuations will be enhanced by Jan's mindless futures speculators.

The second scenario seems quite grim! And I cannot disagree that the world is once again awashed with leverage. Minskey was very right when he said that it is in the times of stability/exuberance that we are the most vulnerable to a recession/downturn (If my memory serves me well..I believe he said something similar?)

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Is not possibility of oil prices ever reaching more than 100U$S, not in a world in which even Italy has large amounts of oil and gas, and the resources are counted in trillions of barrels.

But anyway, expect oil demand raise to 240 million barrels per day by 2070

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1 minute ago, Sebastian Meana said:



But anyway, expect oil demand raise to 240 million barrels per day by 2070

OK< and what do you anticipate the correlated price would be to move that much oil?

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1 minute ago, Jan van Eck said:

OK< and what do you anticipate the correlated price would be to move that much oil?

Between 50$ to 75$ a barrel. If i have to say some kind of price i think 60 to 65$ dollars. Any shortage in supply that the Opec and Russia makes is being absorbed by the US and Canada

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10 hours ago, Osama said:

I think that was a very intelligent forecast!

Please read my comment again.  That $65 oil price number is neither a prediction nor a forecast.  That $65 price is what I hope will be the average this year.

You can see one of my previous comments for more info. 

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11 hours ago, William Edwards said:

And who wants to bet against the hog with unlimited pricing authority?

Whats at stake? Bragging rights?

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