What can bring oil prices down?

(edited)

This is my humble attempt at defining some of the factors, that I opine, can bring down or stabilize the rising oil prices. Let's discuss the possibilities. There can be many other possibilities!

 

Link: https://oilprice.com/Energy/Energy-General/Downside-Risk-Remains-In-Oil-Markets.html

 

@William Edwards, @Jan van Eck, @Erik, @Dan Warnick, @Tom Kirkman

Edited by Osama
Had to mention the link

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Here's my two cents:   What the oil traders (a/k/a/ "the market")  are saying is that the world is run by irrational men.  Look around; it is not only The Donald.  You have Maduro wrecking Venezuela.  You have these combatant ideologues in a low-level shooting civil war in Libya, in a situation not amenable to compromise; you have the ayatollahs spouting the Great Satan invective in Iran; you have MbS in Saudi in shootouts with his extended family.  None of that exactly inspires much confidence. 

Remember that it is the traders that set short-term pricing, not some analytical fundamentals.  The traders, as has been succinctly pointed out here by William Edwards, our resident expert in these matters, know between little to nothing about actual oil-well production mechanics and care even less. They operate on greed and fear.  I can envision oil going to $130 one month and sinking to $22 the next. So you are not going to "stabilize prices" with the traders if they smell money  (the greed side) or if they see doom coming (the fear side). And these days they see lots of both. 

It is my guess that The Donald will simply open the spigots on the Naval Oil Reserve.  It is an easy solution, he can do that with one of his favorite tools, the Executive Order, and it will instantly create fear in the traders, causing the spot price to tumble.  Hey, why not?  It puts the spotlight back on Donald (where he likes it) and focuses all the news stations on Donald (and he likes that) and it makes him look great to the Base (and he likes that).  I see the argument as compelling for those three reasons. Narcissism always trumps competence. 

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Agree!

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18 hours ago, Osama said:

There can be many other possibilities!

If the U.S. and Iran normalize relations this year, the Oil & Gas geopolitics would certainly change - pulling the rug out from under the artificially created supply shortage of trying to squeeze 2+ million bpd of Iranian oil out of the global market.

That would also create havoc for expansion of China's PetroYuan, and MbS' zombie Aramco IPO cum Vision 2030.

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4 hours ago, Tom Kirkman said:

If the U.S. and Iran normalize relations this year, the Oil & Gas geopolitics would certainly change - pulling the rug out from under the artificially created supply shortage of trying to squeeze 2+ million bpd of Iranian oil out of the global market.

That would also create havoc for expansion of China's PetroYuan, and MbS' zombie Aramco IPO cum Vision 2030.

remind me again why you think iran and US will normalize relations by Nov?

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4 hours ago, Tom Kirkman said:

If the U.S. and Iran normalize relations this year, the Oil & Gas geopolitics would certainly change - pulling the rug out from under the artificially created supply shortage of trying to squeeze 2+ million bpd of Iranian oil out of the global market.

That would also create havoc for expansion of China's PetroYuan, and MbS' zombie Aramco IPO cum Vision 2030.

You connected the dots beautifully! Thinking that relationships between Iran and U.S. normalizing....well oil prices can lubricate the process for sure!

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23 hours ago, Jan van Eck said:

Here's my two cents:   What the oil traders (a/k/a/ "the market")  are saying is that the world is run by irrational men.  Look around; it is not only The Donald.  You have Maduro wrecking Venezuela.  You have these combatant ideologues in a low-level shooting civil war in Libya, in a situation not amenable to compromise; you have the ayatollahs spouting the Great Satan invective in Iran; you have MbS in Saudi in shootouts with his extended family.  None of that exactly inspires much confidence. 

Remember that it is the traders that set short-term pricing, not some analytical fundamentals.  The traders, as has been succinctly pointed out here by William Edwards, our resident expert in these matters, know between little to nothing about actual oil-well production mechanics and care even less. They operate on greed and fear.  I can envision oil going to $130 one month and sinking to $22 the next. So you are not going to "stabilize prices" with the traders if they smell money  (the greed side) or if they see doom coming (the fear side). And these days they see lots of both. 

It is my guess that The Donald will simply open the spigots on the Naval Oil Reserve.  It is an easy solution, he can do that with one of his favorite tools, the Executive Order, and it will instantly create fear in the traders, causing the spot price to tumble.  Hey, why not?  It puts the spotlight back on Donald (where he likes it) and focuses all the news stations on Donald (and he likes that) and it makes him look great to the Base (and he likes that).  I see the argument as compelling for those three reasons. Narcissism always trumps competence. 

I agree. So the possibilities are umpteen!

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How did I miss this one? The trade war of course!!

Oil price tumbles as US-China trade war grows-https://www.ft.com/content/548e6938-84fd-11e8-a29d-73e3d454535d

As FT requires subscription---some key points:


A slide in the oil price turned into a dive late on Wednesday, leaving the global crude benchmark with its biggest one-day decline in more than two years. Brent crude sank by $5.46, or 6.9 per cent, to settle at $73.40 a barrel. It was the largest percentage fall since February 2016. On Thursday morning Brent prices in Asian trading steadied at $74.66.The sharp move reflected widespread weakness in commodity markets as trade tensions between the world’s two biggest economies went up a notch. Metals from copper to zinc and agricultural commodities from soyabeans to hogs were also lower, after US president Donald Trump started a process to impose tariffs on a further $200bn of imports from China.

The Bloomberg commodity index ended the day off 2.7 per cent. Crude was under pressure all through the day after Libya’s internationally recognised state oil company said it was reopening four key export terminals which had been handed back by rival factions in the east, suggesting additional supplies to meet rising global demand.

Separately, Opec on Wednesday said Saudi Arabia had raised production by more than 400,000 barrels a day in June as it moved to try to cap a price rally and replace production from struggling members of the group. Around 2pm New York time, oil’s decline gathered speed.

Analysts and brokers suggested fast-moving money managers had quickly pared their bullish positions. The impetus appeared to be concerns about the effects of the trade dispute between the US and China, which together account for a third of world oil demand.
 

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Trump Considers Tapping U.S. Oil Reserve as Prices at the Pump Rise---https://www.bloomberg.com/news/articles/2018-07-13/trump-said-to-mull-tapping-u-s-oil-reserve-as-pump-prices-rise

 

The Trump administration is actively considering tapping into the nation’s emergency supply of crude oil as political pressure grows to rein in rising gasoline prices before congressional elections in November, two people familiar with the situation said.

No decision has been made to release crude from the 660-million-barrel stockpile, known as the Strategic Petroleum Reserve, but options under review range from a 5-million-barrel test sale to release of 30 million barrels, said the people, who requested anonymity to discuss non-public deliberations. An even larger release is possible it were to be coordinated with other nations.

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