Oil @ 69.5, headed for 62.5. Down for 3+ weeks

[Dan Warnick + 6,100]

3 hours ago, Top Oil Trader said:

Like I said many times the prices will be bumpy, this is a market that has lots of big players, a comment from one can make oil do a 360, a non verified news story and bring oil up.. If you play oil be careful, really careful. This market is best attempted by the big hedgefunds, who play it in one direction, usually bullish. Notice even those funds, some need to close with major losses, due to guessing it wrong, even with all their experts, and analysts on their team. Shorting into a trend where almost all are bullish, is really going into a boxing match, and fighting against 10 boxers at the same time.

So especially if you have no experience trading oil, or futures, you need to be really good, better than almost everyone, to be able to trade oil. If you don't like to lose, stay very far away from oil. Notice also it started to go  down 4 weeks ago, and after the first shock down, which caught all the analysts and producers by surprise. Oil, (WTI) is now heavily being supported at 69 - 70, understand there are some quotes in the low 60s, but those are future prices. One more big drop could be devastating to the trillion dollar industry, this is something that no producer wants. There is even some hedfefund now opening with 500 Mill, i expect they will be bullish, so well see how they do.

So, what do the charts say today, in your esteemed opinion?  Are you tending towards a downward move or not so much?  I ask, mainly, because the news available certainly could drive the price either way, depending on which news is given more weight by the media and therefor the traders.

Edited July 24, 2018 by Dan Warnick

[Dan Warnick + 6,100]

The price has already hit 68.39 in pre-trading and is now sitting at about 67.90, in a chart formation that looks eerily the same as yesterday's.  But, like I said, I have no idea what that translates to.

Edited July 24, 2018 by Dan Warnick

[Top Oil Trader + 469]

Ok so if we analyze what is going on here. It is simple, nobody wants oil to go down, even the traders are positioned for it to go up. especially so called analysts, news outlets, and our bloggers.

But after we have a big down move, I expect more traders will start waking up. Today, wti was at 69.43 attempting to break out, above 70 again, but lacked steam. I do expect it to hit about 67.69, this is if the bulls start standing aside, and let oil move naturally instead of being manipulated.

[Top Oil Trader + 469]

Dan i suspect you are looking at future prices, those will be different than wti cash prices.

[Dan Warnick + 6,100]

1 minute ago, Top Oil Trader said:

Ok so if we analyze what is going on here. It is simple, nobody wants oil to go down, even the traders are positioned for it to go up. especially so called analysts, news outlets, and our bloggers.

But after we have a big down move, I expect more traders will start waking up. Today, wti was at 69.43 attempting to break out, above 70 again, but lacked steam. I do expect it to hit about 67.69, this is if the bulls start standing aside, and let oil move naturally instead of being manipulated.

Big "if", right?

[Dan Warnick + 6,100]

Just now, Top Oil Trader said:

Dan i suspect you are looking at future prices, those will be different than wti cash prices.

You are right.  Can you recommend a website that gives real time prices for wti cash prices?

[Top Oil Trader + 469]

https://www.bloomberg.com/energy

these are future prices and right now show about $1 lower than the cash price

[Dan Warnick + 6,100]

I was monitoring Bloomberg's website before, but it appears to also be delayed.  Isn't that right?

[Top Oil Trader + 469]

Most big traders today trade with expensive mathematical models. Those models are often wrong, during ranging markets, those models are saying oil will go up, here, they are right when it's very obvious. So far, they can't see what I can see is happening, this is supporting the prices from going down. Also yet we don't have some major detrimental oil price news. So for now, traders feel confident, that prices are going up. This is obvious, since in fact oil prices have not really broken down in a big way,

........ yet. But I do see tide changing, for the worse.

[Top Oil Trader + 469]

Well i am basing my prices of my charts, my future prices do show much lower prices yes.my future prices are showing 65.69 the ones i trade. actually almost $4 lower than prices i see on the charts.

[Top Oil Trader + 469]

fundamentally why oil is not crashing yet, is because Trump warned Iran today. Iran threatened us, and us back. So Oil isn't nosediving yet.

[Dan Warnick + 6,100]

1 minute ago, Top Oil Trader said:

Well i am basing my prices of my charts, my future prices do show much lower prices yes.my future prices are showing 65.69 the ones i trade. actually almost $4 lower than prices i see on the charts.

Ok, that makes some sense.  I have learned recently that those prices farther out on the horizon are often overlooked and, while that may be okay most of the time, it can be a mistake to ignore them during a "choppy" market.  

[Jeffrey Brown + 208]

A Tale of Two Oil Price Scenarios

Following is a link to an article regarding Dennis Gartman’s January, 2016 proclamation that oil would never trade above $44 in his lifetime.   

Following that is a link to and and excerpt from a July, 2018 report by Philip Verleger, in which he discusses his concerns about 2020 requirement for low sulfur fuel, versus the low sulfur fuel supply, which could lead to oil prices as high as $200, in his opinion. 

I thought it was an interesting spread in oil price scenarios, from a maximum of $44 in January, 2016 to a discussion of $200 in July, 2018.

However, I think that Mr. Verleger is making a critical mistake, which I discuss below.

GARTMAN: Crude oil will never trade back above $44 'in my lifetime’ 
January, 2016

https://www.businessinsider.com/dennis-gartman-crude-oil-call-2016-1

Dennis Gartman has a call on oil.

Gartman said Monday that he thought crude oil wouldn't trade back above $44 "in my lifetime," though he did say oil may have hit a short-term bottom.

The price of crude oil, which has been driving the price action in the stock market for the past month, fell about 7% Monday but bounced back a bit early Tuesday.

$200 Crude, the Economic Crisis of 2020, and Policies to Prevent Catastrophe  
Philip K. Verleger, Jr. 
July, 2018

https://www.pkverlegerllc.com/assets/documents/180704200CrudePaper.pdf

The IMO regulation on marine-fuel sulfur content, if left unchanged, will likely have widespread impacts on the petroleum sector. Crude oil prices could rise to $160 per barrel or higher as the rule takes effect, assuming no market disruptions. Prices could rise much higher with any disruption, even a moderate one. The higher prices will slow economic growth. If they breach $200 per barrel, they would likely lead to a recession or worse.   

The risk of high prices and an attendant economic downturn should force government policymakers across the globe to review the IMO 2020 issue. As of this writing, though, on July 1, 2018, no such reviews are being conducted. Instead, the global economy is moving steadily toward a crisis yet unseen by most, if not all, key individuals in policy positions. Soon it will be too late to act. Very high prices and recession await. 

My Comments:

A critical mistake that Verleger makes is defining BP’s number for total petroleum liquids as “Crude oil,” which is something that not even the EIA does (they define “Crude oil” as Crude + Condensate, or C+C). 

When we ask for the price of oil, we get the price of actual crude oil, most commonly WTI and Brent, but when we ask for the quantity of oil, we get some combination of actual crude oil + condensate + NGL + biofuels.

Note that Cat Feed + Distillate drops from about 60% for light, sweet 39 API gravity crude oil to about 20% for 42 API gravity crude oil—a two-thirds decline, just going from 39 API to 42 API, and based on the most recent EIA data (April, 2018), about 43% of US Lower C+C production exceeds 42 API gravity, which is the maximum API gravity for WTI crude oil (versus about 35% in April, 2015). 

In other words, about 43% of what the EIA calls Lower 48 "Crude oil" production can't be sold as WTI crude oil in 2018, versus about 35% in 2015.   At this rate of increase, in about two years half of US Lower 48 C+C production will exceed the maximum API gravity for WTI crude oil. 

Refinery yields by crude type:

http://i1095.photobucket.com/albums/i475/westexas/Refineryyields_zps4ad928eb.png

The most common dividing line between Crude and Condensate is 45 API gravity, but as noted above, the crude oil distillate yield drops off considerably just going from 39 API to 42 API,

In regard to global data, the rate of increase in global gas and global C+C production from 2002 to 2005 were identical, at 3.3%/year.  

But from 2005 to 2017, the rates of increase diverged considerably, with global gas production increasing at 2.4%/year from 2005 to 2017, while global C+C production increased at only 0.8%/year, one-third of the rate of increase in global gas production.  

Given that condensate is a byproduct of natural gas production, in my opinion the only reasonable conclusion is that actual global crude oil production has probably been on an "Undulating Plateau" since 2005, with rising condensate production accounting for virtually all of the slow post-2005 increase in global C+C production, and note that annual Brent crude oil prices averaged $110 from 2011 to 2013 inclusive (remaining at $99 in 2014).  In other words, there were considerable financial incentives to increase actual crude oil production post-2005.   

Also, note the flat global C+C production from 2015 to 2017, versus rising global gas production, which implies a probable slow decline in actual global crude oil production from 2015 to 2017. 

Global Dry Gas Production and Global Crude + Condensate (C+C) production, 2002 to 2017:

http://i1095.photobucket.com/albums/i475/westexas/Global Gas and CC Production 2002 to 2017_zpslzwt5i6f.jpg

I estimate that actual crude oil production (45 API Gravity and lower crude oil)—the stuff that refiners need to produce petroleum distillates—has probably fluctuated between about 68 and 70 million bpd since 2005 (versus about 69 million bpd in 2005), and it appears likely that the trillions of dollars spent on global upstream capex since 2005 only served to keep actual global crude oil production approximately flat. 

Edited July 24, 2018 by Jeffrey Brown

[Top Oil Trader + 469]

Ok I do see the websites reporting oil at 68.14 or so, which means my prices on chart are off. Need to call the chart co, and ask if my wti prices is actual.  In either case it doesn't affect the prices going down or up. But yes i guess the prices i  have quoted where $1 above the actual prices, however the future prices i have now are like $4 below. Right now about well i trade different month, so some are actually quite lower than other months. But if i look at the september wti, those right now are 67.91 delayed, and further out are at 65.xx. 

[Top Oil Trader + 469]

The big dudes, all make mistakes. But most will be bullish.

[Dan Warnick + 6,100]

4 minutes ago, Top Oil Trader said:

fundamentally why oil is not crashing yet, is because Trump warned Iran today. Iran threatened us, and us back. So Oil isn't nosediving yet.

They pull out the same deck of cards every time.  Iran, Hormuz, small African country with a terminal under attack, a few drillers that stopped drilling (reason casually speculated on), a transformer in Canada blew out (oh my!), not enough pipes, too much demand, not enough supply, and on and on.  My personal opinion about Iran/Trump is that Iran better be careful, Trump went against the whole world backing out of the deal that was made during Obama's term, I don't think he has any problem backing up his words with deeds if Iran tests him (hey, he needs his war too, you know!).

[Top Oil Trader + 469]

Will need to update price wise the original post, to even lower target now. Since the price actually started from 68.5

[Dan Warnick + 6,100]

5 minutes ago, Jeffrey Brown said:

A Tale of Two Oil Price Scenarios

Following is a link to an article regarding Dennis Gartman’s January, 2016 proclamation that oil would never trade above $44 in his lifetime.   

Following that is a link to and and excerpt from a July, 2018 report by Philip Verleger, in which he discusses his concerns about 2020 requirement for low sulfur fuel, versus the low sulfur fuel supply, which could lead to oil prices as high as $200, in his opinion. 

I thought it was an interesting spread in oil price scenarios, from a maximum of $44 in January, 2016 to a discussion of $200 in July, 2018.

However, I think that Mr. Verleger is making a critical mistake, which I discuss below.

GARTMAN: Crude oil will never trade back above $44 'in my lifetime’ 
January, 2016

https://www.businessinsider.com/dennis-gartman-crude-oil-call-2016-1

Dennis Gartman has a call on oil.

Gartman said Monday that he thought crude oil wouldn't trade back above $44 "in my lifetime," though he did say oil may have hit a short-term bottom.

The price of crude oil, which has been driving the price action in the stock market for the past month, fell about 7% Monday but bounced back a bit early Tuesday.

$200 Crude, the Economic Crisis of 2020, and Policies to Prevent Catastrophe  
Philip K. Verleger, Jr. 
July, 2018

https://www.pkverlegerllc.com/assets/documents/180704200CrudePaper.pdf

The IMO regulation on marine-fuel sulfur content, if left unchanged, will likely have widespread impacts on the petroleum sector. Crude oil prices could rise to $160 per barrel or higher as the rule takes effect, assuming no market disruptions. Prices could rise much higher with any disruption, even a moderate one. The higher prices will slow economic growth. If they breach $200 per barrel, they would likely lead to a recession or worse.   

The risk of high prices and an attendant economic downturn should force government policymakers across the globe to review the IMO 2020 issue. As of this writing, though, on July 1, 2018, no such reviews are being conducted. Instead, the global economy is moving steadily toward a crisis yet unseen by most, if not all, key individuals in policy positions. Soon it will be too late to act. Very high prices and recession await. 

My Comments:

A critical mistake that Verleger makes is defining BP’s number for total petroleum liquids as “Crude oil,” which is something that not even the EIA does (they define “Crude oil” as Crude + Condensate, or C+C). 

When we ask for the price of oil, we get the price of actual crude oil, most commonly WTI and Brent, but when we ask for the quantity of oil, we get some combination of actual crude oil + condensate + NGL + biofuels.

Note that Cat Feed + Distillate drops from about 60% for light, sweet 39 API gravity crude oil to about 20% for 42 API gravity crude oil—a two-thirds decline, just going from 39 API to 42 API, and based on the most recent EIA data (April, 2018), about 43% of US Lower C+C production exceeds 42 API gravity, which is the maximum API gravity for WTI crude oil (versus about 35% in April, 2015). 

Refinery yields by crude type:

http://i1095.photobucket.com/albums/i475/westexas/Refineryyields_zps4ad928eb.png

The most common dividing line between Crude and Condensate is 45 API gravity, but as noted above, the crude oil distillate yield drops off considerably just going from 39 API to 42 API,

In other words, about 43% of what the EIA calls Lower 48 "Crude oil" production can't be sold as WTI crude oil in 2018, versus about 35% in 2015.   At this rate of increase, in about two years half of US Lower 48 C+C production will exceed the maximum API gravity for WTI crude oil. 

In regard to global data, the rate of increase in global gas and global C+C production from 2002 to 2005 were identical, at 3.3%/year.  

But from 2005 to 2017, the rates of increase diverged considerably, with global gas production increasing at 2.4%/year from 2005 to 2017, while global C+C production increased at only 0.8%/year, one-third of the rate of increase in global gas production.  

Given that condensate is a byproduct of natural gas production, in my opinion the only reasonable conclusion is that actual global crude oil production has probably been on an "Undulating Plateau" since 2005, with rising condensate production accounting for virtually all of the slow post-2005 increase in global C+C production, and note that annual Brent crude oil prices averaged $110 from 2011 to 2013 inclusive (remaining at $99 in 2014).  In other words, there were considerable financial incentives to increase actual crude oil production post-2005.   

Also, note the flat global C+C production from 2015 to 2017, versus rising global gas production, which implies a probable slow decline in actual global crude oil production from 2015 to 2017. 

Global Dry Gas Production and Global Crude + Condensate (C+C) production, 2002 to 2017:

http://i1095.photobucket.com/albums/i475/westexas/Global Gas and CC Production 2002 to 2017_zpslzwt5i6f.jpg

I estimate that actual crude oil production (45 API Gravity and lower crude oil)—the stuff that refiners need to produce petroleum distillates—has probably fluctuated between about 68 and 70 million bpd since 2005 (versus about 69 million bpd in 2005), and it appears likely that the trillions of dollars spent on global upstream capex since 2005 only served to keep actual global crude oil production approximately flat. 

Excellent write-up, Jeffrey.  Thank you.

[Top Oil Trader + 469]

Too late to edit. But it should have read prices 68.5 going down to 61.5

[Top Oil Trader + 469]

Yes certainly prices look strong, they are trying to break up. Right now the prices ar 69.14, key breakout price would be 70. If they can't break 70, then they really need to try harder. Either someone has to come out with some really bad news, or some analyst has to come out with some outlandish target again, or some war breaks out someplace by the oil fields, so something serious. But I do suspect what is happening, the economies are about to fall, demand will go down, big supply glut. The only reason oil is not down, is that people are still in some kind of haze, as to the reality. This is usually the case, before a major dive.

[Dan Warnick + 6,100]

Just now, Top Oil Trader said:

Yes certainly prices look strong, they are trying to break up. Right now the prices ar 69.14, key breakout price would be 70. If they can't break 70, then they really need to try harder. Either someone has to come out with some really bad news, or some analyst has to come out with some outlandish target again, or some war breaks out someplace by the oil fields, so something serious. But I do suspect what is happening, the economies are about to fall, demand will go down, big supply glut. The only reason oil is not down, is that people are still in some kind of haze, as to the reality. This is usually the case, before a major dive.

It's important for me to read what you think about the supports, breakouts and so on.  Thanks.  Otherwise, I agree with the rest of your sentiments.  It is probably a good time for me to stand aside and see where this washes out for a while.  I've just closed my positions and will think about a new entry point.

[Top Oil Trader + 469]

Looks weak again. From my standpoint trading oil is a big waste of time, unless you try to go for the big moves. The first move was when i said oil was a short at 75. Down here at 67 - 68 its been ranging and a waste of time, unless someone is looking for small moves.

[Top Oil Trader + 469]

The reason Oil Hedgefund go bust, is that they enter in the middle of the Trend. The up trend started at about $26 bucks.  Or you could say the downtrend started at $75.  However, most Oil Hedgefunds enter the market with a bullish view. And of course they can't see the bottom, ahead of time, so they will enter long for example at 50, a couple of thousand contracts as oil drops to $26 they hold until they are forced to close with a big loss. However, the real traders, the ones working for the oil brokers, vitol etc, they make small plays for hedging or quick profits, and are able well some of them, to make money, they don't care about the trend, as long as they made some profitable trades up or down. 

[Top Oil Trader + 469]

Well right now, wti is at 69. So it did  go up as i expected from the low 68. Now what next. Still moving up. However....

yes could move up another 50 b, so to 69.50 that is the pivot point if you want to call it that. If it can break that, well we may even see another big push up. So lesson learned even when Oil has to go down, it will make it very difficult, But oil is by far the most volatile instrument I see, and that may be due to the fact, that when it falls it is well protected by forces outside of the natural market factors, especially after it makes a nice move up. So indeed to play oil it is possible but with shorter time frames, so 1 hr etc, but you still need a good grasp of charting . and then catching 150 basis daily is a piece of cake. If you want to catch the big trend then it is best to  catch it at the bottom or top, but not in the middle, when people go in a the middle with big hopes, their hopes are quickly destroyed. Like i always said, there are things out there a lot more easier than oil, such as currencies, dow, stocks etc, for  catching the big moves. But if you like heavy gambling and heavy risk, and quick profits, oil is the place to be.

[Top Oil Trader + 469]

if you are drawn to trade or day trade oil, you must be the most dangerous trader in the world, so many other things to trade that are 10x easier. This is the wildest instrument anyone can day trade. If you are trying to get in on the big move, you better be very patient and better hope you can pick tops and bottoms, correctly. Now I  understand why everyone is fundamentalists and don't even try to look at a charts. Now I understand why being an analyst with some kind of respect, is a losing game. Having said that, this is the basis for understanding oil, before you can even attempt to project its next move, short term or long term. To be able to predict up moves, you almost have to be one who makes the news through some comment true or not, and then you will know oil is heading up. To be able to predict when such news come out, is impossible, however, you can still predict  the short term moves of prices, if you have some sense, well a lot of sense of charts. To predict the exact moment of a new trend, that is what the big hedge funds, hope to have figure out. Since if they can, the 100s of millions will pour in, or out if they make a bad judgement. Right  now at 69, on spot. Unfortunately in Oil, I am only able to predict a couple hours ahead, until the next move in the opposite direction. So from 69 it looks like down to 68.4, after that they could try and take it up again, and they will try hard this time. Should be some news event or some rumor, or some comment by a big producer.