A bearish September for Oil

[Osama + 248]

When oil prices crossed $71...it was in no time that the bulls came to announce for a $90 oil very soon. However, it was widely anticipated that as the comment period closes down, 6th September, a fresh round of $200 bn of tariffs ready to be fired at US by "a very stable genius" Trump. Also, the strength of dollar might play its role.

Below is my latest for oil price---I see a Bearish September for oil.

https://oilprice.com/Energy/Energy-General/A-Bearish-September-For-Oil.html

"The recent gains in WTI and Brent were a treat for investors and a boon for oil bulls. The original catalyst for this most recent rally was a bullish inventory report, with the EIA announcing that inventories at Cushing, Oklahoma, had declined by 5.8 million barrels. A larger than expected drop of 600,000 bpd in Iranian exports helped to drive prices higher still. Finally, the maiden speech of the Fed’s new chairman, Jay Powell, served to weaken the dollar and send oil prices upwards once again."

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

[Jan van Eck + 7,558]

12 minutes ago, Osama said:

When oil prices crossed $71...it was in no time that the bulls came to announce for a $90 oil very soon. However, it was widely anticipated that as the comment period closes down, 6th September, a fresh round of $200 bn of tariffs ready to be fired at US by "a very stable genius" Trump. Also, the strength of dollar might play its role.

Below is my latest for oil price---I see a Bearish September for oil.

https://oilprice.com/Energy/Energy-General/A-Bearish-September-For-Oil.html

"The recent gains in WTI and Brent were a treat for investors and a boon for oil bulls. The original catalyst for this most recent rally was a bullish inventory report, with the EIA announcing that inventories at Cushing, Oklahoma, had declined by 5.8 million barrels. A larger than expected drop of 600,000 bpd in Iranian exports helped to drive prices higher still. Finally, the maiden speech of the Fed’s new chairman, Jay Powell, served to weaken the dollar and send oil prices upwards once again."

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

Osama, I think you are likely right. 

Also, keep in mind that Trump is now selling oil out of the Strategic Reserve.  Not a lot, but it points out that he is quite capable of selling a whole lot more.  That alone will keep the traders from going nuts. 

[Tom Kirkman + 8,860]

22 minutes ago, Osama said:

Below is my latest for oil price---I see a Bearish September for oil.

https://oilprice.com/Energy/Energy-General/A-Bearish-September-For-Oil.html

Nicely reasoned, Osama.

I still tend to see oil bookended between $50 low and $80 high for the forseeable medium term, despite the impending U.S. sanctions against Iranian oil, and barring any temporary spikes by black swan politics.

And to reiterate some of my repeated comments from earlier this year, I'm still hoping for an average of $65 oil this year, and $70 next year.  Note these are the average prices I am hoping for - these are not predictions.  And $70 oil next year should roughly equal $65 oil this year due to the strengthening U.S. dollar.

[Osama + 248]

Thank you, Mr. Kirkman. 

 

I agree with your analysis. As you and other members here have mentioned before....traders play with the news and sentiments. The real effect might not be , in many cases, justified by the increase or decrease in oil prices!

[Osama + 248]

20 hours ago, Jan van Eck said:

Osama, I think you are likely right. 

Also, keep in mind that Trump is now selling oil out of the Strategic Reserve.  Not a lot, but it points out that he is quite capable of selling a whole lot more.  That alone will keep the traders from going nuts. 

Indeed. 

There can be another spike before November 4th I think (I hope !! need to breakeven few barrels that I bought) ... but factors such as sale of SPR and other might hinder its way to $80. 

[Horton47 + 15]

You guys know best on short term moves, I'll give you plenty of credit.  Long term:  Health care prices are through the roof, home prices are very high, beef is high, groceries are expensive.  To me that spells inflation.  I don't see a reason why oil would be immune to rising inflation.  How about the federal current deficit?  They're printing dollars like crazy.  This is an inflationary period imo.  I think the only thing holding back oil is the upcoming elections.

[Jan van Eck + 7,558]

3 hours ago, Horton47 said:

You guys know best on short term moves, I'll give you plenty of credit.  Long term:  Health care prices are through the roof, home prices are very high, beef is high, groceries are expensive.  To me that spells inflation.  I don't see a reason why oil would be immune to rising inflation.  How about the federal current deficit?  They're printing dollars like crazy.  This is an inflationary period imo.  I think the only thing holding back oil is the upcoming elections.

I suspect what will keep inflation in check, perhaps to 1%, is the massive inflows of capital  (known as "hot cash") just pouring into the USA.  And the reasons are many:  (1) collapse of the Turkish currency; (2)  perceived if not actual stability and safety of the US Dollar, notwithstanding that the deficits mounting up are actually making that more of a mirage;  (3)  actual return on capital, both in the US stock market  (although it might become a bust bubble) and in 10-year Treasury bills.  Some capital is being pushed out of other countries, which are threats to capital (remember the confiscation of capital by banks in Cyprus?  They just took 50% of your cash for themselves.  Amazing stuff when you think about it.), and other cash is being "pulled" by better returns and safety.   When you have these huge inflows buying up US debt,  you parry inflationary pressures.  Just how long that game can go on is the real guess. 

The USA is not immune to a big push of inflation.  I recall some decades ago interest rates went to something like 19%, and price controls were established, in an effort to stem inflation.  Ultimately the inflationary pressures burned themselves out with the effects of recession, but it was a painful time.  Voters today are not likely to be tolerant of any government that leads them to that result.

A final prediction:  the two factors that will determine if The Donald runs for re-election will be inflation and jobs.  If those go against the US workforce, he is out.  If he pulls it off (stable domestic pricing and increase in workforce paychecks) then he is In.  If he has to tariff the entire planet to get there, he will do it.  Do not underestimate the raw power of his will.  He is a lot more dynamic than the newspapermen are prepared to admit.  (Whether or not he is incompetent is not the issue; even incompetent administrators can force solutions by taking very tough positions. Don't kid yourselves about this guy.) 

[TXPower + 643]

7 hours ago, Jan van Eck said:

I suspect what will keep inflation in check, perhaps to 1%, is the massive inflows of capital  (known as "hot cash") just pouring into the USA.  And the reasons are many:  (1) collapse of the Turkish currency; (2)  perceived if not actual stability and safety of the US Dollar, notwithstanding that the deficits mounting up are actually making that more of a mirage;  (3)  actual return on capital, both in the US stock market  (although it might become a bust bubble) and in 10-year Treasury bills.  Some capital is being pushed out of other countries, which are threats to capital (remember the confiscation of capital by banks in Cyprus?  They just took 50% of your cash for themselves.  Amazing stuff when you think about it.), and other cash is being "pulled" by better returns and safety.   When you have these huge inflows buying up US debt,  you parry inflationary pressures.  Just how long that game can go on is the real guess. 

The USA is not immune to a big push of inflation.  I recall some decades ago interest rates went to something like 19%, and price controls were established, in an effort to stem inflation.  Ultimately the inflationary pressures burned themselves out with the effects of recession, but it was a painful time.  Voters today are not likely to be tolerant of any government that leads them to that result.

A final prediction:  the two factors that will determine if The Donald runs for re-election will be inflation and jobs.  If those go against the US workforce, he is out.  If he pulls it off (stable domestic pricing and increase in workforce paychecks) then he is In.  If he has to tariff the entire planet to get there, he will do it.  Do not underestimate the raw power of his will.  He is a lot more dynamic than the newspapermen are prepared to admit.  (Whether or not he is incompetent is not the issue; even incompetent administrators can force solutions by taking very tough positions. Don't kid yourselves about this guy.) 

I think you are spot on Jan.  Or as the venerable James Carville once said, "It's the economy stupid".  People vote their wallets.

[Osama + 248]

Interview With Shan Saeed, Chief Economist At IQI Global: A Bullish Oil Price Outlook----By Osama Rizvi

https://seekingalpha.com/article/4204878-interview-shan-saeed-chief-economist-iqi-global-bullish-oil-price-outlook

It is always interesting to learn about different perspectives. The above interview is part of that learning. I talked to Shan Saeed of IQI global oil prices and he was bullish for the long term. I would love to have your thoughts and counter-arguments on the analysis. And any future ideas of what topic should I cover? I personally find the issue of supply crunch due to reduction in Capex very intriguing.