How High Can Oil Prices Rise? (Part 2 of my previous thread)

[Osama + 248]

The last thread---What does the future hold (as WTI and Brent touched historic highs) has some considerable discussion and comments for all of us to study. However, after having opinions of different energy experts and traders in that thread we should now move to the question that now that oil prices have touched 4 years high ---how high can they rise? To begin the discussion please consider the following article that I wrote for Seeking Alpha:

How High Can Oil Prices Rise?---https://seekingalpha.com/article/4208695-high-can-oil-prices-rise

Also, see the following technical analysis regarding inventories and oil prices.

Ignore The Hype – Oil Prices Aren’t Going Back To $100---https://oilprice.com/Energy/Crude-Oil/Ignore-The-Hype-Oil-Prices-Arent-Going-Back-To-100.html

 

Let's take our discussion from here to somewhere.

 

@Tom Kirkman, @William Edwards, @ATK, @Dan Warnick, @Marina Schwarz, @Jan van Eck, @Jan Erik, @ceo_energemsier.

[Tom Kirkman + 8,860]

I tend to agree with Art Berman on this.

And I'm still hoping for $70 oil next year (2019).

Traders gonna trade, while nervous and jumpy over the next couple months.  Pushing up oil prices needlessly for a while.

Maybe by December the uncertainties with Iran, Iraq, and elsewhere will settle down, and stick to a price closer to $70.

My $70 number for 2019 is not a prediction, it's the number I'm hoping for on average.

[Marina Schwarz + 1,576]

As a regular consumer of all sorts of goods whose price jumps as soon as Brent adds a cent, really do not want to see Brent at $100. Apart from that:

[Jan van Eck + 7,558]

Readers may wish to ponder one irreducible truth: the price of oil is not a function of any of the factors described in your Seeking Alpha article, or any "fundamentals" or "technical analysis."  The price of oil is a number that clears traders seeking to sell futures contracts and those seeking to buy futures contracts.  And those guys are driven by only two factors:  their personal greed, and their jittery fears.  Greed and Fear run the commodities markets. 

We delude ourselves by thinking that some fancy technical or fundamental analysis is going to give a day trader, or a contracts trader, some special leg up in a market run on emotions. It is a special fantasy. 

The next delusion is that participants can somehow out-guess the market.  Unless you are strong on psychology - and even not then - you cannot guess the reactions of men exposed to fear.  The "market" is the collective of thousands of these guys, all about to make a buck in their zero-sum trading game, out to gore the next fellow, and scared to death that the trade is made in the wrong direction and they are on the cusp of losing their shirt and putting their family into the bankruptcy court. 

Now, I grant you that, if enough of these guys are holding onto some fantasies of "oil reserves levels" and "production numbers," then their collective can push the market.  So, what are those current factors?  Iran production will report, officially, significant drops.  In reality, Iran will be selling to their favored customers the usual amounts, all sneaked past some US blockade, which will be predictably very porous.  The real issue will be, how much cash does Iran have to put on the table to sell their blackballed oil?  There is a Number out there that will entice even the most stalwart US supporter into buying loads of Iranian crude - there always is.  Will it be twenty bucks?  Thirty bucks? Forty bucks?  Will the Ayatollah knuckle under to his arch-enemy The Donald to save his country forty bucks?  Who knows.  I don't.  These are imponderables. 

But the issue for this little debate is that the Ayatollah will be out there doing cargo deliveries along with the rest of them.  The official number show dramatic declines, and if you couple that with the "promises" of KSA to up the pumping to meet the shortfall, then the markets are going to be flooded.  Meanwhile, the refineries will be shutting down for their usual maintenance times, and will be not taking cargoes.  So where is all that oil going to end up?  Floating storage, anyone?  Trader arbitrages, anyone? 

The Canada trade mess is ending, the Canadians have pretty much capitulated to reality, The Donald gets to crow  (although the depressed Canadian Dollar keeps real US trade gains to basically nothing), and life on the Border continues, albeit a bit rockier with the aggressive acts of the green-shirted Border Patrol  (which is a different department from the Customs Officers stations and the Federal Entry Inspection Stations, I point out).  The cross-border trade will continue, although cross-Border tourism is taking a hefty hit. 

The Mexicans have capitulated on internal wages, requiring some substantial portion of their auto workers to make a minimum wage more approaching US factory wages (albeit not US or Canadian union auto wages).  So the huge gains of Mexico in auto supply to the USA are likely to be trimmed a tad. 

Will the US continue to import Canadian rail crude?  Probably.  Will Mexico export crude and import gas?  Probably.  Are markets being fundamentally disrupted?  Does not look like it.  What will the traders do?  They will continue to try to screw each other over, and some will succeed, most will fail.  The market will continue to be a sinkhole for speculator cash. I see the world ending up, paradoxically, awash in oil, the Trump embargo on Iran actually increasing world supplies, lots of bootlegging, India buying discounted Iranian crude, and the futures prices collapsing.  How far?  Total guess.  Could be fifty bucks, could go lower.  There is going to be a lot of oil out there. Fear will hit. 

[ATK + 355]

Personally I think if people want to trade this they should just buy the dips until November. It's obvious at this point that Iran Sanctions are driving the current bullish narrative, there is literally no new news coming out from the media. Just the same "tightening oil market" and "lack the spare capacity" headlines over and over, these news sources don't even look at inventory numbers anymore/report them. Bulls want their $100 dollar a barrel and by God they are going to get it, so if you want to make money in October, buy the dip and ride this till the end of October/start of November. The market will go back to trading in a range once all the speculation stops and pepole start looking at numbers again

Edit: Net long positions keep increasing, I see hedge funds being the large driver for this

Edited October 1, 2018 by ATK

[ATK + 355]

Oil climbing again, you know, just because

[Robert Ziegler + 121]

I see lots of worries. Bull markets feed on and climb on worries.

[ATK + 355]

18 minutes ago, Robert Ziegler said:

I see lots of worries. Bull markets feed on and climb on worries.

Yup, worried about the same thing over and over again. I'm honestly surprised sanctions haven't been priced in yet. Prices will be cheaper in 2019 once demand destruction sets in.

[ATK + 355]

Just a reminder of what happened back in June when the market "wasn't sure if Saudi Arabia or Russia had enough spare capacity". Literally everything feels exactly the same.

https://money.cnn.com/2018/06/28/investing/oil-prices-trump-iran-opec/index.html

[Osama + 248]

9 hours ago, Tom Kirkman said:

I tend to agree with Art Berman on this.

And I'm still hoping for $70 oil next year (2019).

Traders gonna trade, while nervous and jumpy over the next couple months.  Pushing up oil prices needlessly for a while.

Maybe by December the uncertainties with Iran, Iraq, and elsewhere will settle down, and stick to a price closer to $70.

My $70 number for 2019 is not a prediction, it's the number I'm hoping for on average.

Indeed. Also, I am going to post an article by Bloomberg here which talks about a potential meeting between Saudi Arabia and Kuwait in order to restart fields at Neutral Zone....this news got unnoticed or rather played down because of .........     IRANIAN SANCTIONS!!

[Osama + 248]

9 hours ago, Jan van Eck said:

Readers may wish to ponder one irreducible truth: the price of oil is not a function of any of the factors described in your Seeking Alpha article, or any "fundamentals" or "technical analysis."  The price of oil is a number that clears traders seeking to sell futures contracts and those seeking to buy futures contracts.  And those guys are driven by only two factors:  their personal greed, and their jittery fears.  Greed and Fear run the commodities markets. 

We delude ourselves by thinking that some fancy technical or fundamental analysis is going to give a day trader, or a contracts trader, some special leg up in a market run on emotions. It is a special fantasy. 

The next delusion is that participants can somehow out-guess the market.  Unless you are strong on psychology - and even not then - you cannot guess the reactions of men exposed to fear.  The "market" is the collective of thousands of these guys, all about to make a buck in their zero-sum trading game, out to gore the next fellow, and scared to death that the trade is made in the wrong direction and they are on the cusp of losing their shirt and putting their family into the bankruptcy court. 

Now, I grant you that, if enough of these guys are holding onto some fantasies of "oil reserves levels" and "production numbers," then their collective can push the market.  So, what are those current factors?  Iran production will report, officially, significant drops.  In reality, Iran will be selling to their favored customers the usual amounts, all sneaked past some US blockade, which will be predictably very porous.  The real issue will be, how much cash does Iran have to put on the table to sell their blackballed oil?  There is a Number out there that will entice even the most stalwart US supporter into buying loads of Iranian crude - there always is.  Will it be twenty bucks?  Thirty bucks? Forty bucks?  Will the Ayatollah knuckle under to his arch-enemy The Donald to save his country forty bucks?  Who knows.  I don't.  These are imponderables. 

But the issue for this little debate is that the Ayatollah will be out there doing cargo deliveries along with the rest of them.  The official number show dramatic declines, and if you couple that with the "promises" of KSA to up the pumping to meet the shortfall, then the markets are going to be flooded.  Meanwhile, the refineries will be shutting down for their usual maintenance times, and will be not taking cargoes.  So where is all that oil going to end up?  Floating storage, anyone?  Trader arbitrages, anyone? 

The Canada trade mess is ending, the Canadians have pretty much capitulated to reality, The Donald gets to crow  (although the depressed Canadian Dollar keeps real US trade gains to basically nothing), and life on the Border continues, albeit a bit rockier with the aggressive acts of the green-shirted Border Patrol  (which is a different department from the Customs Officers stations and the Federal Entry Inspection Stations, I point out).  The cross-border trade will continue, although cross-Border tourism is taking a hefty hit. 

The Mexicans have capitulated on internal wages, requiring some substantial portion of their auto workers to make a minimum wage more approaching US factory wages (albeit not US or Canadian union auto wages).  So the huge gains of Mexico in auto supply to the USA are likely to be trimmed a tad. 

Will the US continue to import Canadian rail crude?  Probably.  Will Mexico export crude and import gas?  Probably.  Are markets being fundamentally disrupted?  Does not look like it.  What will the traders do?  They will continue to try to screw each other over, and some will succeed, most will fail.  The market will continue to be a sinkhole for speculator cash. I see the world ending up, paradoxically, awash in oil, the Trump embargo on Iran actually increasing world supplies, lots of bootlegging, India buying discounted Iranian crude, and the futures prices collapsing.  How far?  Total guess.  Could be fifty bucks, could go lower.  There is going to be a lot of oil out there. Fear will hit. 

If I had read this before...I'd prefer staying away from trading oil. Very well said....some very good points here, Sir!

[Osama + 248]

1 hour ago, ATK said:

Oil climbing again, you know, just because

IRANIAN SANCTIONS---had to say that.

[Osama + 248]

Fate of 500,000 Barrels of Oil at Stake After Saudi Royal Talks----https://www.bloomberg.com/news/articles/2018-10-01/fate-of-shared-oil-fields-unclear-after-saudi-kuwait-royal-talks

"

The Saudi crown prince held talks with Kuwait’s ruler about increasing cooperation on oil policies. In the shadows of their discussions lies the fate of two jointly owned fields that can produce half a million barrels a day of crude and help OPEC fill a possible supply gap."

Khafji and Wafra, the fields located in the shared Neutral Zone between Saudi Arabia and Kuwait, are crucial for the kingdom to meet its official production ceiling of 12.5 million barrels a day of oil.

[oilfutures + 39]

WTI is now the most overbought since Jan 2018

[ATK + 355]

10 minutes ago, oilfutures said:

WTI is now the most overbought since Jan 2018

I was going to say, RSI on the 4hr is at 80, and 71 on the daily. There really isn't any news currently that can explain the sudden price movement aside from what's been said for the past 3 weeks. Hoping for a stop hunt, the amount of liquidated longs would be epic

[CLH8712 + 7]

After 25 years in the refining and marketing industry, responsible for price forecasts of oil, nat gas and refined products  for over 10, I know why the prices are going up.

(100% sarcastic comment! ! ! !) Well everyone knows there is undisputed, irrefutable evidence from multiple sources that proves it is the "evil oil companies" who are responsible for this nefarious increase in prices.  But somehow, these same companies allowed WTI to fall below $40 a couple years back, thus bankrupting several of their own.  Supply and Demand have nothing to do with it!

Edited October 1, 2018 by CLH8712

[Kaiser Soze + 14]

40 minutes ago, Osama said:

IRANIAN SANCTIONS---had to say that.

It's really not just sanctions.

The point is O&G exploration/production is never sustainable at $70bbd. That simply wouldn't be enough for investors to pour in. And capex is everything in O&G.

[ATK + 355]

13 minutes ago, CLH8712 said:

After 25 years in the refining and marketing industry, responsible for price forecasts of oil, nat gas and refined products  for over 10, I know why the prices are going up.

(100% sarcastic comment! ! ! !) Well everyone knows there is undisputed, irrefutable evidence from multiple sources that proves it is the "evil oil companies" who are responsible for this nefarious increase in prices.  But somehow, these same companies allowed WTI to fall below $40 a couple years back, thus bankrupting several of their own.  Supply and Demand have nothing to do with it!

Haha it's not oil companies, it's hedge funds that are driving the price up. I just read reuters article that Iran's exports in September dropped by 100k bpd while OPEC increased production by 40k bpd. So wow, a whopping additional 60k barrels per day have been taken off the market, oh the humanity! How could we replace all that oil! Meanwhile all these refiners that Saudi Arabia has claimed as being well supplied are worried about supplies! However will we serve all these people with SOOOOO much demand!

Edited October 1, 2018 by ATK

[ATK + 355]

6 minutes ago, Kaiser Soze said:

It's really not just sanctions.

The point is O&G exploration/production is never sustainable at $70bbd. That simply wouldn't be enough for investors to pour in. And capex is everything in O&G.

The thing is this is the bulls, rallying call, if there was no Iranian sanctions, oil wouldn't have even come close to what it is at right now. They can invest right now if they want, but when those sanctions go away, going to be hard to keep the bullish narrative going

[oilfutures + 39]

The only thing I can come up with is this is more technical in nature as I was describing on Friday.  Those MAs were lining up precisely for a move like this much like this time last year when all the MAs lined up.  It reminds me of a move I remember in March when WTI was in a triangle and busted out on no news 2-3% No one on the media could explain it but it was an obvious technical break out.  

On my chart I show the last high to be 75.24 so we either double top here or make new 4 year highs. 

 

[Keven Tan + 85]

I know there are too many metrics to determine oil prices and upcoming trends. 

Maybe I shall not tread Oil at all, but who does not wanna make profit if there is an opportunity? 

The more I have been involved in oil world, the more I am lost, because like some of you have poitnted out that oil price has nothing really to do with realities.

I was never a political fan, however I do have an incremental worry and fear by Mr. Trump, who will eventually be the cause to bring the world into a mess again. WTI now just passed $75 with a 2.5% daily gained, regaless what Trump complained. In fact, the more he complaines, the higher oil price goes. 

I just looked up a article back to few months ago, along with some historical records. I hope not, a recession is going to hit us if oil price will not back down in the next 6 months. 

https://www.google.com/amp/s/www.cnbc.com/amp/2018/07/13/risks-rising-that-oil-prices-will-cause-next-recession.html

[ATK + 355]

3 minutes ago, oilfutures said:

The only thing I can come up with is this is more technical in nature as I was describing on Friday.  Those MAs were lining up precisely for a move like this much like this time last year when all the MAs lined up.  It reminds me of a move I remember in March when WTI was in a triangle and busted out on no news 2-3% No one on the media could explain it but it was an obvious technical break out.  

On my chart I show the last high to be 75.24 so we either double top here or make new 4 year highs. 

 

This rally has to be Technical in nature as there is really nothing new, news wise that can explain this . You think RSI has to hit 90 on the 4hr before people tale profits?

[oilfutures + 39]

We currently are at about peak RSI pricing on the 4 HR so I can't imagine getting much higher today - especially absent of any catalyst.  I have never seen 90 register and I do believe that is because most of all of us look at the same charts and basic indicators.  We know where the danger zone is and where to take profits hence why price is typically contained where they don't last when too OB or OS since we all react when we see those conditions.  If you recall back in January we got even more OB but also had a record number of longs from the COTS reports.  

My observation is to sustain this move we need more consolidation days to have the indicators reset but looks like we will take out those July highs.  

[oilfutures + 39]

It is worth pointing out that this move is being made on less than average volume for these types of moves.  

[ATK + 355]

8 minutes ago, oilfutures said:

It is worth pointing out that this move is being made on less than average volume for these types of moves.  

Noticed that too, this is speculation running wild like jesus Christ 3% in 1 day!?

And literally on zero news

Edited October 1, 2018 by ATK