Oil Slide Worries Traders. *relax* This Should Get Sorted by Year End.

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again.

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking.  Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers.  I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year.  Just my opinion; as always, you are free to disagree.

Anyway, after all my blathering, here's the Australian Financial Review for you to consider:

Oil slide rings alarm bell for global economy

Another collapse in the oil price late last week is sending worrying signals about the health of the global economy, with the picture for the commodity further clouded by supply and demand trends and the US President publicly backing lower prices.

By the end of the regular trading session on Friday, West Texas Intermediate crude had dropped 7.7 per cent to $US50.42 a barrel, while Brent crude fell 6.1 per cent to $US58.80 a barrel.

  • Like 2
  • Upvote 2

Share this post


Link to post
Share on other sites

I think it largely depends on the grip that Trump has over the Saudi Crown prince. If he holds him by the neck because of the Khashoggi case, then the price will keep going down.

  • Upvote 3

Share this post


Link to post
Share on other sites

Couple months ago, news, investors, markets, and all oil related traders had a fear of oil which could be over $100, and someone even said it could be over $200. 😂  what happen now? Now it’s totally opposite, ppl start saying that oil will drop as lower as $30-ish. 😂 

I learned a great lesson from Tom, regaless fundamentals and geopolitics, it is all about sustainability. 

This uocoming G20 meeting will not significantly solve the problem, but will be softened. Stockmarkets will rebound and may continually climb higher in 2019. Oil will be back a more stable price around $70-ish as well. 

We ll see. 

  • Like 3

Share this post


Link to post
Share on other sites

6 hours ago, Keven Tan said:

Couple months ago, news, investors, markets, and all oil related traders had a fear of oil which could be over $100, and someone even said it could be over $200. 😂  what happen now? Now it’s totally opposite, ppl start saying that oil will drop as lower as $30-ish. 😂 

Relax  : )   

And try reading the latest from Nick Cunningham:

$50 Oil Puts Shale To The Test

As the WSJ notes, the shale industry is in the midst of putting together drilling plans for 2019. Up until now, very few industry insiders or analyst forecasts had prices falling below $60 per barrel next year. The recent plunge could force a rethink. If the industry goes in a more conservative direction, shale output might not grow as much as previously thought.

With all of that said, OPEC+ could put an end to the latest slide in prices as early as next week. Rumors of a large production cut began circulating a few weeks ago, and the lower prices go, the more likely it is that the cartel will take action. At this point, with expectations of some sort of action largely priced in, inaction would likely drag prices down much farther. As such, it seems highly unlikely that OPEC+ will do nothing.

  • Like 2
  • Upvote 1

Share this post


Link to post
Share on other sites

On 11/26/2018 at 3:49 PM, Tom Kirkman said:

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again.

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking.  Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers.  I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year.  Just my opinion; as always, you are free to disagree.

An article from today (20th December) generally agrees with my *hope* of $70 oil [Brent] and $65 oil [WTI] for 2019.

Oversold oil market will give way to gains in 2019

... Overall, oil prices will continue to “be difficult to predict,” said Youngberg. “2019 will be volatile just as 2018 was.”

Even so, he still offered some predictions for next year. He sees WTI prices averaging $60 a barrel and global benchmark Brent averaging $66 in 2019. That would mark increases of roughly 30% for WTI and 20% for Brent from Thursday’s levels.

Share this post


Link to post
Share on other sites

On 11/26/2018 at 9:13 PM, Tom Kirkman said:

Relax  : )   

And try reading the latest from Nick Cunningham:

$50 Oil Puts Shale To The Test

As the WSJ notes, the shale industry is in the midst of putting together drilling plans for 2019. Up until now, very few industry insiders or analyst forecasts had prices falling below $60 per barrel next year. The recent plunge could force a rethink. If the industry goes in a more conservative direction, shale output might not grow as much as previously thought.

With all of that said, OPEC+ could put an end to the latest slide in prices as early as next week. Rumors of a large production cut began circulating a few weeks ago, and the lower prices go, the more likely it is that the cartel will take action. At this point, with expectations of some sort of action largely priced in, inaction would likely drag prices down much farther. As such, it seems highly unlikely that OPEC+ will do nothing.

Yet the shale drillers and pumpers are not going to stop production simply because the price drops to the point even of negative cash flow.  The reason lies inside the financing structure of these small producers.  They raise their capital by solicitations of private investors who are classified as having capital and total assets above a threshold level that brings them to the status of "sophisticated investor."  Basically, only folks who know what they are doing and have the ability to sustain capital losses are allowed to buy into those investment pools, as limited partners.  Now those folks get seriously upset when the production dividend checks do not emerge, so there is this pressure to pump and sell simply to keep "something" flowing to the investors, or the drill General Partners, the fellows putting the drill deals together, will end up shunned, effectively blackballed.  

Nobody in the oilpatch can afford to take the risk of angering the investors.  Thus, even if WTI sinks to $38, those guys are going to continue to drill and continue to pump, and sell, and issue dividends.  Otherwise they have committed suicide with the investors. The implication is that WTI is going to continue to sink, oil will continue to gush, and will continue to stay well below your target of $60.  Way of the world. 

  • Like 3
  • Upvote 1

Share this post


Link to post
Share on other sites

Predicting is indeed difficult. Whatever you calculate as break-even cost, as longs as player believe there is too much oil the price will continue to slip. Also below above mentioned levels. The real supply and demand picture has changed, but not too the extend we see in the market today. Never catch a falling knife. Small price increases are now used to build shorts positions, just check the graphs. We need some big inventory drops before the tide will be turned. Traders were caught short last month, many of them. So they are cautious. Buyers are relaxed and having lower inventories is beneficial accounting wise in most cases.

2019 will see higher prices, but Brent at $66 sounds optimistic to me. Majors can live with 50-55, so you need real additional demand to pass these levels. Or OPEC has to cut deeper. This latter I believe will happen, but too late as consensus is getting more and more difficult to reach.

Opec will see oil inventories drop in q1 and hence do nothing, but forgets this is result of refiners building for gasoline season. Thereafter inventories will rise and in q3 a cut will be announced. That is my belief. 

Buy at 40-ish for timeframe q3/q4 2019. Be patient.

 

 

  • Like 2

Share this post


Link to post
Share on other sites

@ Tom, in you headline you mention "oil slide worries traders". Why? A trader can make money on both sides? Or do they still hold on to their hopes....?

  • Like 1

Share this post


Link to post
Share on other sites

On 11/26/2018 at 9:49 AM, Tom Kirkman said:

If anybody here hasn't heard my hundreds of ad nauseum comments this entire dang year about my hope for $65 oil [Brent] for 2018 and my hope for $70 oil [Brent] for 2019, please raise your hand, and I can reiterate yet again.

Meanwhile, I'll gently remind that I already warned repeatedly this year that $80 is simply not sustainable, and that the higher that oil goes above $70 then the harder the eventual crash would likely be.

And over to the news, would everyone kindly lay off guzzling the pots of coffee and stop artificially panicking.  Near as I can tell, $70 - ish oil for 2019 still seems about the right balance between the global economy and oil producers.  I hope the current over-reaction on the oil price See Saw will settle back to around $70 by end of this year or early next year.  Just my opinion; as always, you are free to disagree.

Anyway, after all my blathering, here's the Australian Financial Review for you to consider:

Oil slide rings alarm bell for global economy

Another collapse in the oil price late last week is sending worrying signals about the health of the global economy, with the picture for the commodity further clouded by supply and demand trends and the US President publicly backing lower prices.

By the end of the regular trading session on Friday, West Texas Intermediate crude had dropped 7.7 per cent to $US50.42 a barrel, while Brent crude fell 6.1 per cent to $US58.80 a barrel.

agree with you mate, and for me i wish that oil get back to 50ish before the end of this year, good luck all

  • Like 3

Share this post


Link to post
Share on other sites

2 hours ago, rafattt said:

agree with you mate, and for me i wish that oil get back to 50ish before the end of this year, good luck all

As of today,  12/21/2018,  WTI has dropped to $45.59 ,  which is down from the $51.45 that it was at on 12/7/2018,  when the alleged OPEC CUT was passed.    Also to day,  BRENT is down to $53.82.

So,  if the price of gasoline was $1.98 per gallon on 12/7/2018,  when the WTI price per barrel was $51.45,    THEN,   the price of gasoline should continue to drop down to around $1.80 per gallon,  which would be an approximate price for WTI of $45.59.

BUT WILL THE WHOLESALERS LET IT KEEP DROPPING ?

They have spent the last 2 weeks since the CUT,  raking in profits for an increase in the price per barrel THAT THEY NEVER PAID...!

Will they just keep overcharging consumers and keep the money ?

  • Like 1

Share this post


Link to post
Share on other sites

22 hours ago, Illurion said:

As of today,  12/21/2018,  WTI has dropped to $45.59 ,  which is down from the $51.45 that it was at on 12/7/2018,  when the alleged OPEC CUT was passed.    Also to day,  BRENT is down to $53.82.

So,  if the price of gasoline was $1.98 per gallon on 12/7/2018,  when the WTI price per barrel was $51.45,    THEN,   the price of gasoline should continue to drop down to around $1.80 per gallon,  which would be an approximate price for WTI of $45.59.

BUT WILL THE WHOLESALERS LET IT KEEP DROPPING ?

They have spent the last 2 weeks since the CUT,  raking in profits for an increase in the price per barrel THAT THEY NEVER PAID...!

Will they just keep overcharging consumers and keep the money ?

Gasoline isnt priced off of WTI, it is priced off of brent. 

Also, wholesalers most likely have volume commitments and need to get those gallons/barrels out and in the ground in retailers tanks before they begin to rack up storage fees and excess costs. 

Sometimes I feel people need to step back and pull their tinfoil hats off regarding the gasoline business. I'm in it, I grew up around it. Its not that mysterious. 

Share this post


Link to post
Share on other sites

(edited)

3 hours ago, J.mo said:

Gasoline isnt priced off of WTI, it is priced off of brent. 

Also, wholesalers most likely have volume commitments and need to get those gallons/barrels out and in the ground in retailers tanks before they begin to rack up storage fees and excess costs. 

Sometimes I feel people need to step back and pull their tinfoil hats off regarding the gasoline business. I'm in it, I grew up around it. Its not that mysterious. 

Apples and Oranges...

 

Thanks J.MO,      but for several years now,  i have kept a running log of neighborhood gasoline price increases / decreases,  coupled with the corresponding WTI price on that day.

Therefore,  these historical numbers allow me to equate a WTI number with what my neighborhood gasoline prices are.

OR SHOULD BE...!

 

Up until 12/8/2018,   the WTI and Local Gasoline prices were about equal based on the historical numbers i have compiled over time.

On 12/8/2018,  GASOLINE PRICES JUMPED MARKEDLY,   BUT WTI AND BRENT DIDN'T.

 

So i don't have a tinfoil hat.     just a list of raw data that is "WTI based",  instead of "BRENT based."

It still works to point out abnormalities in price.

 

BUT,  I AM GLAD YOU ARE HERE J.MO.

I believe you earlier said you own a gas station.

As Dan also posted to you,  your input is welcome here.

Merry Christmas.

 

ps;  Today,  12/22/2018,  the price of gasoline in my neighborhood is $2.02,  which is way off the historical data.   WTI is $45.59,  and the last time WTI was $45.50,  the price of gasoline was $1.86 in my neighborhood.  So,  the data shows that the retail price is out of whack.   Though,  i assume the people raking in the difference of 16 cents per gallon is the wholesaler rather than the retailer such as yourself.    

Edited by Illurion
  • Like 1

Share this post


Link to post
Share on other sites

On 12/21/2018 at 11:40 AM, oilexpert.nl said:

ec will see oil inventories drop in q1 and hence do nothing, but forgets this is result of refiners building for gasoline season. Thereafter inventories will rise and in q3 a cut will be announced. That is my belief. 

I predict a rise in Q1 as we near April and Trump starts sabre rattling about Iranian oil sanctions and threatens the counties he has given waivers to with the removal as he is to make a decision early April wether he will continue or not with the policy. What he will actually do in April is off course unknown even to him.

  • Like 1

Share this post


Link to post
Share on other sites

On 12/21/2018 at 8:23 PM, oilexpert.nl said:

@ Tom, in you headline you mention "oil slide worries traders". Why? A trader can make money on both sides? Or do they still hold on to their hopes....?

The day that I started this thread, I had read a few articles that implied that oil traders were worried about the drop in oil prices.

  • Like 2

Share this post


Link to post
Share on other sites

2 hours ago, Tom Kirkman said:

The day that I started this thread, I had read a few articles that implied that oil traders were worried about the drop in oil prices.

things have certainly changed since then, haven't they? we are coming to a close on the great oil price challenge! I clearly am not even remotely a contender any longer, barring some unforeseen natural disaster in at least two of the five top oil producers of the world. 😁

  • Like 1
  • Haha 1

Share this post


Link to post
Share on other sites

The 'return' of oil prices to $70 per barrel becomes unlikelier by the day. The most direct influence is the continual optimization of fracking, leading to lower unit costs. Those with the cheapest oil are happy to drive competitors out of the market. The only way they can do that is to make the high priced producers unprofitable.

The next most direct influence is the continual expansion of 'recoverable' reserves. Some of this is due to better analysis of reservoirs, some of it is due to technology enhancements that expand the scope of 'recoverable' hydrocarbons, and some of it is shrinkage of waste, such as converting flare gas to liquids.

In a complex business, there are endless opportunities for cost reduction, plus the occasional 'disruptive' technology that obsoletes some whole segment. In a global industry, these changes can originate from anywhere. 

  • Like 1

Share this post


Link to post
Share on other sites

2 hours ago, Rodent said:

things have certainly changed since then, haven't they? we are coming to a close on the great oil price challenge! I clearly am not even remotely a contender any longer, barring some unforeseen natural disaster in at least two of the five top oil producers of the world. 😁

Where are our numbers/predictions?  I don't remember what I said.

Share this post


Link to post
Share on other sites

1 hour ago, Dan Warnick said:

Where are our numbers/predictions?  I don't remember what I said.

 

Share this post


Link to post
Share on other sites

2 hours ago, Meredith Poor said:

The 'return' of oil prices to $70 per barrel becomes unlikelier by the day. The most direct influence is the continual optimization of fracking, leading to lower unit costs. Those with the cheapest oil are happy to drive competitors out of the market. The only way they can do that is to make the high priced producers unprofitable.

The next most direct influence is the continual expansion of 'recoverable' reserves. Some of this is due to better analysis of reservoirs, some of it is due to technology enhancements that expand the scope of 'recoverable' hydrocarbons, and some of it is shrinkage of waste, such as converting flare gas to liquids.

In a complex business, there are endless opportunities for cost reduction, plus the occasional 'disruptive' technology that obsoletes some whole segment. In a global industry, these changes can originate from anywhere. 

I remember people \saying that when oil was $40 a barrel.

  • Like 1

Share this post


Link to post
Share on other sites

21 minutes ago, Rodent said:

 

Hey!  Somebody MUST have changed my numbers without my knowledge!  Dastardly, I'm telling you.  Dastardly!  🙃

  • Like 1
  • Haha 2

Share this post


Link to post
Share on other sites

(edited)

13 hours ago, jaycee said:

I predict a rise in Q1 as we near April and Trump starts sabre rattling about Iranian oil sanctions and threatens the counties he has given waivers to with the removal as he is to make a decision early April wether he will continue or not with the policy. What he will actually do in April is off course unknown even to him.

You are probably right.

It was announced last night that Trump unexpectedly announced the removal of our troops from Syria in a phone call to Turkey.

Apparently the call was made by Trump,  with Bolton and the generals to back him up,  to Turkey,  to tell Turkey not to attack the Kurds near any of our Troop locations in Syria.

In response to Trumps statement,   Erdogan asked Trump the question:   "IF YOU ARE HERE TO STOP ISIS,  AND ISIS IS 99% GONE,  THEN WHY ARE YOU STILL HERE..?  JUST GO HOME AND LEAVE ISIS TO US."

It is said that Trump turned and asked his people to answer the question,  and they could not come up with another reason for keeping our troops in Syria.  So Trump ended the call by telling Erdogan that he will withdraw our troops.

Some of the State Dept and Military big wigs do not like the decision,   BUT I DO.   AND I AM SURE OUR TROOPS IN SYRIA WILL TOO.

Personally,  i like the fact that Trump can change his mind on things.

As for what he will do in April,  who knows.    But i have confidence he will do the right thing.

 

 

Edited by Illurion
  • Like 2
  • Haha 1
  • Upvote 2

Share this post


Link to post
Share on other sites

3 hours ago, Illurion said:

As for what he will do in April,  who knows.    But i have confidence he will do the right thing.

 

Whatever he does is the right thing, for who is always the question.

Share this post


Link to post
Share on other sites

24 minutes ago, jaycee said:

Whatever he does is the right thing, for who is always the question.

True.

One of the reasons i trust Trump is that he is already a Billionaire,  and he cannot be bought.

So many others i cannot say the same about.

So,  when it comes to WHO Trump does the right thing for,  i tend to think it is for WE AMERICANS,  or for HIS FAMILY.

I believe like most people,  he would do most anything for his kids.

  • Like 1
  • Downvote 1

Share this post


Link to post
Share on other sites

(edited)

2 hours ago, Illurion said:

True.

One of the reasons i trust Trump is that he is already a Billionaire,  and he cannot be bought.

So many others i cannot say the same about.

So,  when it comes to WHO Trump does the right thing for,  i tend to think it is for WE AMERICANS,  or for HIS FAMILY.

I believe like most people,  he would do most anything for his kids.

It appears Putin has bought Trump and it is difficult for me to trust anyone who lies many times in excess of 100 times per day.

Edited by Razoo
One who too many
  • Like 1
  • Upvote 1
  • Downvote 1

Share this post


Link to post
Share on other sites

4 hours ago, Razoo said:

It appears Putin has bought Trump and it is difficult for me to trust anyone who who lies many times in excess of 100 times per day.

 

c0a21a986b2265be48646c06ec954df4fcd5520390c414235cbcf0ff50e38e1f.png

 

ef91d41068e512c0dc33105c55a3825fed2b56297d3ae4dbebd799d8149eaba5.jpg

 

  • Like 1
  • Haha 2

Share this post


Link to post
Share on other sites