How long will they keep the low oil price?

[Phong Vo + 2]

Will the low price last for the whole 2019? 

[Phong Vo + 2]

On 11/29/2018 at 6:10 PM, Streamer said:

My long answer to your question is:

There are many issues that will impact on this. These are some of them that I am looking at:

 1) Global economic growth prospects:

The immediate point of focus is the effect of the ongoing US-China trade war. These are the two greatest economies in the world and the impact is felt globally. For example, US farmers, carmakers, etc are already showing the negative side. But neither Donald Trump nor Xi Jingping actually want a trade war, they just want better trading terms. So a solution will be found and it is purely a matter of how long it takes, what the final terms are like and and how much damage will be done to the global economic outlook in the meantime. So I certainly don't think this issue will last throughout 2019 and may probably already be resolved this weekend in Argentina in the G20 meeting! 

 2) Donald Trump wants lower oil prices, but many producer nations need higher prices to meet their production breakeven costs and to fund their budgets and infrastructure plans. Countries like Saudi Arabia have big plans to diversify their economies but need the revenue from oil to fund these plans. This revenue does not come from low prices. So we can expect OPEC to reduce their production levels to support prices into the new year. 

3) The US shale industry may have a low breakeven cost on average but I believe there are many operations there with higher than average B/Es. In addition, the US oil industry needs to attract investment funds and those funds want to see a payout at some time soon. This also puts an upward pressure on prices.

 4) I believe many producers will generally use the futures market to lock in some of their future selling prices - but only when the price is suitably high. The lower the prices sink the less attract it becomes to lock in such prices for future production. If one believes the intrinsic value of one's commodity, oil in this case, is higher than current prices then it is more sensible to shut down some of one's supplies until prices recover - this takes off some of the selling interest as prices sink lower.

 5) A longer term aspect could be how producer nations value their proven oil resources whilst still underground. If the global direction towards alternative energy sources, EV's, electic treight vehicles and even commercial airlines then the demand for oil could shrink and the value of those proven reserves could diminish substantially - in which case, the quicker one can get it out of the ground and sold the better........

 So my short answer to your question is: I don't know!

 

 

hahaha your answers are really impressing. thank you. You are probably right. 

[MAIK + 2]

Taking in consideration that all information from all traders configure the prices everyday, one way for estimations is the statistical approach...

The shorter the estimation the better the result.

By using mainly The Seasonality Method (TRADING OIL SEASONALITY)...for CRUDE OIL WTI,  the Average Monthly price for December is estimated arround 52,32$ ... 

ML