Oil Prices

[yewkim]

Oil price may edge down to night.

[BlackCat]

At first, I thought it was short squeeze last Friday, when oil soar 8%. I don't think it is totally a short covering from my observation, over the last few session last week.

After something has fallen over 50%, we would automatically expect any daily 8% spike to be a short squeeze.

YewKim, can you share with us (if the moderator don't mind?), what specific observations over these past few sessions made you believe it was not a short squeeze? I'm interested to know.

You mentioned oil price target of 65$/70$ this year. Is that from technical or fundamental analysis? Most of the fundamental analysis I looked at gives long term sustainable price of $60-80. Above that, shale producers can quickly start producing to bring the price down again.

[Boon]

World's largest independent storage company to start crude oil storage site in M'sia

Wednesday, 4 February 2015

http://www.thestar.com.my/Business/Busin...?style=biz

[Layman A]

A comment by Howard Wang that I read from the internet pretty much sum up the whole episode :


" The three day rally since Friday can no longer be taken as simply short covering. Especially today's oil rally in front of news of higher inventory and refiners unions on strike further (limiting oil demand near term as a result).

I think it is a strong sign of markets have started to focus on the future Spring, summer and fall, a future with less production with all the announced cuts by oil majors

Oil is going to stay between 60 to 75 range pretty soon. It was ridiculous to push oil above 100 given the development in shale technology. It is even more ridiculous to think oil can sell at low 40s equivalent to $20 in the 1990s adjusted for inflation, a period when China was still on bicycles and India was still walking on barefoot.

The world is so different today than 20 years ago. For anyone to think low $40s are not overshooting on its way down, and US producers are not going to react is naive at best. "



I agreed with him 101% !

[bear]

I guess the key to surviving the oil slump is to stay slim and cut down on unnecessary costs,as what BP is doing now...A weak balance sheet is the sure way to the bottom during harsh conditions of low profit margins due to oversupply by the strongest players(cost-wise and reserve wise) in the industry.

http://www.economist.com/news/business-a...ef412227be

They say a leopard can't change its spot:
“If you give an oil guy a dollar, he’s going to use it to drill,” said H. B. Juengling, a vice president of investor relations at Resolute. “But the available funding is starting to close down.”

http://dealbook.nytimes.com/2015/02/02/s...nity/?_r=0

[yewkim]

At first, I thought it was short squeeze last Friday, when oil soar 8%. I don't think it is totally a short covering from my observation, over the last few session last week.

After something has fallen over 50%, we would automatically expect any daily 8% spike to be a short squeeze.

YewKim, can you share with us (if the moderator don't mind?), what specific observations over these past few sessions made you believe it was not a short squeeze? I'm interested to know.

You mentioned oil price target of 65$/70$ this year. Is that from technical or fundamental analysis? Most of the fundamental analysis I looked at gives long term sustainable price of $60-80. Above that, shale producers can quickly start producing to bring the price down again.

I think I will paste here post: # 408 by me for you to read..

" At first, I thought it was short squeeze last Friday, when oil soar 8%. I don't think it is totally a short covering from my observation, over the last few session last week.

And I am not a trader , I would like to say 50/50, value investing is still mostly the way for me. I apply FA and TA and do read and follow coy report closely too.

Now still not late to get back to OnG. My target price for oil is 65$/70$, if 50$ does not hold, we will still see 35$ bottom. Take care.

If one want to use ETF, you have to be careful, because oil is traded almost 23 hrs , less one hrs break, so if during the day, if oil price move against you, you got no means to take action till Wall st open at 10.30pm. By then, the damage will be huge. This is one of the disadvantage, please take notice.

Use ETF only when confident that the trend is strong. Like I ride SCO from 80$ to 48$, now I am on UCO. But I do not suggest you follow as it is volatile and are 2X gear,and it’s not appropriate for buy-and-hold investors, this is purely for trading short to mid term or till trend go against you. You will be better off, buying into solid OnG counter like Ezion or Nam Cheong.

I sold Nam Cheong at 35c, bought 32c and sold Ezion at 1.35, bought 1.265 today for some nice profit. I bought them yesterday morning. I am making use of the current weakness in oil. I did post at 3pm( post # 421) that oil was edging down tonight before it come to pass. This I was right again. Will be looking to get back to both counter or other. I think both counter will be under pressure tomorrow. If you got these 2 counters, just sit tight, that is my suggestion for now.

If TA ( hope moderator forgiveness) and price action I observe are correct, and if it stay above 50$ ( like tonight) for 2 to 3 sessions, then 44$ is history for now.

Market are always 6 months ahead of the real economy, they are pricing into the future of QE and stimulus that will follow.

Look China today reduce their bank reserve, isn't that a good news for oil and stock?

I think i should talk less of TA, and more of FA. Is it true that FA for oil is lousy, but wasn't 2009 the economy was very lousy too. But market soar like nobody business.

Last, please take not that only if 50$ fail to hold for 2 to 3 session, then we will see 35$ bottom, but that is unlikely. 65$/70$ is my target px for this year.

This will be the last post I about trading and TA, This I promise the moderator. Thank you for your kindness.

[BlueKelah]

Oil drops nearly 9% to end below $50 a barrel

SAN FRANCISCO (MarketWatch) — U.S. crude-oil futures marked their first decline in five sessions on Wednesday, plunging by almost 9% to settle below the $50 mark as the nation’s stockpiles climbed more than expected.

West Texas Intermediate crude for March delivery CLH5, +0.43% slid $4.60, or 8.7%, to settle at $48.45 a barrel on the New York Mercantile Exchange. Oil was trading around $50.90 before the supply data were released.

The retreat took a bite out of the contract’s nearly 20% rebound that had begun on Thursday on hope that a cut in U.S. production would whittle down crude stockpiles.

But such hopes were dampened, at least for the short term. On Wednesday, the U.S. Energy Information Administration said crude stockpiles rose 6.3 million barrels for the week ended Jan. 30. Analysts polled by Platts forecast a climb of 2.8 million barrels.

“Crude stocks have now built by 30 million barrels in the last four weeks, and will continue to through the first quarter — as is the seasonal trend,” said Matt Smith, commodity analyst at Schneider Electric.

American Petroleum Institute data released after the Nymex close on Tuesday showed weekly inventories rising by 6.1 million barrels.

[Jacmar]

A comment by Howard Wang that I read from the internet pretty much sum up the whole episode :

Oil is going to stay between 60 to 75 range pretty soon. It was ridiculous to push oil above 100 given the development in shale technology. It is even more ridiculous to think oil can sell at low 40s equivalent to $20 in the 1990s adjusted for inflation, a period when China was still on bicycles and India was still walking on barefoot.

The world is so different today than 20 years ago. For anyone to think low $40s are not overshooting on its way down, and US producers are not going to react is naive at best. "

I agreed with him 101% !

Sorry but I totally disagree with him. this is kindergarten101 thinking. Nearly 10 yrs ago when oil prices was shooting to the sky, everyone is running scared and there was a lot of talk on "Peak Oil Theory"(remember?) seems forgotten now that the world is awash with oil. At that time I heard 1 oil giant leader(cannot remember if it's exxon or shell) came out to say that what will rescue us will be technology and he is spot on. Sure there are much more consumption from India and China since 90's but see what technology has rescued us from running out of energy. Since then:

1. there is proliferation and increase use of renewables like solar, wind, geothermal, biogas etc
2. in 90's we could only drill deep water up to 2km or less. nowadays we could drill >4km in deep water
3. there is also an increase in gas drilling as technology enable us to drill and much more impt transport(liquefied form)and use.
4. of course there is shale now.
5. and I haven't even touch on other more efficient use of energy aspects like less oil guzzling planes etc

I am no expert in oil and in fact I have no clue where oil price will go to settle down. this is why I am caught totally off guard with the oil price collapse. commodity price is very hard to fcst and oil is the mother of all commodities to predict when politicians get into the picture and not just straight demand and supply. This one goes into the too hard for me pile.

[specuvestor]

It is a matter of timeframe you are talking about. it is obvious that in the long run non-renewables are depleting and inconceivable as of now that we will be able to manufacture crude. Without alternatives it is not impossible to have $200 crude within our generation. But in the long run we are all dead as well.

We call it 远水救不了近火

So the short term dynamics becomes just as important when we want to talk about super long term picture that was the same today vs 20 years ago. You could use the same report and just change the date with little difference. The short term dynamics swing factor in production is shale and IMHO the geopolitical catalyst was Ukraine. We can roughly project what will be coming for the former but much tougher for the latter when China is funding Russia.

[BlueKelah]

A comment by Howard Wang that I read from the internet pretty much sum up the whole episode :

Oil is going to stay between 60 to 75 range pretty soon. It was ridiculous to push oil above 100 given the development in shale technology. It is even more ridiculous to think oil can sell at low 40s equivalent to $20 in the 1990s adjusted for inflation, a period when China was still on bicycles and India was still walking on barefoot.

The world is so different today than 20 years ago. For anyone to think low $40s are not overshooting on its way down, and US producers are not going to react is naive at best. "

I agreed with him 101% !

Sorry but I totally disagree with him. this is kindergarten101 thinking. Nearly 10 yrs ago when oil prices was shooting to the sky, everyone is running scared and there was a lot of talk on "Peak Oil Theory"(remember?) seems forgotten now that the world is awash with oil. At that time I heard 1 oil giant leader(cannot remember if it's exxon or shell) came out to say that what will rescue us will be technology and he is spot on. Sure there are much more consumption from India and China since 90's but see what technology has rescued us from running out of energy. Since then:

1. there is proliferation and increase use of renewables like solar, wind, geothermal, biogas etc
2. in 90's we could only drill deep water up to 2km or less. nowadays we could drill >4km in deep water
3. there is also an increase in gas drilling as technology enable us to drill and much more impt transport(liquefied form)and use.
4. of course there is shale now.
5. and I haven't even touch on other more efficient use of energy aspects like less oil guzzling planes etc

I am no expert in oil and in fact I have no clue where oil price will go to settle down. this is why I am caught totally off guard with the oil price collapse. commodity price is very hard to fcst and oil is the mother of all commodities to predict when politicians get into the picture and not just straight demand and supply. This one goes into the too hard for me pile.

Agreed, the past few years the cost of solar panel has plummeted to only about USD50cents per watt now (made in China panels).

It is starting to get commercially viable enough that private companies are taking it up not only in the USA but even locally in SG

More HDB blocks to have solar panels

Won't replace fossil fuels but definitely renewables will put a dent in the use of fossil fuels for energy production.

So decrease demand for oil and gas or a slowdown in demand increase would be logically what will be happening, at least currently and in the near future. With abundant supply, for now oil price only one way, which is down.