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Is There an Oil Freeze in the Near Future?
An agreement, or an actual limit which is complied with? Because there is zero chance of the latter. The 900 lb. gorilla in the room is the fact that Iran, and the Sunni/Wahhabi states lead by Saudi Arabia are in an existential proxy war. This is happening more in Africa right now, but it is also happening in places on the Arabian peninsula, and other places in the Middle East. None of the players can afford to cut production and allow the others to bank oil dollars. Also Saudi has no economy outside of oil, and Iran knows this, and so wants to make as much from oil as possible. Saudi will be hurt more by low oil prices than Iran. Expect if an agreement is reached, that none of the parties will follow it. If they were to follow it, the US shale oil, and Canadian oil producers are well situated to capitalize on any price increase. I expect an oil production limit would be at best a cash wash for the producers so limiting.
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Britain faces a nasty shock when the global energy cycle turns
Ambrose Evans-Prichard notes, "Britain's energy industry is dying. While the US is striving for self-sufficiency in fuel and power as a primary goal of strategic security in a dangerous world, this country has acted with strange insouciance. More after the break. As Oil Crashes Under $40, How Much Further Can It Drop
I am still standing pat on my under $30 assessment, which I first bandied about back in the fall, a few months before exchanging the newsletter format for the blog. The last assessment I made was for oil at $30 plus or minus $5. That still stands. Demand is weak, and US demand is not taking up the slack. Supply remains high, and all the autocratic oil nations need to pump as much oil as they can to preserve national stability. I cannot see an end to this condition, and the world economy is weakening. WTI at 4 month lows
"This is a crucial level as BofA warns, should oil slice through $40/bbl, attention will quickly switch to weak oil, weak Chinese renminbi and weak credit in a repeat of last summer. Well that escalated quickly... $39.86 hit..." Looking more and more like a lead zeppelin, to turn a phrase. The problem is no demand, growing supply, and the big players are cutting prices to find new buyers. Saudis Slash Oil Prices For Asian Markets; So Much For Solving That Banking Liquidity Crisis All we need now is a weakening world economy, and stagnant, or declining US fuel use. Is This The Beginning Of The End For Venezuela's Oil Sector? | OilPrice.com
The only thing floating Venezuela today is oil revenue, it cannot afford to lose this revenue. The disaster accelerates. Crude Crashes Into Bear Market To April Doha Lows
The oil bulls tried to create a fictional bull market, but failed. The world economy is not sufficient to support the supply levels of oil at $40+ per bbl, but the oil producers need money so bad they cannot cut production. And, so, oil prices will remain low until these dynamics change, or the oil bulls take another flyer at a fictional bull market. Oil prices should continue to settle. The WTI price today should settle to around $30 plus or minus 5. Oil recovery faces new downstream threat - FT.com
I have been forecasting lower oil prices, and I continue to do so. With the strengthening of the dollar, the price should be somewhere between $30 and $35 bbl. We have a glut in oil, and in gasoline. Worse yet for the oil bulls, we are in mid summer, and gas/oil prices should be strengthening. They are not. Expect the price to suffer once the driving season ends. The world economy is not going to move powerfully towards using more oil. China has been buying up lots of oil, but it is using far less, and that can only mean storage issues. The long term price of oil should be lower. And with US tight oil becoming ever less costly to produce, it will be difficult to force the price upwards. Shale Keeps Getting Leaner and Meaner
This is America's best foreign policy strategy, bankrupt the autocratic oil producers. Best not to bet against the Americans. Canada to Follow America’s Energy Lead
I can hardly wait till the responsible republics shift into overdrive. More below. |
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