Commodity Trade Mantra

All posts under ‘Crude Oil Trading’

Rally in Oil Prices is Fundamentally Driven, not Based on Speculation

Oil prices are at their highest since the start of 2017, after rising above the key $50-a-barrel mark in Sept & holding those gains. Rather than pure speculation, this move is rooted in fundamentals: falling inventories and increasing demand. The outlook for crude is no less bright as U.S. fiscal stimulus, in the form of tax cuts financed by additional deficit spending, could also send oil prices higher.

There is Nothing Stopping a Rally in Oil Prices Now

We have growing US production, regardless of where oil prices are going. OPEC is struggling to maintain compliance & doomed to make the production cut deal indefinite as every higher figure reported pushes benchmark oil prices down immediately. New US sanctions against Iran would tip the scales in a more favorable direction for oil prices, and this fact could just make the sanctions more likely.

YES - This Rally in Oil Prices has a Long Way to go Ahead

Can we finally call the crisis in oil prices officially over? Okay, maybe not completely over, or even close to almost over, but is sure was nice for a while to taste the sweet nectar of oil prices over $50, no matter how fleeting that might be. So what happened? Well, among a few things, we see the market over the next six months going well above $60 for a simple reason … surprisingly good demand.

Global Oil Market Equation looks Bullish for Oil Prices

The oil market appears to be handling the outages without too much trouble, certainly aided by the fact that inventories have been “comfortable.” That doesn’t mean that there aren’t significant atypical market conditions. IEA just published one of its more bullish oil market reports in quite a while. Supply fell, demand is at its strongest in two years & inventories are drawing down at a good pace.

Will Yuan Priced Crude Oil Futures Backed by Gold be Appealing to Oil Exporters?

China is preparing to launch a crude oil futures contract denominated in Yuan. Backing the yuan-priced futures with gold would be appealing to oil exporters, especially to those who would rather avoid US dollars in trade. It is a mechanism which is likely to appeal to oil producers who prefer to avoid using dollars & are yet not ready to accept being paid in yuan for oil sales to China.

A Rebound in Oil Prices may not be Short-Lived this Time

An open military conflict in Northern Asia would disrupt more than a third of global seaborne crude oil trade. It seems an open war is not as far from reality as opponents would like it to be. Given the amount of refining capacity in the area would be affected and the fact that China, Japan, and South Korea are among the largest consumers of oil, a war would be good news for OPEC and oil prices.

Oil Market Tightening Puts a Firm Floor Beneath Oil Prices

The shift into backwardation in the futures market suggests that the supply balance is heading in the right direction, and it probably puts a floor beneath oil prices for the time being. EIA reported a hefty draw in U.S. commercial oil inventories but oil prices did not rally on the hefty draw, because the EIA also reported that U.S. crude oil production rose last week.

Oil Prices Distorted by Derivatives, Not Supply and Demand Based Any More

Supply and demand are functions of the physical market in oil consignments that tell us about actual oil being traded & not about the trade in paper barrels & other derivatives. Unfortunately, that’s what really determines oil prices – financial transactions involving oil derivatives, not the trade in oil itself. And here, there are several additional levels of derivatives impacting on the perception of price.

Consistent Declines In Crude Oil Inventories Boosts Oil Prices

The EIA said crude oil inventories diminished by 7.2 million barrels, to 483.4 million barrels. The authority reported hefty inventory draws in the last three weeks as well. Saudi Arabia pledged to cut its crude oil exports and Nigeria said it was willing to cap its output. These factors pushed Brent crude back up above US$50 for the first time in two months, with WTI trading above US$48 a barrel.

Oil Price Decline may Reverse Trajectory from July - Here's Why

I believe that this most recent drop in oil prices is not being caused by the actual fundamentals of supply and demand. Those fundamentals are actually improving the bullish case for oil — slowly, but steadily. Starting in July, we should start to see a more bullish (and accurate) view of the global oil supply-and-demand fundamentals hit the mainstream.

With Several Opposing Factors, can we expect Higher Oil Prices anytime soon?

One factor that could prevent oil prices from falling further is the possibility that prices floundering in the mid-$40s actually puts a lid on shale production. If U.S. shale underperforms over the next year, the OPEC deal could succeed in balancing the market. But if U.S. shale continues to rise & OPEC fails to extend its deal beyond the first quarter of 2018, oil prices could fall to $30 per barrel.

Oil Prices are most Definitely Heading to the Upper US$30s

Oil is in a downtrend and risks trending into the $30’s. The future might be bright for oil prices but the present is not. Any immediate price gain would be “wishful thinking”. Oil producers are no longer hedging their production because oil prices have fallen too much. US shale continues to grow production & Libya is adding large volumes of supply back onto the market at the worst possible time.

Is There a Relationship Between the Malaysian Ringgit & Crude Oil Prices?

The fortunes of the Malaysian Ringgit (MYR) have reversed in line with crude oil prices since the beginning of 2017, as OPEC’s production caps continue to drive incremental hikes. This highlights the direct correlation between crude oil prices & the Malaysian currency, with the former dictating the performance of the latter & driving clearly visible trends in growth & depreciation.

China-Saudi deal "Yuan for Oil," Another step to the Grave for the Dollar

As China imports more & more oil, the idea of paying for oil in yuan instead of the US dollar becomes more critical. China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar. If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974.

Is This Oil Price Rally for Real or Just a Dead Cat Bounce?

What a difference a week makes. Oil prices are more than 9% above last Friday’s capitulation low. The bounce has legs in the short-term but it doesn’t alter the long-term bearish story. U.S. oil inventories just had their largest drop of 2017 & a fifth consecutive weekly decline. OPEC is expected to extend production cuts on May 25. Goldman reiterated its bullish call for an imminent supply deficit.

How Will Brexit Impact the UK's Oil and Gas Markets?

The level of concern surrounding Brexit & the UK’s energy market is slowly rising. The situation has been exacerbated by the details of a North Sea industry report, which suggest that Britain’s oil and gas trades bill could almost double to £1.1 billion per annum in a worse case Brexit scenario. This remains one of many small elements that underline the danger posed by Brexit, yet strike a huge blow.

Futures Market Trend Indicates The Return Of Bearishness In Oil Markets

Speculative movements in the futures market don’t dictate everything, but they are good indicators of market sentiment. Net-long positions in crude futures reduced for a third week in a row. Also the fact that the oil glut persists despite what should be bullish trends – high OPEC compliance, growing demand, and the initial signs of falling inventories – suggests that lower oil prices could be forthcoming.

Can An OPEC Production Cut Extension Push Oil Prices To $60?

Barring another bout of “geopolitical risk,” it seems only significant changes in oil fundamentals will deliver the boost OPEC needs. If OPEC succeeds in lengthening, or even deepening cuts & pulls Russia on board, there’s a chance that the IEA & Goldman’s prediction of a stabilizing oil market & a closer balance between supply & demand by the late-summer 2017 could come true.

OPEC on the Brink of Failure - The End to the Cartel may be Near

OPEC, which has far exceeded the average life of cartels, is on the brink of failure. Though cracks have been developing in the cartel since the start of the current oil crisis, it has managed to stay together so far. The success of the current OPEC deal for production cuts will decide its future as a cartel. If the OPEC members don’t act together, chances are that the cartel will come to an end very soon.

The Next War In Oil Prices - Saudi Arabia Vs. Russia

Europe, a very stable and surprisingly growing crude oil market, is now the stage for a possible oil price war scenario. Riyadh’s decision to change its European price setting is, however, a clear signal that there is a red line for the Oil Kingdom. No more market share will be lost without being confronted by a more aggressive and powerful Aramco establishment.

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