Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Can We Expect A Major Rebound In Crude Oil Prices?

Commodities / Crude Oil Nov 20, 2018 - 05:34 PM GMT

By: OilPrice_Com

Commodities

After declining by more than 20 percent from the October peak, oil prices are showing some signs that they have now bottomed out.

WTI hit a low point at $56 per barrel on Wednesday and Brent hit a low just below $65 per barrel. Both crude benchmarks regained some ground at the end of the week, despite the huge increase in U.S. crude oil inventories. In fact, rising prices in the face of the 10-million-barrel increase in crude stocks suggests that oil may have already hit a bottom. “[Y]esterday’s price reaction to the US inventory data shows that negative news is now largely priced in,” Commerzbank said in a note. “This is the only way to explain why an increase in US crude oil stocks of a good 10 million barrels failed to put further pressure on prices.”


At the same time, crude stocks have now climbed for eight consecutive weeks, surely a sign that the market is decidedly back in a surplus situation. That is bearish, to be sure, and helps explain the collapse in oil prices over the past month.

But it also significantly increases the odds of a response from the OPEC+ coalition in early December. “[W]e believe oil is oversold and will likely bounce up from the current levels, as OPEC+ dials back production in December,” Bank of America Merrill Lynch said in a note on Wednesday. The bank said that it no longer sees Brent rising to $95 per barrel next year, as it previously thought, noting that “oil bulls have capitulated and so have we.”

However, the liquidation of net-long positioning by hedge funds and other money managers has taken a lot of pressure out of the market. As a result, there is more room on the upside once again. “[T]he oil market is a lot cleaner now from a positioning standpoint. Given that inventories are still not too high, we believe oil prices should find some support from a fundamental perspective,” BofAML wrote.

Barclays pointed to some fundamentals to suggest that things aren’t as bad as they seem. For instance, OECD stocks in terms of “days of demand cover,” remain below the five-year average. “Based on our balances, we expect the amount of inventories in the OECD on a days of demand cover basis to remain supportive of prices through the end of next year,” Barclays said in a note.

Moreover, the waivers on Iran sanctions are temporary, and even though the U.S. was more lenient than expected, Iran should continue to lose exports in the months ahead. Indeed, the recent price crash actually gives the Trump administration a lot more room to work with, and it can take a harder line with the eight countries it granted waivers to the next time around.

Finally, lower prices could shut in marginal supply and stimulate demand. Barclays even suggests that Iran may step up threats on the Strait of Hormuz because of lower prices, while Venezuela might lose output at a faster rate.

Still, a price increase from current levels hinges on action from OPEC+. Saudi Arabia has already signaled that it intends to lower exports by 500,000 bpd in December, and that further action might be forthcoming from OPEC+. Russian officials told Reuters that they are not enthusiastic about the 1.4-million-barrel-per-day cut that was reported in the media, but that they might sign on to something more on the order of 1 mb/d.

These rumors tend to drive the market and the price gains seen on Thursday and Friday may have been somewhat driven by rising expectations of OPEC+ action. As these things go, oil traders buy and sell on the rumor. More specifically, the 500,000-bpd Saudi cut is already being priced into the market, and the potential 1-mb/d cut from OPEC+ collectively is now increasingly being factored into the market as well. Because there are now rumors of a cut as large as 1.4 mb/d, the 1 mb/d option could take on a “middle-of-the-road” option. Anything less will be a huge disappointment and could drag oil prices back down.

The IEA noted that the global supply surplus could rise to as much as 2 mb/d in the first half of 2019 based on the trajectory of the current fundamentals. It will require OPEC+ action to head that off.

By Nick Cunningham of Oilprice.com

Link to original article: https://oilprice.com/Energy/Oil-Prices/Can-We-Expect-A-Major-Rebound-In-Oil-Prices.html

© 2018 Copyright OilPrice.com - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules