Just to add to the ‘why now’ - this is how UK traders/readers/investors see the new EPA regime right now.
See the ‘related stories’, the dateline and the reference to fossil fuels - again not important if fake or not, it’s what the market believes is what affects price.
Hi Peterma!
Thanks for dropping by and for your thoughts, I really appreciate that and it gives me some (more) things to ponder over the weekend! Actually, I just reading the latest OPEC monthly report that you mention right now! I was first looking at the CERAweek stuff from this week and then somehow ended up on the OPEC official site and hence the monthly report - looks very useful!
As for the down move this week, as I understand it (remember I’m a noobie in this market :)) it started because of the huge and unexpected increase in US oil inventories published on weds by the US Energy Information Administration (EIA). I believe this again increased to record levels which points to increased US shale oil production undermining the impact of the OPEC agreements to support prices with coordinated production cuts. As I understand it, these OPEC cuts have been unusually well observed by the OPEC members so far with a target of keeping oil prices above $50 level.
There are apparently large numbers of long positions in oil futures (I haven’t checked that) and these are being significantly reduced as a result of the release. Looks like we will be closing on or under this apparently important 200MA tonight which is quite significant in front of a weekend…
Thanks for those links Peterma!..I love this bit:
"Scott Pruitt, Donald Trump’s head of the US Environmental Protection Agency, has dismissed a basic scientific understanding of climate change by denying that carbon dioxide emissions are a primary cause of global warming.
Pruitt said on Thursday that he did not believe that the release of CO2, a heat-trapping gas, was pushing global temperatures upwards. …
…This stance puts Pruitt[B] at odds with his own agency[/B], which states on its website that carbon dioxide is the “primary greenhouse gas that is contributing to recent climate change”. This finding is backed by Nasa, which calls CO2 “the most important long-lived ‘forcing’ of climate change”.
Wasn’t there once some fairy tale about the Emperor’s new clothes…?
It would seem that this appointment is in line with a general US administration trend whereby the majority of such appointments are people with very deep and strong links with the industries and businesses that the organisation to which they are appointed are concerned with - whether the organisation is a watchdog, supervisory or promotional. Everything is becoming business driven - maybe good for trading environments but not necessarily for the growing multitudes of sufferers in this world whether they are refugees or victims of drought, starvation, terrorism, disease, etc.
Looks like the US will not be interested in observing any global initiatives that restrain US prosperity and evenprefer to undo those initiatives already achieved.
From an oil perspective, that means increased production, exports and infrastructure from the US whilst the OPEC and other non-OPEC producers attempt to support prices with production cuts. Even so, there is a point where, if oil prices drop too low as a result of over-production, then future exploration and extraction is no longer cost-effective and the industry starts to implode upon itself.
I guess the ideal from a US perspective is to maintain a low-but-viable price level but with a greater US share and a reduced non-US share of production and profit. But I don’t see OPEC etc accepting that formula…
In other words, business development and wealth production are now the prime (only?) objectives being pursued in the US, and the only criteria by which success will be measured. Global health, safety and human rights issues seem to now be taking a back seat, or maybe even no seat at all, in US administration priorities.
Activities in the oil industry are divided into three chronological sectors which are defined as:
Upstream:
The upstream sector basically covers all the stages involved in searching for, accessing and bringing the crude oil to the surface. It includes, for example, geological surveying, drilling and operating the wells.
Midstream:
This sector covers the processing, storing, marketing and transporting of the crude. Basically all the activities between production and refining.
Downstream:
This sector is where oil is finally refined and manufactured into products, sold and distributed to the consumers. Often midstream activities are combined into downstream as they overlap considerably.
It’s not all black and white, it’s important to remember the new President’s age, he will remember well, like myself, the first oil shock.
OPEC has been tainted ever since, the last thing that any self respecting President wants to do is to give those guys any semblance of oil price control ever again, they enforced a 3day working week, major power outages.
This was at a time when coal was still a major feature of energy.
This 1970’s history is part of the reason that Saudia Arabia remains an important western ally and maintains a certain independence from OPEC thinking.
Should explain that the 3 day week was a UK reaction to a coal miners’ strike, the option of oil use was limited due to oil price being raised re opec.
Thanks once again Peterma for another really thought-provoking post! A Sunday afternoon reflection and ponder coming up…
Indeed it is not black and white - far from it I think! 
In fact it seems nowadays everything is at least “50 shades of grey”! Thanks very much for that link, it was very interesting reading! In terms of oil it highlights precisely the factors that make oil so important, powerful and volatile - and so fascinating:
Put those five criteria together and we have a fine explosive recipe that is potentially ready to erupt at any time like the best of volcanoes… that’s why I am only interested in day trading it here!
Actually, from what I read here, was this not the [I]OAPEC [/I]members (i.e. just the Arab members of OPEC plus Egypt and Syria)?. And did not include the[I] other[/I] members of OPEC.
Maybe it is not totally fair to blame OPEC for the oil shock as its roots are buried in the Israel-Syria conflict and the US decision to intervene there (rightly or wrongly). The issue was a local hotspot and the oil embargo was a reaction specifically to that “interference” and not necessarily a unilateral attempt simply to take advantage of demand and make huge profits.
As with many commodities (including human slavery) the affluent and powerful West has a history of exploiting the valuable resources of undeveloped countries and making big profits for its own companies. This is still prevalent today where many of the goods that make up our high living standards are priced artificially low because they take advantage of low salaries and costs in undeveloped countries.
In that link it describes OPEC as originally being an [I]“informal bargaining unit for resource-rich third-world countries. OPEC confined its activities to gaining a larger share of the profits generated by oil companies and greater control over member production levels. In the early 1970s it began to exert economic and political strength; the oil companies and importing nations suddenly faced a unified exporter bloc.”
[/I]This reminds me of a saying “only break the law if it leads to power, otherwise it is best to obey the law”. In this case OAPEC took on the “law” of western supremacy and actually found itself powerful. But the problem with all power ultimately is whether to use it or abuse it.
That particular period of history, say, the latter half of the 20th century is, I think, intensely interesting and covers a plethora of huge, varying factors and “players” on the world stage. The post-war world was rising from the ashes and there was work in abundance and an insatiable demand for all kinds of resources. There was a victorious US and a communist USSR fighting for supremacy, there was a new -found freedom amongst youth with all kinds of movements and events like the Beatles, Carnaby Street, Flower Power, LSD, etc. But there was also the Vietnam war, Woodstock, Ohio, Bob Dylan and those never-to-be-built- again American fuel-guzzlers. There was Bretton Woods, the break from the Gold Standard, high inflation, industrial unrest, and everyone was getting wealthier. Air travel was widening leisure possibilities, computers started to become household items, communications changed inconceivably with everyone owning a TV (and even in colour!), the introduction of the internet, and mobile phones.
Then came the digital era and everything is changing again…but that is a chat for another Sunday afternoon 
So a new week starts.
No significant price change over the weekend but the market still looks weak. Weekend reading suggests that the key issue is still whether the OPEC coordinated production cuts agreed at the end of last year can still support prices. The daily chart shows how prices rallied immediately after the agreement and remained above the $50 barrel level since then, supported by ongoing encouraging news that OPEC members were indeed complying with the agreement with some 90+% success.
However, the simultaneous, unexpectedly high, increase in production and inventory levels of US shale oil has brought price levels back to the pre-OPEC agreement level and even settled below the apparently important 200ma level on Friday.
Since the threshold cost of bringing oil resources on line is dropping as a result of new technology then there is every likelihood that the US would prefer to keep crude oil prices low, and production high, as a boost to the economy and in order to reduce (and reverse) dependence on oil imports.
On the other hand, low oil prices are a major concern to those countries (including the Russian Federation) whose economies are highly dependent on oil export revenues. They will not (and cannot) tolerate continuing cuts in production levels, especially when they seem ineffective anyway, and will be even more reluctant to agree to further cuts.
So it would seem that the front row issue right now is how the trend in US production continues and how the OPEC and other producer countries react to it.
That would make this Weds 15.3. a key day to watch with both the EIA weekly inventories data and the US Fed meeting regarding interest rates (which are highly expected to be increased a notch - but since this is already priced into the market the key factor would be if it doesn’t happen)!
So my overall anticipation prior to Wednesday is further overall weakness but with volatile swings. So I am only looking to take quick trades selling into rallies. So entry levels are going to be a key issue here and for that reason I will be trading off a 5 min chart at least until Wednesday’s releases…
Here’s a look at the daily chart showing the change in prices since the end-Nov OPEC meeting:
Edited to add: Reminder! This thread is my learning curve regarding trading crude and is not intended in any way as a trade recommendation!
This from the White House official site concerning energy policy:
[I]“Energy is an essential part of American life and a staple of the world economy. The Trump Administration is committed to energy policies [B]that lower costs for hardworking Americans and maximize the use of American resources, freeing us from dependence on foreign oil.”[/B]
…
“Sound energy policy begins with the recognition that we have vast untapped domestic energy reserves right here in America. The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. [B]We must take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves,[/B] especially those on federal lands that the American people own.”
…
“In addition to being good for our economy, boosting domestic energy production is in America’s national security interest. [B]President Trump is committed to achieving energy independence from the OPEC cartel [/B]and any nations hostile to our interests.”[/I]
https://www.whitehouse.gov/america-first-energy
Edited: Typos - mine, not the White House!
Libya is a North African arabic country with a population of over 6 million. Its economy depends heavily and primarily upon petroleum sector revenues, which account for practically all export earnings. Libya is an important global supplier of light, sweet (low sulphur) crude oil. The majority of its oil is exported to European markets.
Whilst Libya was not a founder member of OPEC, it did join only a few years after OPEC’s formation (1960) in 1962 - a year after Libya began exporting oil. Its proven crude oil reserves are the largest in Africa and among the ten largest globally with over 48 billion barrels as at end 2015. This represents about 4% of OPEC total oil reserves. The country’s oil output is dominated by the state-owned National Oil Corporation (NOC).
Libya’s hydrocarbon production and exports have been substantially affected by civil unrest since its civil war in 2011, when its hydrocarbon exports suffered a near-total disruption. The minimal and sporadic production that occurred in that year was mostly consumed domestically. After a temporary rebound in 2012, GDP again contracted by almost 14% in 2013 and by 24% in 2014, reflecting the ongoing production disruptions.
The country is currently divided between rival east and west powers, which are both still fighting for control over the country’s hydrocarbon facilities:
The eastern forces comprise a collection of militias and eastern tribal forces as well as the remnants of the Libyan National Army. Their forces seized the oil facilities last year. The U.N. called on them to hand them over to the Tripoli government, and when this was refused they were regained by the west, Tripoli, by force.
The western forces come under the Tripoli government which was created under a U.N. deal in the hope of ending the east-west split.
Good volatility so far - as anticipated. I’m not going to post here every trade, but this was a good example of what I am looking at from now to Weds evening.
This is the 5m chart where the ribbon crossed both on the main chart and on the MACD (red-ringed). At the same time it also broke below the band on the 15m chart, not shown here, which confirmed an entry.
As usual ( 
) I jumped off a bit too early (I should have normally waited until the close shown in the second red ring) but it was a good move to the close of that next bar - and (psychologically) an encouraging start to the week…
(Not too relevant in this context, admittedly, but Libya is also one of the closer neighbours of Malta, unaccountably not shown on the map above! :o 
)
Been nothing else to do so far today since the longer TFs have remained above their signal levels. Plenty of activity going nowhere…Technically speaking, I guess I shouldn’t really have even taken that first trade this morning since the 1H chart was upwards in spite of the down daily and 4H, but, well, it was kind of obvious that there would be an early push to test the downside and the 5m opened the gate…But I am now waiting for a cross on the 1H before selling again.
In the meantime, I came across this pithy and pointed quote from Dubai’s Sheikh Rashid bin Saeed Al Maktoum concerning over-dependence on oil revenues:
[I]“My grandfather rode a Camel, my father rode a Camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a Camel.” [/I]
…and one other thing, tomorrow, 14.3., OPEC publishes its March volume of the OPEC Monthly Oil Market Report.
This is described on OPEC’s site as[I] “covers major issues affecting the world oil market and provides an outlook for crude oil market developments for the coming year. The report provides a detailed analysis of key developments impacting oil market trends in world oil demand, supply as well as the oil market balance.”
[/I]
What with the EIA inventories and Fed news on Weds, we’ve got lots of room to move…
Even though the longer TF didn’t offer up any trades today, I am really pleased with the 1H chart which, although trading below the band, did not give any crossover of the ribbon to the downside to permit shorts from the 5m chart, which has been zigzagging up and down all day - and which would have ended up with a string of whipsaws if traded without the longer TF consideration.
I also experimented a bit with trading from a 1m chart (which I never normally touch) just to see if today’s kind of whippy action would be tradeable on a scalping type basis (remember, I’m a Newbie at trading Crude Oil!). But the results were very mixed, and with a 5-pip spread on CFD’s was not successful and ended up on the minus side. So I will leave that alone. But that is how we develop our ideas
Here is today’s 1H chart with positive ribbon and positive MACD all day:
No change overnight. Longer TFs still technically in negative/neutral territory. short term neutral. Today we see publication of OPEC monthly report, which generally contains a lot of interesting articles but not likely to contain anything sensational from a short term trading perspective - especially ahead of tomorrow’s weekly inventories release which is the current focus point.
In the meantime, the IEA (International Energy Agency) released yesterday its latest annual 5-year oil-market forecast: Market Report Series: Oil 2017
Whilst trading focus at present seems to be almost entirely on the supply side, i.e…:
[I]- Will the OPEC (and eleven non-OPEC producers) agreement to substantially cut production levels last November succeed in supporting oil prices? (It has achieved about 98% compliance so far from members and even the non-compliant, UEA and Iraq, have agreed to catch up, via drill well maintenance shut-downs etc, before the reduction period ends in June.)
Will the OPEC-led agreement be extended beyond the current arrangement in May? (These cuts, combined with low price levels have already caused severe economic problems in many countries causing savings programmes, cut-backs and cancellations in projects. These countries will not easily be persuaded to extend production cuts if they do not seem to be working successfully.)
How far and how quickly will the US shale oil production be increased? (Reserves are huge and the technological costs of upstream development have reduced considerably especially with horizontal drilling and fracking processes. Also US ambitions to reduce import dependency[/I])
…The IEA report reminds us that there is also a demand side and that demand is expected to increase consistently and strongly throughout this 5-year period. Here are some demand-side highlights of the report:
[I]Our outlook for demand in this report is little changed from the one we published a year ago: global oil demand is expected to grow on average by 1.2 mb/d each year to 2022.
This net global figure contains OECD demand falling by an average 0.2 mb/d per year due to long term trends in fuel efficiency standards and changing demographics. In the non-OECD countries, there is still plenty of growth potential and we expect an upside of 1.4 mb/d each year to 2022.
India is gradually becoming the focus of attention as Chinese demand growth slows. Twenty years of strong demand growth in China, fuelled by rapid industrialisation and infrastructure spending, is giving way to a slower pace as the Chinese economy moves towards a services and consumer-led structure. Indian per capita oil consumption is just 1.2 barrels per year today, and the number is expected to reach 1.5 barrels per year by 2022.
That is also probably true for transportation fuels in many other developing economies, as more families move up the income scale and buy their first car. In our forecast period, this will almost certainly be gasoline-fuelled. While the much-discussed growth in the electric vehicles fleet is a very important longer term issue for oil demand, by 2022 we estimate that only limited volumes of global transport fuel demand will be lost to EVs from conventional fuels.
Regarding tighter vehicle efficiency standards now being applied to trucks for transport fuel demand. Even though big savings will be achieved over time, within the five-year outlook it is a question of merely slowing the rate of growth, rather than seeing a major change to the pattern of demand.
The Middle East producers, traditionally amongst the leading suppliers to growing Asian markets, cannot alone meet the growth in Asia’s crude import requirement which will rise from 21 mb/d in 2016 to 25 mb/d in 2022 due to growth in demand and the decline in regional production.
Summary:
More investment is needed in oil production capacity to avoid the risk of a sharp increase in oil prices towards the end of our outlook period. The oil market today seems remarkably sanguine about this issue, but this feeling might not persist for too long before the realisation dawns that unwelcome price pressures might lie ahead[/I]
Full report here: http://www.iea.org/Textbase/npsum/oil2017MRSsum.pdf
Regarding the above post concerning the latest IEA 5-year forecast for oil 2017-2022, here is the IEA’s description of who they are:
INTERNATIONAL ENERGY AGENCY
The International Energy Agency (IEA), an autonomous agency, was established in November 1974.
Its primary mandate was – and is – two-fold:
to promote energy security amongst its member countries through collective response to physical disruptions in oil supply
to provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member countries and beyond.
The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives:
Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions.
Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change.
Improve transparency of international markets through collection and analysis of energy data.
Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies.
Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders.
Signature of the Agreement Establishing the IEA, 18 November 1974. (Photograph: OECD)
Not such a quiet day after all…
Here was a nice ribbon cross on the 5m chart (right hand side) that took price back below the 5m band. This combined with a failure to hold above the Daily 200ma (shown as red dot-dash on the left hand side 1H chart) and prices fallng from the top of the negative 1H band created a good risk/reward sell which paid off unexpectedly well.
I wish I could say that I caught the best of this move, but in fact I missed the first part totally!! 
I was not expecting much action today (and I am still not quite sure what prompted this fall, although there are reports concerning significant US shale oil production increases in the immediate future) and was not sitting by my screen watching paint dry all morning.
My näive understanding did not see anything dramatic in the March OPEC report released today to catalyse the move, but I guess all will be revealed soon enough!
This situation is the other side of the position v. day trader issue! A day trader is in the market only briefly and usually can avoid major disasters such as Black Swans, but they also miss profits from such sudden moves by not already being in the market before they occur. Each trader has to decide which risk/reward scenario suits them best. Personally, I prefer to be sad at missing an opportunity rather than sad from losing the fruits of even years of work on a single disaster like with Brexit or CHF.
Bloomberg:
"Oil declined after Saudi Arabia told OPEC it raised production back above 10 million barrels a day in February, reversing about a third of the cuts it made the previous month.
Futures*tumbled 1.5 percent in New York, reversing earlier gains. The kingdom, which had curbed supplies more than it needed in January as part of a deal to help re-balance world markets and reduce a global glut, told OPEC it boosted production by 263,300 barrels a day last month, a figure that jarred with the group’s own estimate that Saudi output fell further. Russia, Iraq and the United Arab Emirates are yet to deliver all the cuts they promised."
