Crude Oil and oil markets

Global Markets Commodities Oil and Gold
888

Yes, the same issues seem to be pincering the market. Growth slowdown kills the upside and OPEC+ is flooring the downside - and here we are right where we were yesterday in spite of a few wobbles.

My charts are still showing the same 4H-1H (neutral) compression but the downside is clearly starting to show its vulnerability.

I think there are clearly some worried people in OPEC/Russia who are desperately trying to decide what to aim for in the upcoming meeting (even the dates for that are uncertain). Russia has indicated that prices could easily crash to $30-40 if a supply glut starts to build over the coming months.

It is kind of strange that SA and Iraq are upping production to make up for the Iran outage due to sanctions, whilst simultaneously planning further production cuts to reflect falling demand in the near future, but that is how confused the scenario is right now.

There is no doubt that many countries are beginning to published weaker economic data as a result of the trade war between the two biggest economies in the world. Mr Trump is currently enjoying a strong domestic equities market and is happy if we see weak oil prices and low interest rates. But Mr Putin wants oil prices to stay at least around current levels and his oil industry executives are tired of the production cuts. Meanwhile SA (and the rest of OPEC) wants higher prices than at present.

The supply side is also somewhat confusing. Whilst there is no doubt that US shale is pumping at record levels, WTI is not just one grade. Alongside WTI (intermediate). production is increasingly including lighter (WTL) and condensates (WTC). These light grades are not so much in demand and refineries both in the US and elsewhere need heavier crudes that are not so plentiful at present.

Whilst WTI and Brent are international benchmarks, they do not tell the whole story concerning demand.

So, on balance, as long as Russia and OPEC are concerned with supporting oil prices there is little to suggest we are about to start any rallies in any time soon! We are very much in a “cutting supply to meet (falling) demand” rather than a runaway bull market trying to keep up with economic growth!

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889

Hi @frandlost
I thought you had been anticipating a drop in order to fill your buy orders under the market? What are you looking at now?

890

Seems a number of commentators are not so impressed with Mr Trump’s deal with Mexico, claiming that there is actually nothing new here. Apparently, everything that Mexico has now agreed to had, in fact, already been agreed months back!

If that is so, then what kind of pseudo-business, pyscho-politics have we all come down to! :thinking:

891

Local neighborhood realtor “perception” tactics. He’s a realtor not a negotiator. Any negative comments I may have are a reflection of the man and not the office in which he tweets from.

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892

This market is just so boring! I have absolutely no ideas on which way this is likely to go next and I am getting so intensely bored with reading the same old stuff. So I have decided to take a break from writing here and will be back if and when things get going again.

In the meantime, happy trading. :slight_smile:

893

Sorry to interrupt or bother BUT take a look at this post on my thread (link below) with regard to Bill Williams (which you have shown some interest in hence my letting you know about this). As you know I’ve been referring to some of Bill Williams’ stuff here but it’s been bugging me that I’ve not actually seen the stuff to which I was referring in the two Bill Williams books that I made available. The answer lies in the link below. All is revealed.

Link to the book contained in the post.

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894

What has this thread become? Not a lot of oil discussions anymore. This used to be a great resource for oil news and market sentiment. But thanks to SOME people this thread’s been hijacked. Poor @anon46773462. You should report these troublemakers @dpaterso and @frandlost :stuck_out_tongue: :stuck_out_tongue: :stuck_out_tongue:

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895

And so the boredom continues. One would think that with OPEC meeting in Austria on the horizon, followed by G20 in Osaka with its “will Trump meet with Xi Jinping or not!?”, against a background of limpet mines and rockets blowing holes in the sides of tankers and setting fire to them in the busiest oil shipping lanes in the world, and all this amidst growing evidence that the world in on the brink of recession… - that something would be moving in the markets…

OK so videos of little white speedboats alongside the tankers that the US claims as evidence that it was all Iran’s fault (I can’t help wondering who actually took that film and from which vantage point…) did set the oil commentators screaming that oil surged and soared here and there, but in reality?

Here’s the 4-Hour chart of the last two weeks for WTI:

2019-06-16 oil 4H
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Can you spot the surging and soaring?

And if that wasn’t sleepy enough, then what about SP500? Are we on the brink of a global recession? or a war with Iran? or a massive escalation of tariffs of China? How did SP500 react to all this?

Last week’s 4-Hour chart:

2019-06-16 SP 4H
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For what its worth my own view is that if the oil markets were underlying bullish then indeed the tankers burning in the Hormuz Straits and a threat of escalation of war in the Middle East would have seen prices (noticeably) skywards - but it didn’t! My “ULCC tanker” daily chart and “VLCC tanker” 4-hour chart are both still on the negative side while the 1-Hour closed neutral on Friday - and the 15m chart just zoomed around all week like a drunk of a water scooter…

All in all, I think the trade wars/recession issue holds all the cards at present.

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896

I agree 100%!

big money has brought the market so high I honestly believe they’re all getting short right now.

The media will "curve fit’ (my favorite term right now!) anyting as a reason for a decline or surge.

Call me paranoid! Just sayin’…

KC

897

Oil prices have started the week relatively unchanged from Fridays’ close and still sitting right on the Weekly 200SMA and well within the range from the last two weeks.

Recent major events in the Gulf region including explosive attacks of oil tankers and onshore pipelines have created little reaction in oil prices. This is so strange considering that blowing holes in oil tankers in the most important oil shipping bottleneck in the world is so incredibly serious! Some 30% of seaborne crude oil and oil products pass through the Strait of Hormuz!

Maybe large-scale speculative trading has become too risky for many because new attacks and/or responses could happen at any time, making short positions vulnerable. But there is no appetite to buy either with a limited upside potential in the face of weakening global demand and moves to non-fossil energy and products.

But apart from the physical risks to tanker shipping in the area and oil flow interruptions, there are significant other changes affecting oil prices already as a by-product of these attacks. For example, insurance premiums have increased by 5-15 percent according to shipowners and will likely increase more. In addition, we are likely to see additional protective measures aimed at keeping ships moving in this region. These will undoubtedly raised shipping costs and eventually filter through as additional costs to consumers.

The risk of new flare-ups is reflected in the move by the Joint War Committee of Lloyd’s Market Association, which raised its security-risk status to the highest it has been in the region since the Iraq war in 2005.

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898

Another quiet day for crude oil markets, but with a continuing weak bias.

Once again the commodity is caught between bullish and bearish news.

On one hand, Iran announces that its enriched uranium production stockpile limit, set under the 2015 agreement, will be breached on 27.6. And US Mike Pompeo states that the Strait of Hormuz will be kept open to traffic. Therefore, the risk of “accidental” military clashes between Iran and the US are increasing greatly. There can be little doubt that we will see further acts of violence in some form at some point in the near future - so far there has been no loss of life…

On the other hand, Huawei’s founder and CEO, Ren Zhengfei, announced that the company has taken a harder than expected hit from the US sanctions. For example, smartphone overseas shipments have already dropped by 40%. Thus again pointing to a widespread decline in growth as a result of the on-going trade war. Other US economic data releases also pointed to weakening demand domestically.

As a result, oil prices have stayed so far within a range barely exceeding one dollar (52.72 - 51.58).

Uranium

899

This whole tanker issue and the “video proof” sound awfully familiar?

Sad to say It was probably shot on the same camera that provided the pre-war “hard evidence” of the wmd factory in Iraq.

While the situation begs to validate the saying “life isn’t a joke” You can’t deny the words and actions used to describe it can be used for one …

KC

Edit: Manxx, I can pull the vid so I don’t knock your thread off the rails. Happy to do so!

900

What bothers me most about the attacks on these tankers is the fact that the resultant damage was so minimal - and that there has been no declaration of responsibility from anyone e.g. some terrorist organisation. So what was the real purpose here?

Considering that one ship was loaded with highly inflammable methanol, it could have exploded and sunk the entire ship and crew. So was that the intention but it failed? Or was it a pre-determined minimal damage/maximum exposure event? If the latter was indeed the intent then it required a huge degree of expertise and knowledge to avoid the enormous risk of blowing up the entire vessel?

But if the intention had been to destroy the ship then why attack two boats instead of concentrating on ensuring 100% success with only one? The impact of destroying one ship totally would have been just as great as two - and certainly far greater than the limited damage inflicted here.

So what was the motive and why? What the mission “successful” in their eyes or did it fail? Either way, this kind of attack is literally playing with fire and with a severe risk of getting out of control. The whole thing is very mysterious and doesn’t seem to bother oil markets much at all…

The markets remain vulnerable on the downside. This week will probably see even greater focus on the inventories data leading up to the OPEC+ meetings. Further evidence of bloating stock levels for crude, gasoline and distillates (mainly diesel) will undoubtedly fuel the weakness that is already present from weak economic data from various corners of the globe.

Various organisations and investment banks are downgrading their forecasts for economic growth, oil demand and oil prices for 2019 and 2020.

Neither does the coming G20 meeting seem to be offering much hope of any encouraging signals from a Trump/Jinping meeting regarding the trade war, except maybe an agreement to start talking again - if they even meet at all, that is!

As if that were not enough negative news on prices, there is also speculation that the Venezuelan situation could be resolved within a few months, followed by a rapid resurrection of the oil production infrastructure. How fast that can be is another issue, but the concept of a major producer like Venezuela returning to its former position as a significant factor in global oil supplies, in an era of possible economic recession in 2020, would be another serious depressant on oil prices.

At present, the only serious events that could significantly boost oil prices are a major escalation of military activity towards warfare in the middle east and/or a concrete positive change in the trade war outlook.

But, as the old sage might say, whenever things look their gloomiest, then …

901

It’s how wars are started…The US has blamed the attack on Iran… the UK and Saudi Arabia (who would have guessed) are backing the US version of events… And today it was announced that the US are deploying 1000 ground troops to the area… So no real mystery here at all for those that know their history…

Gold is heading up… always a precursor for uncertain times…

902

Hi @Trendswithbenefits, thanks for dropping by and for adding your input! :slight_smile:

True.

But I am not so sure one can draw parallels here with the run up to the Vietnam war. Iran is not a “North Vietnam” and I am sure they are well aware of the consequences of taking on the current US administration. The very thought of that brings to mind the quote attributed to the Japanese Admiral Isoroku Yamamoto after their attack on Pearl Harbor in 1941.

“I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”

But, at the same time, to antagonise by the equivalent of just putting a drawing pin on the seat of the USA does not match the rhetoric from Iran direct, neither does it further the cause of any of their apparent terrorist proxies.

The other alternative - that it is all a fabrication to provide an excuse to forcibly remove the current Iranian regime - seems a little hard to swallow when Mr Trump is starting his runup tothe next election and all is going well at present: stock market holding, oil prices falling, interest rates falling, immigration reduction working, trade wars producing additional income, and so on - why risk an all-out war at this stage? Unless, that is, it is all part of an even grander Middle East plan to upturn the Syria/Russia axis or to eliminate a real nuclear threat that we do not know much about (WMD all over)!!!

But the mystery here, to me anyway, is not so much the “why did it happen” but the fact that the oil markets are not showing much concern about it. I am naturally a bad seller of commodities and prefer to just buy the dips - but that would mean going fishing for a long time as it looks right now! :smiley:

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903

That’s exactly it… they need a reason to be there… and now they have it… Whats good for the Saudi’s is good for America and Iran is a persistent PIA to both…

904

Are you expecting this to end up as a full-blown war? Or just brinkmanship to see who stands back first? Why do you think they are looking for a reason to be there?

905

I’m no historian… I’d say just Brinkmanship… The Iranians would be annoyed at having the US in their backyard breathing down their necks and are more than likely to do something stupid… allowing the US (and the coalition of the willing) to pounce… we’ll have to wait and see…

It’s possibly another “Weapons of Mass Destruction” moment… a real regime changer as previously seen… Like all street fights… you don’t want to be seen throwing the first punch…

This may not even be a Trump play… The Clinton’s are the ones with all the Saudi email addresses…

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906

I agree with you there - and it seems that is also how the oil markets are seeing it - a threat, but shouldn’t escalate into anything too serious!

Well, that is a different angle on the issue! :smiley:

Maybe, but somehow, knowing how closely Mr Trump watches his rivals and antagonists, I doubt it would have escaped his notice? :slight_smile:

IN the meantime, it is just carry on scratching ticks from the short side. But we are into breakeven territories for many producers and even Russia had said a while back that it was happy with prices at “these” levels.

If it wasn’t that the oil (energy) industry interests me anyway, apart from trading, I would be feeling quite bitter that I hadn’t been trading GBP instead - but all markets have their moments and I’m sure oil will soon be trending again. The main aim now is not to give up profits while we are going nowhere! Small bites on idling revs for now!

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907

I was just reading one article that offers some kind of credible reasoning why Iran would be carrying out such attacks - and why the oil markets are not overly affected by them.

Following on from the US withdrawal from the Iran agreement and the re-introduction of severe sanctions, the Iranian economy has been driven substantially downhill. The internal pressures this must be creating in Iran can only be imagined. But outright war with the US surely cannot be a serious option at this stage.

But we know that Mr Trump is first a businessman and only second a politician, and he has already stated a willingness to negotiate with Iran - as he did with N. Korea, too. But we also know his negotiating tactics only too well - prior to negotiating, show your own strength and weaken your opponent until they are a pulp and then talk - then their only hope is to emerge with the best from a series of bad options (from their point of view).

So if Iran is looking to negotiate, then they need to strengthen their own hand by showing what they are potentially capable of doing to the international oil trade. There is a real risk of military escalation but their options are few and it is a reasonable assumption that Mr Trump would avoid war in his preference for a business deal.

Thus demonstrating its capability, range and scale of destabilising activities, such as threats over shipping in the Hormuz Straits and also increasing production of enriched uranium (which they can also sell as well as use), they are strengthening their negotiating hand by having something to surrender in exchange for the reduction or removal of sanctions - as it has done in previous negotiations.

If that is so, then it does offer a credible explanation for the current events, the lack of direct admission of responsibility and the fact that oil markets are not concerned with the US/Iran negotiations any more than they have been previously. I.e. the prospect of global recession is still the only real game in town.

But also, if this is true, then what a dangerous game to be playing… but then so is also assuming that a country with an ancient, deep, and proud cultural and religious heritage would always think and (re)act in the same track as a typical western country :thinking:

Persepolis

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