Crude Oil and oil markets

[anon46773462]

Oil prices were pretty much unchanged overnight with a mildly supportive undertone. This, in spite of a week with plenty of potentially negative factors. The markets are currently spookily quiet considering how many various inputs have appeared this week.

Apart from a batch of revised long-term outlook publications, we had both the API and EIA releasing data showing surprise increases in crude oil stockpiles contrary to the expectations for declines.

Gasoline inventories also went up by 900,000 barrels last week, following a 3.3-million-barrel decline in the previous week.

The International Energy Agency (IEA) also surprised the market by revising downwards its estimates for oil demand growth for both this year and next year, creating extra potential for builds in oil inventories.

A further potentially bearish report concerned claims by satellite imaging analysts that they had identified 624 floating roof storage tanks in Saudi Arabia, which is nearly twice the official number in databases, and indicates that there is a lot more stored oil there than officially reported.

So there are many varied and potentially market-moving factors around at present, yet the market is unnaturally subdued…

There is one big event in the near future which is indeed being watched closely by all parties as it approaches and that is the OPEC meeting at the end of this month. In this meeting they will possibly be deciding whether the existing OPEC/NOPEC production cut agreement will be extended from end-March until the end of 2018 - and will the agreed amounts remain the same.

But that is still some way away…where will we be going in the meantime? If I have noticed anything during my short time watching oil, it is that oil never does nothing!

I still have a feeling that if oil could not drop lower on the bearish news so far, then it must be well-supported and possibly moving higher - but the charts are not showing a move either way at present and the best that can be said is that we are currently stagnating in the midst of a correction in the middle of a daily uptrend! Huh!

This “no-mans-land” can be seen here on the 4H chart with the green (i.e. upwards) daily band. Unusually for me, I kind of got fed up with just watching this so I actually have a very small long position from last night just so’s I’ve got something to look at!!! I don’t expect to actually profit from this trade but at least it is currently in the green - and proves I am not just writing about this stuff!!! Haha!!

Floating roof storage tanks:

[anon46773462]

OK call me chicken if you like!! Got bored, scapped the trade, with one whole, entire, beautiful, green pip (5 pips for my broker and 1pip for me and we all lived happily together ever after! ).

I’ll wait for a proper strategy entry instead - like one always should!

1 hour chart going nowhere:

…and here’s one for @_bob. I have never seen a road train before but apparently these are not uncommon in Australia?

[_bob]

@Simple_Simon

I have never seen a road train before but apparently these are not uncommon in Australia?

They litter the landscape like ants up north.

[anon46773462]

They litter the landscape like ants up north.

Wow!!! Them’s mighty big “ants”!! Great pics!, Thanks!

BTW is that you with those seksi kneecaps in the last picture!!

[anon46773462]

Seems my great “one-pip” trade was not so stupid afterall! Whilst the market has STILL done nothing, it has drifted off enough that it would have stopped me out if I had left it open. It is always good to remember that one green pip is always better than 20 red ones!

In fact, it is always worth remembering that the actual evaluation of a specific trade is not just the potential gain or the potential loss, but is the combination of the two. In other words, if you are looking for a profit of say 100 pips with a stop of say 50 pips, then the impact on your account is actually 150 pips depending on whether it wins or loses. Looked at this way, it can help evaluate whether a prospective trade is actually really worth entering or not, according to the viability of the setup, if you see what I mean?

But, oh, the power of charting, how it always knows what is best - and always better than I

Afterall, we don’t want to end up looking like this, do we:

[_bob]

My belly is as big

[anon46773462]

Good news or bad?

The U.S. Senate energy and natural resources panel has voted to open a portion of an Alaskan wildlife refuge to allow oil drilling. This, is spite of protests from conservationists who had been fighting to save the nature reserve area from fossil fuel development.

Alaska senator Lisa Murkowski, who heads the energy committee, said drilling the area would boost jobs in the area and increase national natural resources. She also apparently said drilling in the area would be done “the right way.”

In the meantime, I tried a short position, scraped out 11 pips and immediately the market shot back up to yesterday’s close. Why is this market so buoyant and yet doesn’t go up…or down!

This is fingernail biting stuff for a mere “fistful of pips” or is it just plain boring watching paint drying…

[anon46773462]

What can I say? There is nothing to say here! Perhaps the 15 min chart shows best how we have been in a 50 pip range for over two days now:

Here is my first customer using my brand new fibrescope magnifyer to spot the moves on the oil charts :

This won’t last for much longer but right now all the MAs are lining up straighter than the pipelines that carry the stuff…

[anon46773462]

[quote=“Simple_Simon, post:352, topic:83773”]
This won’t last for much longer [/quote]
…and it didn’t!

It was not long after my last post that the market broke out of the top end of the recent range and has been a steady rise all day.

As far as I can tell at this stage, the move started with the Saudi oil minister stating that oil inventories will not be in balance by the end-March 2018 deadline for the current OPEC/NOPEC production cuts agreement. This strongly suggests that there will be an extension of some kind to the agreement. However, there is still no definite indication whether there will be any decisions at the OPEC meeting on Nov 30th in Vienaa, however, the oil minister did apparently suggest that a mutual agreement would materialise then.

(To be honest, I am not sure whether the above was today’s news or appeared earlier, I have seen different timings for it!)

The Baker Hughes rig count came in as unchanged on the week.

Today’s 15m chart showing the two signals:

[anon46773462]

New Guys on the Block

It has been a while since posting here. Got a bit bored with just reporting on the weekly ups and downs of crude oil inventories and US shale v. OPEC outputs and rig counts.

But as we reel in towards the year end it is always a good time to reflect on things. I started here with USOil trading back in March this year and it has been a very rewarding and interesting experience in many ways. Perhaps the biggest impact has been how following oil as a commodity opens up so many other interesting places and topics apart from just which direction is the price going.

So I am picking up from where I left off and putting more of the stuff that has interested me here in addition to my thoughts about price movements.

I have also been developing some additional tweaks to my core charting content based on some trials on another thread here.

I guess the inspiration to start inputting here again came with this topic about which i read today about Lebanon starting to explore for oil and gas in the east Mediterranean:

In brief, Lebanon is starting exploratory drilling for offshore oil and gas in 2019 and is looking to create a local energy source as well as helping to solve its indebted economy with “a new sector in the economy,”

Lebanon’s economy has suffered a lot from the civil war in Syria and having to deal with some one million refugees from it.

The country is looking to exploit possible mineral resources in its offshore waters. It has now accepted a bid by a consortium of international oil and gas companies to explore sectors in the eastern Mediterranean. This consortium comprises Eni from Italy, Total from France and Novatek from Russia.

The country’s own share of revenues from oil and gas sales will apparently measure somewhere between 55 and 71 percent.

The U.S. Energy Information Administration estimated in 2010 there were 122 trillion cubic feet of undiscovered natural gas resources in the eastern Mediterranean basin. I don’t know what are the equivalent estimations for oil…

[anon46773462]

Anyone who is interested in the broad changes taking place in the world of energy and which are influencing the global energy systems should find this summary interesting. It is from the IEA (International Energy Agency) 2017 report published in November:

http://www.iea.org/Textbase/npsum/weo2017SUM.pdf

Regarding oil, these comments on the USA shale areas:

"The shale revolution in the United States is turning to exports. A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country has ever managed; already a net exporter of gas, the US becomes a net exporter of oil in the late 2020s.

In our projections, the 8 mb/d rise in US tight oil output from 2010 to 2025 would match the highest sustained period of oil output growth by a single country in the history of oil markets. A 630 bcm increase in US shale gas production over the 15 years from 2008 would comfortably exceed the previous record for gas.

Expansion on this scale is having wide-ranging impacts within North America, fuelling major investments in petrochemicals and other energy-intensive industries. It is also reordering international trade flows and challenging incumbent suppliers and business models.

By the mid-2020s, the United States become the world’s largest liquefied natural gas (LNG) exporter and a few years later a net exporter of oil – still a major importer of heavier crudes that suit the configuration of its refineries, but a larger exporter of light crude and refined products. This reversal is by no means only a supply-side story; without continued improvements in fuel-economy standards, the United States would remain a net oil importer.

In our projections, factoring in extra volumes from Canada and Mexico, North America emerges as the largest source of additional crude oil to the international market (growth in refinery capacity and demand in the Middle East limits the supply of extra crude from this region). By 2040, around 70% of the world’s oil trade ends up in a port in Asia, as the region’s crude oil imports expand by a massive 9 mb/d. The shifting pattern of risks implies a significant reappraisal of oil security and how best to achieve it."

[anon46773462]

As we draw towards the end of the first year here in the oilfields, the oil markets are in an optimistic mood.

I hope that same positive mood will carry us all through the coming year whatever we are trading.

The beauty of being a trader in these markets is that we are all on the same side with the same objectives, the same opportunities, the same problems, and the same hopes and fears.

As we walk this journey together may I wish everyone a very Happy and Peaceful Christmas Season.

[anon46773462]

Nice follow-through on the daily chart breakout!..

Its that time of year when all the commentators ponder the outlook and key factors for 2018. It will be interesting to pull together a summary of these over the next few days before we start the New Year…

[anon46773462]

Thoughts on 2018

Seems like 2018, at least in its first half, is going to be dominated by the same main key themes as 2017.

Balancing global inventories:

The core issue that will be driving the price of oil will continue to be whether and when the global oil inventories will reach a balance point during the year.

The current production reduction agreement between OPEC and the Russian-led group of non-OPEC producers is showing some results in reducing the global excessive oil inventories and OPEC expects to reach a supply/demand balance by end 2018. Some countries, like Iraq, are expecting it even sooner.

However, the speed with which it is achieved still depends on the rate of growth in US shale output. The general belief is that US shale production will continue to increase but the issue is by how much?

Even though companies may be keen to increase output there have been problems along the way. Operating costs have been rising and logistics problems are hampering developments. A lack of ongoing investment sources are putting restraint on the pace of drilling. But more recent data suggests there is now a pickup in activity as we approach the new year.

The IEA said in its December Oil Market Report that it actually expects inventories to begin rising again in 2018, mainly due to growth from U.S. shale.

Ending the OPEC deal and an exit strategy:

The stock surplus is now at about 100 million barrels more than the targeted five-year average, which is down two-thirds from the start of 2017. If this surplus should further decline during 2018, then at some point OPEC will be considering how to unwind these current production limits.

The markets will be looking very closely at how this will be achieved without again creating further increases in inventory levels. Any sudden return to previous production levels by revenue-hungry producers will inevitably result in lower prices.

So we can expect that OPEC will opt for some sort of gradual lifting of the production limits, but compliance will again be a major factor in its effectiveness.

Changes in demand:

Another major factor that will continue to affect oil prices will be changes in global demand and, in particular, from China. Any revisions to earlier estimates by the various agencies and investment bänks, etc will noticeably impact on prices during the year.

Unexpected outages and geopolitical risk:

Regardless of the forecasts and predictions regarding global production and demand, the market will inevitably be affected by any unexpected outages such as the recent cracking of the North Sea Forties pipeline and its subsequent shut down. The spill from the Keystone pipeline in the U.S. was another example as well as the recent explosion in a major oil pipeline in Libya.

Other potential geopolitical flashpoints could also lead to supply outages in 2018. For example, the declining production levels in Venezuela, instability in countries like Nigeria and Libya, and other tensions in the Middle East.

Prospects:

All in all, it seems there is plenty of potential for some significant moves in both directions during 2018, but maybe the most appropriate general strategy will be to trade from the long side and buy into the inevitable dips along the way. At least, that is my intention for 2018…

California oilfields from 1930’s

[anon46773462]

Just read an article on Investing.com regarding the enormous growth in financial oil trading (i.e. financial derivatives like futures, CFD’s, etc and not the real mucky stuff itself!).

Apparently the 2017 volumes in the front-month WTI futures is reaching a record level of close to 150 million for this year (well ahead of the spot Brent futures at 71 million trades). WTI is the US benchmark and Brent is the international benchmark

The increased use of futures is also appearing in the number of open contracts across all months and not just in the front month. This is partly a reflection of oil producers locking in profits for future production (price v. production costs) and partly buyers protecting against future price increases.

This boost in use of financial derivatives is also partly due to the fast growth in US oil production, which is now close to 10 mill b/d and with only Saudi Arabia and Russia producing more.

[anon46773462]

Having spent a busy Christmas in the UK this year, I really haven’t got round to thinking about 2018 at all. All I can say is that we finished the year on a very strong note and the commentators are even more mixed in their views than ever.

But we are now back to normal and tomorrow is a “free” day to prepare for the start of the New Year and take a look through the periscope at what we might be seeing.

I wish everyone a truly Happy and Successful New Year wherever you are and whatever you trade. What a wonderful big family we are…

[Skynet_Online]

Hi there,ive stumbled across your thread as im looking for the same on oil, why does it move?

Been reading your thread and i like your approach to it, none of that wannabe stuff thankfully as its everywhere unfortunately as ive been searching for sometime now looking for a definitive thread or guidance.

Im currently stuck in demo mode trading only WTI crude oil after i had a poor starting journey ie Buying signals ( joined up and lost on 3 different Traders signals providers) then traded for myself foolishly and lost again after some good wins then stayed in demo for about 8 months now as i realised there’s more to it, I moved off Forex and into WTI and in that time i built up from $50k to $500k and lost it all when the market broke out so started again with $50k in December 2017, got to $186k then got caught the wrong way, dropping $126k in 2 days alone last week but have picked up about $60k since then, my goal being to increase my capital by 5% daily so effectively doubling my account monthly (remembering its just for fun but just maybe it can be real…) and i have managed this prior to the massive spikes in the market i miss time.

I trade on swings and trends mainly and have worked out my mental kinks to be secure in this method however when it moves it really hurts! I used to trade PAT as per Forex but cant seem to get to grips with it on WTI only as its different and i cant find anyone else offering a view of trading WTI only.

So ive joined BP and read this thread of yours and its really good to see the analysis your doing and what trades you make and well done!

My trading method is as i say based on swing trades between the highs and lows as well as trend, its been pretty successful overall apart from the big moves. Here i have grown from 10k barrels per trade to 30k and can make $5k daily off this, but the moves i dont see hit me for three times that. Ive learnt to wait and be patient as this is a good point to WTI, it comes back in your favour should you swing the trade well, but still sometimes i lose heavily like i have this month.

I see you look at a lot of fundamentals and ive done similar however there is always a point when the price of oil fell and i was placed opposite to it or vice versa and cant explain why.

Any ideas at all on what can improve trading to catch the massive moves at all or simply have no trades after a successful period? Something I am working on is the trades prior to 2pm daily (UK ) where it then reverses trend at 2pm and goes the other way but its early days yet.

I have charts and graphs coming out of everywhere trying to tabulate some sense but nothing concrete

[anon46773462]

Hello @Skynet_Online
and thanks for your post!
That sounds quite a “big dipper” ride you’ve been experiencing there!

[quote=“Skynet_Online, post:361, topic:83773”]
Any ideas at all on what can improve trading to catch the massive moves at all or simply have no trades after a successful period? Something I am working on is the trades prior to 2pm daily (UK ) where it then reverses trend at 2pm and goes the other way but its early days yet. [/quote]
It sounds like you are trading very actively and, judging by the swings in your P/L, maybe a little too biased by either short-term intuition or short term charts?

I have not been trading oil for long but I have learnt that it is important to keep the woods in sight and not just look at the nearby trees? Oil can be very volatile and it moves a long way - only to often turn around and retrace its footsteps…

For this reason I have always kept my positions in line with a daily chart analysis even though I may often be in and out on the same day. Looking at a daily chart helps to keep in perspective what the underlying forces are doing.

Here is a simplified daily chart for the whole of last year that I hope demonstrates what I mean?

As you can see, I have been in a long mode since last September. That doesn’t mean I have held the same position all that time (which one cannot do anyway with CFDs or futures (except with the back months, I guess)) but that I have only been looking for dips to buy into.

I really do like to watch the fundamentals, mainly because I find them very interesting but they do also put the flesh on the technical structure. On the other hand, commentaries are not so very reliable or useful (as I think you have also discovered?)

I am not sure what else I can say here because I am not really maintaining this thread any more (in fact, I am not really very active at all here any more for various reasons). I found writing this thread very useful during my early trading with WTI because it helped me crystallize my thoughts and listen to what I am saying to myself. But this is an Oil thread on a 100% forex site and rather out of place. So I kind of do this in my own sanctuary nowadays and leave these guys with less distraction from their concentration on forex matters

Edit:

BTW, there is some uncertainty how trading oil will be affected by the new ESMA proposals. I received this information from one broker:

ESMA has come out with a number of proposals to try to increase conduct standards across the industry. ESMA’s leverage proposals include:

• 30:1 leverage on major currency pairs = 3.33% margin
• 20:1 leverage on major indices = 5% margin
• 10:1 leverage on commodities (excluding gold) = 10% margin
• 5:1 leverage on equities = 20% margin

These proposals would severely increase the margin required to trade, for example:

Market: Brent Crude
Size : 10 CFDs
Current Margin Required: £493
ESMA Proposed margin: £4,930

[anon46773462]

WTI prices have risen sharply by around USD10 per barrel since early last month to levels not seen since 2014. But are there still reasons for even higher prices.
Just parking here some notes of things to keep in mind:

• record net longs in the oil futures market. Need to be unwound at some stage.

• dollar has weakened over the last several weeks adding upward pressure on crude prices. Is there room for more weakness in the dollar.

• Inventories have already declined significantly, OPEC compliance has remained tight, production from Venezuela, Libya and Nigeria continue to be problematic. But the IEA is predicting that global oil markets will return to surplus in the first half of 2018, leading to a rebound in inventories. There are comments that oil prices are probably at their high for the year right now…

“The market is dangerously focused on newly published backwards-looking data and, in our view, is not paying attention to the stockbuilds that are likely to emerge later this year and in 2019,”

• Increases in US shale and new developments in Canadian shale too.

[anon46773462]

More on ESMA proposals:
https://www.esma.europa.eu/press-news/esma-news/esma-issues-updated-statement-preparatory-work-in-relation-cfds-binary-options?utm_campaign=2018%2001%2029%20FXCM%20LTD%20EN%20ESMA%20Response%20Reminder&utm_medium=email&utm_source=Eloqua

This is the FXCM view and instructions how to submit your feedback to ESMA:

FXCM supports ESMA’s efforts to protect consumers and promote good customer outcomes. We agree with the proposed changes but feel the leverage cap will be restrictive for clients and is considerably more restrictive than those enforced by some other global regulators.

FXCM will be proposing to ESMA that leverage be restricted to no less than 50:1, which is in line with other global regulators including the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) in the USA.

We believe that ESMA’s current leverage proposal is too restrictive and will bring about undesirable consequences. Many customers may feel they no longer have the option to trade FX/CFDs on reasonable margin terms with a firm licensed in Europe or the UK.
_ _
As a result, the industry as a whole may see a rise in offshore accounts held by European customers. The lightly regulated, or unregulated, brokers from outside Europe and the UK may see account numbers swell as traders seek alternatives to very strict leverage regulations at home. 50:1 is in line with foreign regulators and we feel it strikes a good balance between keeping Europe and the UK competitive and increasing customer protections for the FX/CFD trading community.

If you share this sentiment please include it in the feedback you submit to ESMA.

HOW TO PROVIDE YOUR FEEDBACK TO ESMA
ESMA has very specific requirements when submitting your views. Below are the steps:

Visit ESMA’s consultation page

Download the “Call for Evidence” Form located under “Related Documents”.

Open Microsoft Word or any similar program to provide your feedback. 

Copy and paste questions from Page 9 of the proposal to Microsoft Word. You do not have to answer each question but we recommend at least answering letters “B” and “I.”

Save your Word document.

Upload your Word document under “Response Form” and fill in your details. 

Click “Respond.”