Where do you think Crude Oil prices are going?

[TMSBOSS]

: And it'll be funny to hear OPEC's forecasts next week.

My guess: API numbers are going to be short of EIA numbers on Wednesday and we're all going to be surprised at how much gas was consumed over the Memorial day weekend. I know many of us BMO east and west were doing our part! 850 miles for the trip and about 110 on track.

Yep. 850 miles got us to the track. 1750 total with around track driving. 250 on the Boss. 3 days.

Great time.

 

[Grant 302]

Our road trips are finally showing up in the API numbers today! 8)

Crude weekly stocks -6.7M bbl
Gasoline weekly stocks -3.9M bbl

I hope the EIA numbers tomorrow confirm or beat.

 

[Grant 302]

One heck of a wild ride so far...WTI trading in the mid-$54 range now!

Any guesses for the next 'bottom'?

 

[Grant 302]

Finally a bounce? Frankly I'm surprised it went this low.

I'm predicting production drops for the next 4-5 months.

US crude finally cleared the 'nose' of the production curve. I've been predicting a -50k bbl/day per week decrease, and I believe the -151k reduction is 'catch up' from EIAs lagged data and outdated estimating tools.

Target of -1.5 to -1.7 MBPD decrease in production from the peak (9.7 MBPD) by 2016. IOW, back to late 2013/early 2014 production levels.

Also watch for the EIA's monthly production numbers due on Friday. Whatever your bull/bear bias...don't get caught unprepared.

 

[Wingrider]

I have a family member who tried to play the futures market for unleaded and was rocking it for quite a while. Then he got greedy and overconfident and this drop and sustained low market cleaned him out. It looks like something you could do well in with the street smarts to manage it- I tip my hat to you, sir and best of luck. I roll old school and use dividends from stodgy folks like F and T with some offbeat ones ones like HPT to fund my HPDE adventures.

 

[Grant 302]

Eesh. I feel for your family member. That's exactly the kind of thing I caution against. There's a farmer in China who bet his whole savings of ~$164k on one mining stock on MARGIN. He now owes about that much...

There's nothing wrong with safe investments and dividends. In November '07, I went 90% cash and bonds. Perhaps a little early, but I missed out on the '201k' experience that faced many. While I have more fun talking about oil, safe investments pay the bills.

I also have my share of total failures in the past...anybody remember MCI? :-[

Anyway, any investor trading futures or using leveraged financial instruments needs to manage the cash and risk to protect against being 100% wrong. So far, I've done a good job of that.

 

[Jabooh]

Overall crude stocks in the U.S. declined 4.2MM barrels, while stocks at Cushing declined just over 200k barrels. Refinery utilization remains over 95%. Distillate stocks exceeded expectations, building nearly 2.6MM barrels, while gasoline declined 360k barrels. Domestic production, obviously somewhat volatile week-to-week, declined 145kbpd. The 4-week moving average for domestic production shows a decline of 46kbpd. WTI rallied on the numbers, and for the most part hung on to those gains. The high on the day was $49.50. The spread between Brent and WTI has tightened up quite a bit in the past few days, moving from $7 to under $5 in a week. In other news, Saudi Arabia says it will reduce production after the summer months. This could be due to refinery turnarounds. The Saudis are using more of their own crude oil in domestic refining operations due to new refineries and domestic demand.

 

[Grant 302]

Not sure how much I subscribe to conspiracy theory, but isn't it a huuuuge coincidence that WTI bottoms (maybe), US production and stocks drop and shorts start covering on the same day the Saudis float a rumour about reducing production? ???

I mean the Saudis definitely have enough money and production control to simply make this happen, right?

 

[Jabooh]

It's theories like that which keep me from playing short.

 

[Grant 302]

It's theories like that which keep me from playing short.

This is the article that planted some of the thoughts in my head:
http://oilandenergyinvestor.com/2015/07/opec-shorts-are-driving-down-the-price-of-oil/

But the rumours from today certainly make me wonder....

I don't short (directly) for safety reasons. Inverse ETFs and buying puts contain and define the risk for me.

 

[Grant 302]

Looks like the bottom is forming to me...for better or worse, soaked in oil right now!

Big money shorts are certainly at work again. I'm hoping it's about time for them to give up and start covering. Predicting that starts in earnest next Mon/Tues before the API and EIA numbers are out.

 

[coboss]

I'm thinking of buy some XOM and BP. Ignoring they hit BP took after Deepwater Horizon, they are at a 20 year low and the dividend yield is over 6%.

XOM is at a four year low and the dividend yield is approaching 4%.

If you look at a 5-7 year hold, it is hard to imagine you could lose. The Saudis are playing a serious game of chicken right now, and Iran will come back, but on the other hand, US drilling has had huge cutbacks, and the shale wells drilled in the past 3-5 years will deplete rapidly. Eventually the price of oil *will* go back up.

 

[Grant 302]

I think those are good ways to play this sector if you don't have the risk tolerance tied directly to the commodity. My main caution on the dividends are risk to getting cut or suspended because sustained low crude prices. Look for healthy balance sheets that can sustain the dividends.


Just out:
"EIA estimates total U.S. crude oil production declined by 100,000 barrels per day (b/d) in July compared with June. Production is expected to continue decreasing through mid-2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.4 million b/d in 2015 and 9.0 million b/d in 2016, 0.1 million b/d and 0.4 million b/d lower, respectively, than in July's STEO."

Good news for oil bulls. EIA is lowering its US production forecasts.

 

[TymeSlayer]

Grant,

What's your take on the possibility of lifting the US export ban and it's effect on prices?

 

[Grant 302]

Grant,

What's your take on the possibility of lifting the US export ban and it's effect on prices?

I have no read on the likelyhood of passing, but I'm sure I'd be smiling if it does. Even in rumour form, it's getting baked into pricing...but I think the net result would be slightly higher WTI prices, maybe a nominal spike when the news breaks. I think balancing of the supply side will take care of that anyway.

 

[Jabooh]

Headed to $30's???

 

[Grant 302]

Headed to $30's???

Hedged against such a move yesterday, so I doubt it! :-\

 

[coboss]

WTI - $38.24

XOM is at a 9 year low, Total at a 12 year low, and BP at a 20 year low. Dividend return on BP is over 7%! Obviously, that won't last.

Anyone have a crystal ball for sale?

 

[Jabooh]

If you have some money, time (>5 years), and nerve now is the time to go long on energy companies. Well at least the majors. They will go back up even if they go down more.

 

[Grant 302]

WTI - $38.24

XOM is at a 9 year low, Total at a 12 year low, and BP at a 20 year low. Dividend return on BP is over 7%! Obviously, that won't last.

Anyone have a crystal ball for sale?

No crystal ball here, but I was frantically buying almost everything I track on Monday morning right from the open. Last transaction was at about 11a PST dumping the bulk my hedges/insurance which came down from the 6x range to about 3x. Sometimes you just gotta be lucky.

If you have some money, time (>5 years), and nerve now is the time to go long on energy companies. Well at least the majors. They will go back up even if they go down more.

Great advice for the risk adverse, IMO.

For those of us crazy enough to trade the commodity or anything directly tied to it, I do think last Monday was *the* day to buy on this 'cycle'. And man, it was hard not to sell something while watching it come close to my $46 prediction for Fri/tomorrow...especially while at Track Tour. Now I think it goes higher than that tomorrow and am thinking WTI hits $48 or $49 before the close. Gonna roll out of some of the long options to cash in on some of my gains and re-buy the protection at a discount.

I think the volatility continues...