Displaying items by tag: shale

(Houston)

Oil, like many other commodities, is seen as a good leading indicator of the economy. Because it is a strong gauge for total economic demand, it functions are a good bellwether of future growth. However, Barron’s is arguing that, right now, the signal is broken. There are a number of reasons why. The foremost of them are that the recent moves in oil have much more to do with supply growth and geopolitics than they do with economic demand.


FINSUM: Oil is not a good barometer of the economy right now because of its own issues. The oil market has changed dramatically in the last decade because of the huge expansion of oil reserves due to shale. That has led to the whole sector recalibrating itself. As evidence of this argument, take for instance the fact that oil suffered an extreme bear market from 2014-2016, but the global economy kept expanding nicely.

Published in Eq: Energy
Tuesday, 13 November 2018 09:15

Big Downturn in Oil Coming?

(Houston)

Oil is in the middle of a fit. The commodity just recently entered a bear market and it is has been swinging up and down based on confusion over whether it will be over- or undersupplied in coming years. The market is plunging today as OPEC announced yesterday that it sees a slowdown in oil demand coming as well as oversupply. According to OPEC, “The recent downward revision to the global economic growth forecast and associated uncertainties confirms the emerging pressure on oil demand observed in recent months”.


FINSUM: The oil market seems to be trying to get ahead of a recession. OPEC’s demand forecast has slumped considerably, which in our opinion is one of the major drivers of the bear market.

Published in Eq: Energy
Monday, 12 November 2018 12:06

Oil Surges on Output Cut Hopes

(Houston)

Oil lost big time over the last few weeks and entered a bear market late last week. However, it is surging today as new hope of an OPEC output cut has come to light. Saudi Arabia, the leader of OPEC, says OPEC is willing to consider another round of output cuts as a measure to keep prices high. The last time OPEC agreed to a round of cuts, the market was pulled out of its deep bear market and more than doubled in price.


FINSUM: We used to be skeptical that OPEC could pull off a coordinated cut because of the competing interests of members. But the success it saw last time around means no one should doubt it.

Published in Eq: Energy
Friday, 09 November 2018 10:36

Oil Plunges into Bear Market

(Houston)

Oil prices have taken a nose dive lately, and yesterday officially fell into a bear market. Prices on Brent crude fell below the $70 per barrel mark for the first time since April. US crude is even lower, with prices sitting at $59 per barrel. For most of the summer the market was worried about undersupply, but the US has been more generous with sanction exemptions on Iran, and the US, Russia, and Saudi Arabia have all boosted output, alleviating fears and pushing prices lower.


FINSUM: The oil market seems to be trading based on supply and demand fundamentals—just like it should. It is very hard to predict how things will progress.

Published in Eq: Energy
Thursday, 08 November 2018 09:24

Oil Looks Set for Volatility

(Houston)

The oil market is nervous, which seems likely to lead to volatility. The surprise is that sharp moves may trend to the upside rather than the downside. The two big concerns are about how sanctions on Iran may crimp output, as well as how OPEC lacks spare capacity to boost output. Such concerns are a stark change from the attitude that accompanied the sharp price falls in recent weeks, when supply seemed to be expanding strongly.


FINSUM: The Saudis are saying they will expand production to a record, but the reality is they do not want to do so because they don’t want prices to fall. It seems like OPEC will walk a line to keep prices where they are.

Published in Eq: Energy
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