Comm: Precious

(Houston)

Oil has been struggling for the last two and a half years, but has dipped back into one its truly dark periods over the last couple months. Now, it also appears to be waking up to the very real threat of electric cars. In the last year, major oil companies and groups, including Exxon and OPEC, have rapidly scaled up their forecasts for the amount of electric cars that will be on the road in coming years. OPEC, for instance, quadrupled their expectations to 12 percent of all cars on the road by 2040. Some groups put that figure at closer to 33%.


FINSUM: Speaking generally, estimates for how quickly the electric vehicle market will grow vary widely, but one thing is clear—they will have a very material impact on the fossil fuel industry.

(Houston)

Raymond James took a page out of the president’s playbook in trying to explain the bear market currently occurring in oil. The firm argues that a lot of the current weakness in oil is not due to realities in the oil market, but rather bad or false reporting of headlines that have driven investor perceptions into the gutter. Raymond James presents 10 common headlines that have recently been published, all of which are both bearish and false.


FINSUM: So the common narrative of OPEC cuts being undermined by shale is false? Weak reporting or not, we disagree here. The overarching issue in the oil market is that oil reserves are abundant, getting it out of the ground is constantly getting cheaper, and the market is less consolidated, and thus more competitive, than ever.

(New York)

You do not hear Godman Sachs admitting that it made mistakes very often, but that is exactly what it is doing today. Goldman was not the only one to misjudge the direction of commodities prices this year, but according to the bank “this still leaves the question of how did we (and the market) get it so wrong?”. The bank says it misjudged some of the fundamentals of commodities pricing in making its forecasting error. In particular, it says that they underappreciated price differences in some “contacts”, which is a key driver of determining whether the market is under- or over-supplied.


FINSUM: We have been bearish on oil all year, and our own view is that banks completely misjudged the ability of OPEC to actually lower total global output.

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